Case: S.V.L.Murthy Vs. State Rep.By Cbi,Hyderabad

3. Accused No. 4 - S.V.L. Murthy was the Branch Manager of Begum Bazar Branch of State Bank of India (for short, "SBI"). Accused No. 1 - Venugopal Loya was proprietor of some business concerns, namely, M/s Shobhachand Shivijiram ("SS"), M/s Sreeji Industries ("SI") and M/s Harikrishan Roopchand ("HR"). Whereas SS and HR used to deal in wholesale trade in grains and spices, SI was a plastic manufacturing concern. Accused No. 2 - Gopaldas Dharak was a partner of M/s Gayatri Traders ("GT"). He used to operate current account in the same Branch. Accused No. 3 - Radheshyam Dharak, partner of GT, an Accountant working in the firms of Accused No.1. Accused No. 5 - P. Jayakumar was the Accountant in the Begam Bazar Branch of the State Bank of India. Accused No. 6 - Y. Narahari Murthy was the Charge Branch Manager.4. SS was established in the year 1860. It opened current account with Begum Bazar Branch of the State Bank of India on or about 5.12.1979. Accused No. 1 opened Current Account with SBI on behalf of SI in his capacity as a Managing Partner on or about 10.5.1988. He was granted cheque discounting facility. For the said purpose, he deposited his title deeds on or about 6.9.1988.5. Srinivasa Rao (P.W. 22), the then Branch Manager of the SBI by a letter dated 10.1.1989 addressed to the Regional Manager sought for his advice as to whether levy of 5 paise per thousand per day instead of 10 paise as commission should be relaxed. Indisputably, collateral securities were furnished by the appellants for availing cheque discounting facility.6. Accused No. 4 - S.V.L. Murthy, however, stopped this discounting facility with SS. inter alia on the premise that three bills purchased by the Bank and sent to Salem Branch for collection had been returned unpaid. So far as the bill limit due in account of SS was concerned, the same stood at Rs.20,18,240/- out of which Accused No. 1 is said to have made payment of Rs.5,00,314/- for returned bills with interest within 2 hrs. It is stated that on or about 7.4.1989, a meeting was held at the residence of the Regional Manager (P.W. 20 - V. Ramamurthy). Accused No. 1 is alleged to have complained that Accused No. 4 had stopped discounting of cheques to him whereupon Regional Manager (P.W. 20) allegedly instructed Accused No. 4 to continue the practice of discounting cheques to Accused No. 1 on the premise that he was a reputed customer of the Bank. Pursuant thereto, the discounting facility was made available with Accused No.1 upon obtaining sufficient collateral security, i.e., title deeds of moveable and immoveable properties of Accused No.1 worth Rs.1.09 lacs.7. The Bank allegedly sanctioned discounting facility to the extent of Rs.30 lacs on the basis of collateral securities furnished on or about 15.4.1989. However, ten cheques aggregating to Rs.29,86,219/- were discounted and sent for clearing by Bank, which were returned unpaid from clearing house. Appellants contended that they were sent for clearing without proper stamping/endorsement; they did not reach drawer bank at all. Indisputably, however, the Regional Office issued instructions for stopping cheque discounting facility without notice. It is stated that the appellants paid a sum of Rs.29,90,941/-, which covered the discounting amount together with interest on or about 25.4.1989. The Bank seized office-cum-godown and stocks of SS at about 11.45 a.m. on the same day. On or about 26.4.1989, 26 account payee cheques were presented in various banks across the counter which should have been presented through clearing. However, Rs.1,28,63,441/- was said to have remained outstanding.8. Accused No. 1 is stated to have made payment of Rs.38,84,000/- through pay order on or about 27.4.1989. On the said date, liability is said to have stood at Rs.89,79,441/-.Indisputably, Accused No. 4 proceeded on leave from 19.4.1989 and handed over the charge of his office to Mr. Y. Narahari Murthy (Accused No. 6). Accused No. 1 furthermore applied for grant of overdraft facility to the limit of Rs.90 lacs against collateral security. It was granted. Sufficient securities were also furnished. The Regional Manager was informed by the Branch that Accused No. 1 has promised to pay a sum of Rs.15 lacs within a week. However, a suit was filed in the court of 4th Additional Judge, City Civil Court at Hyderabad being CSOS No. 827 of 1989 for recovery of a sum of Rs.90,19,789.11 with interest on or about 10.5.1989. On or about 10.5.1989, City Civil Court passed interim direction ordering attachment before judgment.9. On 21.6.1989, a criminal complaint was lodged by the Bank before the III Metropolitan Magistrate at Hyderabad