Case: State of Karnataka &amp; Another Vs. Selvi J. Jayalalitha &amp; Others

contemplated in Section 13(1)(e) of 1988 Act, it is inessential as well to resort to any arithmetic to compute the percentage thereof. In any view of this matter, the decision of this Court in Krishnanand Agnihotri (supra) has no application in the facts of this case and therefore, the respondents cannot avail any benefit therefrom. 539. Both the Courts have construed all the assets, income and expenditure of all the accused collectively. We see no convincing reason to adopt a different course which even otherwise, having regard to the charge, is not warranted. 540. Noticeably, the respondents accused accepted all the findings of the High Court. We have analyzed the evidence adduced by the parties and we come to the conclusion that A1 to A4 have entered into a conspiracy and in furtherance of the same, A1 who was a public servant at the relevant time had come into possession of assets disproportionate to the known sources of her income during the check period and had got the same dispersed in the names of A2 to A4 and the firms & companies involved to hold these on her behalf with a masked front. Furthermore, the the charge of abetment laid against A2 to A4 in the commission of the offence by A1 also stands proved. 541. We have noticed that: In State Through Central Bureau of Investigation, New Delhi Vs. Jitender Kumar Singh, reported in (2014) 11 SCC 724 , this Court held that once the power has been exercised by the Special Judge under sub-section (3) of Section 4 of the P.C. Act to proceed against non-PC offences alongwith PC offences, the mere fact that the sole public servant dies after the exercise of powers under sub-section (3) of Section 4, will not divest the jurisdiction of the Special Judge or vitiate the proceedings pending before him. Therefore, we hold that as the sole public servant has died being A1 in this matter, in our opinion, though the appeals against her have abated, even then A2 to A4 are liable to be convicted and sentenced in the manner as has been held by the Trial Judge. The Trial Court held that even private individuals could be prosecuted for the offence under Section 109 of I.P.C. and we find that the Trial Court was right in coming to the conclusion relying on the decision of Nallammal (supra), wherein it was observed that acquisition and possession by a public servant was capable of being abetted, and observed that Under Section 3 of the 1988 Act, the Special Judge had the power to try offences punishing even abetment or conspiracy of the offences mentioned in the PC Act and in our opinion, the Trial Court correctly held in this matter that private individuals can be prosecuted by the Court on the ground that they have abetted the act of criminal misconduct falling under Section 13(1)(e) of the 1988 Act committed by the public servant. Furthermore, the reasoning given by the Trial Court in respect of criminal conspiracy and abetment, after scrutinizing the evidence of this case, is correct in the face of the overwhelming evidence indicating the circumstances of active abetment and conspiracy by A2 to A4 in the commission of the above offences under Section 13(1)(e) of the 1988 Act. This would be evident from the following circumstances:- (i) A1 had executed a General Power of Attorney in favour of A2 in respect of Jaya Publications marked as Ex.P-995. The circumstance of executing the power of attorney in favour of A2 indicates that with a view to keep herself secured from legal complications, A1 executed the said power of attorney knowing fully well that under the said powers, A2 would be dealing with her funds credited to her account in Jaya Publications. (ii) Constitution of various firms during the check period is another circumstance establishing the conspiracy between the parties. It has come in evidence that 10 firms were constituted on a single day. In addition, A2 and A3 started independent concerns and apart from buying properties, no other business activity was undertaken by them. The circumstances proved in evidence undoubtedly establish that these firms are nothing but extentions of Namadhu MGR and Jaya Publications and they owed their existence to the benevolence of A1 and A2 (iii) The aforesaid firms and companies were operating from the residence of A1 and it cannot be accepted that she was unaware of the same even though she feigned ignorance about the activities carried on by A2 to A4. They were residing with A1 without any blood relation between them. (iv) Although A2 to A4 claims to have independent sources of income but the fact of constitution of firms and acquisition of large tracts of land out of the funds provided by A1 indicate that, all the accused congregated in the house of A1 neither for social living nor A1 allowed them free accommodation out of humanitarian concern, rather the facts and circumstances proved in evidence undoubtedly point out that A2 to A4 were accommodated in the house of A1 pursuant to the criminal conspiracy hatched by them to hold the assets of A1. (v) Ex.D.61 reveals that before the Income Tax Authorities, the representative of A1 himself had put forth an argument that Rs.1 crore was advanced by A1 to Sasi Enterprises towards share capital and further it was submitted that on the security of the said amount, loan was borrowed by A1, and thus she cannot claim noninvolvement with the firms. (vi) The flow of money from one account to the other proves that there existed active conspiracy to launder the illgotten wealth of A1 for purchasing properties in the names of the firms. (vii) The conspiracy among the accused persons is also proved by the evidence of Sub-Registrar, North Beach, Sub-Registrar office-PW.159 and the evidence of PW.71 Radha Krishnan, Horticultural officer. In our opinion, the Trial Court correctly came to the conclusion on such reasoning and we hereby uphold the same.