under Sections 120B, 420, 467, 471 of Indian Penal Code (IPC) and under Section 138 of the Negotiable Instrument Act inter alia alleging that cheques issued to SI were fraudulently discounted and amounts were drawn between 14.2.1989 and 1.5.1989.It is not in dispute that in the said complaint no allegation was made against the officers of the Bank. On or about 17.7.1989, the Metropolitan Magistrate directed the Central Bureau of Investigation (CBI) to investigate into the case pursuant whereto a First Information Report was lodged under Sections 120B, 420 of IPC read with Section 13(1)(d) of the Prevention of Corruption Act on or about 5.9.1989.10. We may, however, place on record that P.W. 22 - Srinivasa Rao took over charge as Branch Manager on the oral instructions of P.W. 20 - V. Ramamurthy, on or about 28.4.1989.Indisputably, disciplinary proceedings were initiated against the Accused No. 4, Accused No. 5 as also P.W. 20.In the said disciplinary proceedings, they were placed under suspension. They were, however, reinstated in service. Whereas P.W. 20 was censured, Accused No. 4 was inflicted with a punishment of stoppage of five increments. Some minor punishments was also imposed on the Accused No. 5.Indisputably, a vigilance enquiry was conducted on or about 26.4.1989 at Begum Bazaar Branch of the SBI wherein a report dated 18.1.1990 was submitted indicating that there has been a technical violation on the part of the Bank Officer, inter alia, arriving at the followingS.V.L. Murthy, who had succeeded Shri Vijaya Kumar has apparently also passed on pecuniary advantage to Shri Loya and his group of concerns,a. By continuing the irregular practice of purchasing local cheques and that too for large amounts. It was his period the liability on account of local cheque purchased touched one crore mark in March 1989.b. By not collecting the applicable interest as laid down, he had caused considerable loss of income to the Bank.c. He also did not report the LOIT facility being extended to the firms to the Controlling Authority directly. He had, however, made a reference to the Controlling Authority in January 1989.d. Although, it came to his knowledge that the firms are indulging in irregular and objectionable transactions, he did not adequately safeguard the Banks interests nor initiated location as is necessary to avoid loss to the Bank.e. He did not ensure that the local cheques purchased were promptly presented in clearing and payment obtained.Similarly, he did not ensure prompt recovery on return of cheques inhis predecessor as also successor in office were found guilty of some negligence on their part. Some laxity on the part of office of the Controlling Authority was also pointed out.11. A charge sheet was filed on or about 8.9.1993 under Sections 120B, 420 IPC read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 alleging inter alia that there was criminal conspiracy between the accused persons during 1988-89 to cheat SBI.12. On or about 7.2.1994, learned Special Judge for CBI Cases, Hyderabad framed charges against the accused persons under Sections 120B, 420 IPC read with Section 138 of the Negotiable Instruments Act. However, Accused Nos. 4 to 6 were additionally charged with Section 13(1)(2) of the Prevention of Corruption Act.13. Before the learned Special Judge, a large number of witnesses were examined. They included P.W. 1 - Sh. R. Vijay Kumar, Branch Manager, State Bank of India, Karimnagar Branch, who was holding the post of Manager, in the Begum Bazaar of the State Bank of India, Hyderabad from 31.8.1987 to 9.8.1988, i.e., prior to Accused No.4. P.W. 19 - S.V. Panchapakesan, Dy. General Manager, SBI Capital Market Bombay, who worked as Administrative Officer Advances in the Regional Office and P.W.20 - V. Ramamurthy, the Additional Manager-cum-Deputy General Manager of the Regional Offices.14. Learned Special Judge for CBI Cases, Hyderabad by reason of judgment and order 28.8.1998,The prosecution has failed to establish the Charge U/s 138 of N.I. Act against A1 to A3. Hence I found them not guilty for the offence U/s 138 of N.I. Act against A1 to A3.85. Admittedly A4 to A6 are the employees working in Begumbazar branch at Hyderabad and they are public servants. They abused their positions as public servants. They purchased local cheques which are totally irregular and against the establishment norms of the bank and therefore they have committed an offence of criminal misconduct. A4 to A6 purchased local cheques upto Rs.90 lakhs. There cannot be any evidence that A4 to A6 had pecuniary advantage due to their misconduct but due to their misconduct they obtained benefit to A1 to A3. Hence I found A4 to A6 guilty