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]140. A bare perusal of this extract would reveal that the criminal misconduct of the public servant, as envisaged therein, would ensue if he/she or any person on his/her behalf was in possession or had, at any point of time during the period of his/her office, been in possession of pecuniary resources or property, disproportionate to his/her known sources of income, which the public servant cannot satisfactorily account. Significantly, for such misconduct, the possession of the disproportionate pecuniary resources or property, which the public servant is unable to satisfactorily account, can be held either by him/her or any person on his/her behalf is essential. This offence thus, enfolds in its sweep a definitive involvement and role of persons other than the public servant, either as a abetter or ar in the actualisation of the crime. Consequently, thus such abettors ors or partners in this item of offence, if proved, cannot escape the legal consequences for their participatory role. The other segments of Section 5, not being of immediate relevance, are not being referred to153. A plain perusal of the scheme of the Act presents several noticeable special features thereof in accord with the legislative intendment to achieve the objectives set therefor. Apart from the overwhelming backdrop demanding the necessity to consolidate and reinforce the anti corruption law, the main mission being to achieve a catharsis in public office, the statute besides expanding the notion of public servant to effect maximum extension of its sweep as envisaged, has ordained the constitution of a court of Special Judge to try the offences thereunder and also the charge of any conspiracy or attempt or abetment in the commission thereof. Thus, an exclusive autonomous adjudicative regime has been put in place. The provisions of the Code have been made applicable subject to the modifications contemplated and the special Judge in particular, while trying an offence punishable under the Act has been authorised to exercise all powers and functions invocable by a District Judge under the Ordinance. Sections 7 to 12 of the Act correspond to Section 161 to 165A of the Indian Penal Code, thereby integrating the offences in the legislation to be tried by a special forum as envisaged. Resultantly, Sections 161 to 165A have been effaced from the Indian Penal Code for obvious reasons. Explanation to Section 13(i)(e) makes it limpid that the known sources of income of the public servant, to satisfactorily account the pecuniary resources or the property otherwise alleged to be disproportionate thereto, has to be from a lawful source and further that the receipt thereof had been intimated in accordance with the provisions of any law, rule or orders for the time being applicable to him/her, as the case may be. This prescription indubitably emphasizes the lawfulness or legitimacy of the income to enable the public servant to satisfactorily account for the pecuniary resources or property otherwise imputed to be disproportionate thereto. Not only the Act entertains presumption against the public servant, in the eventualities as comprehended in Section 20 of the Act, it is clarified in Section 28 that nothing in the statute would exempt any public servant from any proceeding which might apart from the Act, be instituted against him or her. Section 29, amongst others to reiterate, has substituted in paragraph 4A of the Ordinance, an offence punishable under the 1988 Act, in lieu of the offence under Section 5 of the 1947 Act. The legislation thus is a complete code by itself, vibrant with the purpose therefor and animated with the spirit to effectuate the statutory goal. All these predicate a purposive explication of the provisions thereof to further the salutary legislative vision161. The overwhelming judicial opinion thus is that a conspiracy can be proved by circumstantial evidence as mostly having regard to the nature of the offending act, no direct evidence can be expected175. The decision is to convey that though the I.T. returns and the orders passed in the I.T. Proceedings in the instant case recorded the income of the accused concerned as disclosed in their returns, in view of the charge levelled against them, such returns and the orders in the I.T. Proceedings would not by themselves establish that such income had been from lawful source as contemplated in the explanation to Section 13(1(e) and that independent evidence would be required to account for the same176. Though considerable exchanges had been made in course of the arguments, centring around Section 43 of the Indian Evidence Act, 1872, we are of the comprehension that those need not be expatiated in details. Suffice it to state that even assuming that the income tax returns, the proceedings in connection therewith and the decisions rendered therein are relevant and admissible in evidence as well, nothing as such, turns