for the offence U/s 13(2) r/w 13(1)(d) of P.C. Act, 1988.86. In the result, A1 to A6 are found guilty for the offence U/s 120-B, A1 to A6 are found guilty for the offence U/s 420 I.P.C. A4 to A6 are found guilty for the offence U/s 13(2) r/w 13(1)(d) of P.C. Act,convicted and sentenced the accused persons asA1 is convicted and sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs.10,000/-. In default S.I. for ONE YEAR for offence U/S 420 IPC.A1 is sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs.10,000/-. In default S.I. for ONE YEAR for offence U/s 120-B IPC.A2 is sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs.5000/- for offence U/S. 120-B IPC. In default S.I. for ONE YEAR.A2 is sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs.5000/-. In default S.I. for ONE YEAR for offence U/S. 420 IPC.A3 is convicted and sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs.5000/- In default S.I. for ONE YEAR for offence U/s. 120-B I.P.C.A3 is convicted and sentenced to suffer R.I. for THREE YEARS and to pay a fine of Rs. 5000/-. In default S.I. for ONE YEAR for offence U/s. 420 I.P.C.A4 to A6 are convicted and sentenced to suffer R.I. for THREE YEARS each and to pay a fine of Rs.5000/- each. In default S.I. for ONE YEAR for offence U/s. 120-B I.P.C.A4 to A6 are convicted and sentenced to suffer R.I. for THREE YEARS each and to pay a fine of Rs.5000/- each. In default S.I. for ONE YEAR for offence U/s 420 I.P.C.A4 to A6 are convicted and sentenced to suffer R.I. for TWO YEARS for offence U/s. 13(2) r/w 13(1)(d) of P.C. Act, 1988 and to pay a fine of Rs.5000/- each. In default, S.I. for SIX MONTHS each.A1 to A3 are not found guilty for offence U/s. 138 of Negotiable Instruments Act and they are acquitted for the same offence.All the sentences of imprisonment shall run concurrently. Accused are entitled to set off for the remand period if any.Feeling aggrieved and dissatisfied with the aforesaid judgment, appellants preferred appeals.The High Court by reason of the impugned judgment in dismissing the appeals of the appellant,Learned counsel appearing for the accused contended in chorus that the practice of discounting cheques was in existence even prior to A4 taking charge as the Branch Manager of Begum Bazar Branch, State Bank of India, Hyderabad and the said practice was a part of accepted norms. I do not find any substance in their contention. A practice even if it was prevailing, if wrong, is not to be approved. The subsequent clarifications do not in any way put seal of approval on the practices adopted in the past, on the other hand it condemns it.58. When the factual background highlighted is considered in the light of the various provisions, it is clear that the alleged offences under Sections 120-B and 420 IPC against A1 to A5 and under Section 13(1)(c) r/w. 13(2) of the Prevention of Corruption Act, 198 against A4 and A5 are clearlyaccused No. 6 was

Reasoning:
21. It may be that there had been certain procedural irregularities in the transaction.However, sufficient evidence is available on record to show that the Officers had done so for the purpose of promoting the business of the Bank. In relation whereto or in respect whereof, initiatives had been taken by P.Ws. 19 and 20. It is furthermore not denied or disputed that after the cheque discounting facility was stopped in April, 1989 by Accused No. 4, there has been a meeting at the residence of P.W. 20. In his deposition, the said witness categorically admitted that the said meeting was arranged at the instance of Accsued No. 1. It is incomprehensible that a meeting has been arranged at his residence on the day he was on leave at the instance of Accused No.1. He must have developed grievance against the Accused No.4 as regards the stoppage of the said facility. If immediately thereafter the said facility had been restored by the Accused No. 4, a stand taken by him that it was done under the oral instructions of the higher authorities appears to be plausible.22. The prosecution apart from the fact that it had utterly failed to bring on record any evidence of conspiracy must also be held to have failed to bring on record any evidence of wrongful gain so as to attract the provisions of the Prevention of Corruption Act, 1988 or otherwise.23. The entire argument of Mr. B. Datta, learned Additional Solicitor General as also the findings arrived at by the learned Special Judge as also the High Court proved the ingredients of offence under Section 409 of the IPC. The accused persons, however, have not been charged for commission of the said offence. Conspiracy by and between the Bank officials and the Accused Nos. 1 to 3 has been stated to be for commission of the