thereon definitively as those do not furnish any guarantee or authentication of the lawfulness of the source(s) of income, the pith of the charge levelled against the respondents. It is the plea of the defence that the income tax returns and orders, while proved by the accused persons had not been objected to by the prosecution and further it (prosecution) as well had called in evidence the income tax returns/orders and thus, it cannot object to the admissibility of the records produced by the defence. To reiterate, even if such returns and orders are admissible, the probative value would depend on the nature of the information furnished, the findings recorded in the orders and having a bearing on the charge levelled. In any view of the matter, however, such returns and orders would not ipso facto either conclusively prove or disprove the charge and can at best be pieces of evidence which have to be evaluated along with the other materials on record. Noticeably, none of the respondents has been examined on oath in the case in hand. Further, the income tax returns relied upon by the defence as well as the orders passed in the proceedings pertaining thereto have been filed/passed after thet had been submitted. Significantly, there is a charge of conspiracy and abetment against the accused persons. In the overall perspective therefore neither the income tax returns nor the orders passed in the proceedings relatable thereto, either definitively attest the lawfulness of the sources of income of the accused persons or are of any avail to them to satisfactorily account the disproportionateness of their pecuniary resources and properties as mandated by Section 13(1)(e) of the Act183. The import of this decision is that in the tax regime, the legality or illegality of the transactions generating profit or loss is inconsequential qua the issue whether the income is from a lawful source or not. The scrutiny in an assessment proceeding is directed only to quantify the taxable income and the orders passed therein do not certify or authenticate that the source(s) thereof to be lawful and are thus of no significances a charge under Section 13(1)(e) of the Act234. In the present case, there is also a charge of conspiracy and abetment and, therefore, the factors as above would have to be tested on the anvil of the overall circumstances to ascertain as to whether a reasonable inference therefrom can be drawn of a benami transaction as alleged. This is more so as by the very nature of the offence of conspiracy, the activities in connection therewith are expectedly hatched in secrecy239. The narration of the judgment clearly indicates that this Court had assessed the evidence on record by itself on the items of dispute pertaining to income, expenditure and assets and had recorded its own independent findings. In most of the items, where this Court had rejected the contention of the prosecution, it appears that it had not adduced any evidence whatsoever. Further the judgment does not advance any proposition that in order to adjudge the disproportionateness of the assets in comparison of the income of a public servant, the margin of 10% is a permissible index of uniform application and acknowledged as a determinant to decide as to whether a public servant charged under Section 13(1)(e) of the 1988 Act can be held guilty of a criminal misconduct contemplated by the statute judged on such benchmarkFrom the evidence led and the arguments advanced, it appears that the income, expenditure and assets, all have been cumulatively taken account of. Though it had been argued on behalf of A1 that she had no connection whatsoever with A2, A3 and A4 and, therefore the figures relating to income, expenditure and assets would have to be separately considered, it would transpire that while adverting to the charts submitted in the course of arguments, such segregation has not been insisted upon and is even uncalled for, having regard to the charge of conspiracy and abetment, for the purpose of the appraisal to followIn view of the fact that the respondents accept the income of Rs.9,34,26,053.56 as cited by DVAC and there is no dispute with regard thereto, it is not necessary to examine the evidence of the prosecution in support of its figuresIn absence of any independent evidence in support of this claim, having regard to the state of law that income tax returns/orders are not automatically binding on a criminal court, in our view, the effortless acceptance thereof by the High Court is in disregard to this settled legal proposition. Therebythe High Court hasaccorded unassailable primacy to such income tax returns/orders and have made those final and binding on the criminal court without any appreciation of the probative potential thereof259. This head corresponds to item No. 1 of Annexure IV (Expenditure). This indicates that this loan account was closed on 25.6.1994. An amount of Rs.50,93,921/on this loan which is evident from Exb.. This has been stated by PW 182. PW6 also confirms the repayment of the loan. Thus, this head of income did not existat the end ofthe check period i.e. 30.4.1996 and cannot be accounted forThe Trial Court did take note of this aspect in its judgment while dealing with these items of loan on the basis of the evidence adduced, more particularly while dealing with the heads of expenditureIn that view of the matter, the High Court was in error in including this item of loan in the income of the respondents260. This corresponds to item No. 8 of the Heads of Income vide Exb.9 as cited by the DVAC. The oral evidence to this effect has been adduced by PW 182 who has proved Exb.. The Trial Court dealt with the evidence both oral and documentary in this regard and by referring to the letter Exb., addressed to the bank by the applicant for the loan thereof, had concluded that the liability to liquidate the loan had been taken over by A2 to A4. The evidence on record, thus, demonstrates that the Trial Court had taken note of this item of loan and, therefore the High Court ought not to have added this figure by way of duplicationIndian Bank – A1 – Rs.90,00,000/261. As would be apparent from the evidence of PW 182 who proved Exb., this loan was taken after the check period i.e. in August 1996 and thus, the amount thereof could not have been taken into account by the High Court. This figure, therefore as a corollary has to be excludedIndian Bank – Jay Real Estate – Rs.25,00,000/262. This corresponds to item No. 4 of the list of income cited by the DVAC and relatable to Exb.. PW 182 through Exb.3 has proved this loan. Exb.1 written by A3 on behalf of Jay Real Estate is one seeking loan of Rs.29 lakhs providing the necessary particulars in the annexure appended thereto. Exb.The Trial Court has duly dealt with the evidence to this effect while quantifying the income as well as in noting the expenditureby way of interestThe plea of the prosecution that in the above premise, the High Court was wrong in adding a sum of Rs.25 lakhs towards the income of the respondents under this head, has to be accepted263. This corresponds to item No. 3 of the heads of income cited by the DVAC vide Exb.. This loan has been proved by PW 182 through Exb. P1171 to 1173.The Trial Court has referred to this evidence while quantifying the income and the expenditureby way of intereston the loan amount as had been listed in Annexure IV (Expenditure) cited by the DVAC264. The documents pertaining to this loan transaction authenticate that though an amount of Rs.12,46,000/had been sanctioned by the bank, it had released only a sum of Rs.7 lakhs and the principal amount and the interest had not been repaid by the firm. Thus, per se the High Court was not justified in adding a sum of Rs.12,46,000/to the tally of income of the respondents under this head265. This corresponds to item No. 2 of the heads of income cited by the DVAC and has been proved by PW 182 through Ex. The records attest that though the full amount of Rs.50,00,000/was sanctioned, a sum of Rs.28 lakhs was only disbursed and the principal amount with interest had not been repaidThe Trial Court has considered the evidence, oral and documentary, to this effect. The addition of a further amount of Rs.50 lakhs by the High Court to the corpus of income of the respondents, therefore, is clearly erroneous266. This corresponds to item No. 1 of the items of income cited by the DVAC and in fact had been availed by Sasi Enterprise, as has been deposed by PW 182 through Ex.. The amount due and outstanding to the bank, at the relevant point of time, was Rs.13,55,023/The Trial Court noted that the application for loan had been made by Ms. Sasikala as the Managing Partner of the firm and had examined the relevant evidence including the statement of account pertaining to the loan. This head of income thus had been taken noteby the Trial Courtand, therefore the High Court was not justified to add a further sum of Rs.25 lakhs thereunderIndian Bank – Mr. Sudhakaran267. This corresponds to item No. 7 of the heads of income cited by the DVAC and has been proved by PW 182 through Ex. The Trial Court has examined the evidence relating to this loan applied for by Mr. V.N. Sudhakaran on behalf of Lex Property Development (P) Limited for a loan of Rs.. The oral and other documentary evidence with regard to the sanction of loan and the statement of account has been analysed as well. The Trial Court, thus, had taken note of this loan while computing the income of the respondents. The principal amount, due under this account at the relevant point of time, was Rs.. The addition of an amount of Rs.1,57,00,000/by the High Court towards income in the above backdrop is indefensible268. This item is not included in the list of income furnished by the DVAC. PW 182 has deposed about this loan through Exb.. The statement of account of Ramraj Agro Mills Limited is Exb.. This has been corroborated as well by PW 235 who has stated that an amount of Rs.1.65 crores had been sanctioned as loan. There is, however, no evidence with regard to the disbursement of any amount qua the loan sanctioned. In any case, the amount due to the bank at the relevant point of time in this account was Rs.. Therefore, addition of amount of Rs.1.65 crores, by no means, as done by the High Court, can be said to be justified269. There is no discussion about this head of loanby the Trial Courtpresumably due to the absence of any evidence with regard to disbursement of any amount in connection therewith. The High Court, however, has added an amount of Rs.1.65 crores without even referring to the evidence to ascertain as to whether any amount out of the loan sanctioned, in fact had been released in favour of the firm involvedIn any case, examination of Exb., the statement of account of Ramaraj Agro Mills Private Limited pertaining to this loan, discloses that, at the relevant time, the