offence of cheating for the purpose of arriving at a finding that there has been a conspiracy so as to cheat the Bank. It was necessary for the prosecution to establish that there had been a meeting of mind at the time when the facility had been granted. Such meeting of mind on the part of the accused persons has not been proved. Furthermore, the prosecution case even if given face value and taken to be correct in its entirety does not lead to a finding that even Accused Nos. 1 to 3 had any wrongful intention at the time when the contract was initiated.24. We do not mean to suggest that in the matter of operating the account, no offence might have been committed by them. The offence, if any, it will be bear repetition to state, was committed under Section 409 of the IPC.25. The learned Special Judge as also the High court unfortunately proceeded on the basis that the cheque discounting facility could under no circumstances be made available to them.26. We do not think that, that was a correct approach. The RBI guidelines categorically show that it was not a wrong practice. It is one thing to say that there has been an abuse of a prevalent banking practice for the purpose of causing wrongful loss to the Bank and causing wrongful gain to others but it is another thing to say that by reason thereof, the ingredients of cheating are attracted.27. We have noticed hereinbefore that learned Additional Solicitor General merely took us through the judgment of the learned Special Judge as also the High court. His entire contention revolved around the commission of criminal breach of trust. Unfortunately, they have not been charged therewith. It would bear repetition to state that accused persons have not been charged under Section 409 of the IPC; even the Accused Nos. 1 to 3 have not been charged for entering into a conspiracy with Accused Nos. 4, 5 and 6 in respect of commission of offences under the Prevention of Corruption Act.28. It is in the aforementioned situation, we are of the opinion that the judgment of conviction and sentence cannot be upheld. So far as the submission of learned Additional Solicitor General that this Court, having regard to the concurrent findings of fact as regards the commission of offence arrived at by the learned Special Judge as also the High Court, should not exercise its discretionary jurisdiction under Article 136 of the Constitution of India is concerned, we do not find any substance therein. Appellants have been charged under wrong provisions. Proper charges have not been framed against them.29. In Lala Ram & Ors. vs. State of U.P. (1990) 2 SCC 113 , whereupon strong reliance has been placed by the learned Additional Solicitor General, this Court noticing various decisions opined that when there are various infirmities, the Supreme Court can interfere.It is, therefore, a case which comes within the purview of the dicta laid down therein. It is significant to notice that in that case itself this Court keeping in view the findings arrived at therein allowed the appeal preferred by the accused persons and set aside the judgment of conviction.It is one thing to say that ordinarily a concurrent finding of fact shall not be interfered with by this Court in exercise of its jurisdiction under Article 136 of the Constitution of India but it is another thing to say that despite opining that accused are entitled to acquittal, a judgment of conviction passed against them should be upheld. In fact, the jurisdiction of this Court must be exercised wherever it is required to do so for securing the ends of justice and to avoid injustice.30. The upshot of our discussionsThe prosecution did not lay down any foundational facts to arrive at a finding of dishonest intention on the part of the appellants, nor any such finding has been arrived at by the trial court or the High Court.(b) The circumstances which were considered sufficient to bring home the charges against the appellant were: the cheques of accused Nos. 1, 2 and 3 were discounted after purchasing cheques; cheques were deposited after a gap of 1 to 4 days; only later the amounts were deposited in the account which circumstances, in our opinion, are not sufficient to hold the appellants guilty for commission of offence under Section 420 of the IPC as all the actions on the part of the bank officers were in consonance with the long standing banking practice.(c) Accused No. 4 had taken care of having adequate security to ensure that the bank does not suffer any loss, the gain if any was caused to the Bank.(d) Appellants acted on instructions by the higher authority.(e) The prosecution evidence does not establish any conspiracy on their partAccused Nos. 1, 2 and 3.