outstanding amount due to the bank was Rs.39,10,781/and thus, in any view of the matter, the High Court could not have added Rs.1.65 crores against this item270. This corresponds to item No. 6 of the heads of income cited by the DVAC and has been referred to by PW 182 who proved Ex7 in connection therewith. The amount due under this account at the relevant time was Rs.19,81,802/The Trial Court has considered the evidence, oral and documentary, to this effect and thus had accounted for this component while quantifying the total income of the respondents. In this premise, the High Court was not right in adding the entire sum of, as if the same had escaped the notice of DVAC or the Trial CourtThe High Court, thereafter, adjusting, i.e. the income quantified by the DVAC added Rs.18,17,46,000/(Rs.24,17,31,274 – Rs.5,99,85,274) to the income of the respondents272. In view of the abovethe High Court hasnot only erred in including the entire amount of loan encompassed in ten items, mentioned hereto before, but also premised its finding on income on an inflated and patently incorrect figure of Rs.. This addition of Rs.18,17,46,000/to the income of the respondents, as done by the High Court, is obviously erroneous and thus cannot be sustained285. In contradistinction, the High Court quantified the amount of gifts to be Rs.1.5 crores principally referring to the income tax returns and the orders of the authorities passed thereon. It did notice that there had been a delay in the submission of the income tax returns but accepted the plea of the defence acting on the orders of the income tax authorities. It seems to have been convinced as well by the contention that there was a practice of offering gifts to political leaders on their birthdays in the State. Not only is the ultimate conclusion of the High Court, de hors any independent assessment of the evidence to overturn the categorical finding of the Trial Court to the contrary, no convincing or persuasive reason is also forthcoming. This assumes significance also in view of the state of law that the findings of the income tax authorities/forums are not binding on a criminal court to readily accept the legality or lawfulness of the source of income as mentioned in the income tax returns by an assessee without any semblance of inquisition into the inherent merit of the materials on record relatable thereto. Not only this aspect was totally missed by the High Court, no attempt seems to have been made by it to appraise the evidence adduced by the parties in this regard, to come to aTo reiterate, disclosure of such giftsin the income tax returnsof A1 and theorders of the income tax authorities on the basis thereof, do not validate the said receipts to elevate the same to lawful income to repel the charge under Section 13(1)(e) thereof. The reliance of the defence on the decisions of this Court inM. Krishna Reddy (supra)and Kedari Lal (supra), in the facts and circumstances of the case, is of no avail299. We have examined the oral and documentary evidence referred to hereinabove to the extent warranted. Apart from the fact that the contents of the income tax returns, the profit and loss account and the balance sheet for the relevant assessment years, as well as the determination made by the income tax authorities on the basis thereof, are not final and binding on the criminal court, the investigative approach of the Trial Court visibly has been relatively exhaustive and searching qua every piece of evidence adduced as expected. Though the orders of the income tax authorities on the various aspects of the issue under consideration, reveal examination of the materials considered to be relevant therefrom in the limited perspective of computation of taxable income alone, we are left with the impression that High Court has not made any endeavour to appraise the evidence available, independent of documents/records pertaining to income tax assessments and the decision of the tax authorities to arrive at its conclusions. The income tax returns and the appendices thereto as well as the orders of the income tax authorities, to reiterate are neither decisive nor binding on the criminal court and the facts narrated therein, if fall for scrutiny in a criminal proceeding, have to be essentially addressed by adducing evidence to prove or disprove the same, as the case may be. Correspondingly, the court would be legally obliged to undertake an incised scrutiny thereof on its own to record its deduction therefrom300. The respondents having claimed the income of Rs.95,92,776/quantified by the DVAC, the onus was on them to prove the same. Even judged by the bench mark of balance of probabilities, in our view, the High Court in order to reverse the determination of the Trial Court, on the same set of evidence ought to have applied itself to examine and assess the evidence in this perspective301. The High Court, in our view, having regard to its approach has failed as an appellate forum and as a higher court of facts to appreciate the evidence in the correct legal context. The finding of the High Court, on this issue, thus, cannot be sustained306. In our view, as the evidence adduced by the defence did establish that Rs.43,75,132/had been paid as rent for the two premises in question, as identified under item nos. 53 & 54 in the list of income provided by the DVAC, the High Court was justified in adding Rs.3,22,000/Income of Jaya Publications and Namadhu MGR: