Case: CENTRAL BUREAU OF INVESTIGATION Vs. HARI SINGH RANKA

4. The CBI investigated the case and filed a charge-sheet. The facts unfold that on 30.6.2004 a case was registered against Shri H.S. Ranka and Shri Sachin Ranka, Chairman and Managing Director of M/s. Modern Denim Ltd. for commission of the offences punishable under sections 120B, 420,467,468, 471 of the IPC. After the investigation, charge-sheet was filed against the respondents, in all 13 accused persons. The respondents-accused persons filed applications under section 239 of the Code of Criminal Procedure, 1973 (in short the Cr.P.C.) seeking discharge, mainly on the ground that M/s. Modern Denim Ltd.- Accused No.13 had since entered into One Time Settlement (in short the OTS) with the bank and the allegation of forgery and use of forged documents as genuine were not raised by the bank in the proceedings before the Debt Recovery Tribunal, as such no case was made out against them. It would be futile to proceed in the matter for the other offences under Section 468,471 & 201 IPC. An offence under Section 420 I.P.C. is compoundable. Other offences hinge around that.5. The allegation levelled by CBI was that accused entered into a criminal conspiracy during the period between 1994 to 2000 between themselves to cheat the bank of Baroda, Bhadra Branch, Ahmedabad and in pursuance of the said criminal conspiracy they availed working capital facility and several other credit facility from the Bank of Baroda by using false documents as genuine. The funds of the Bank of Baroda to the tune of Rs. 43,86,000/-(Rupees forty three crores and eighty six lakhs only) were misused and not repaid by the aforesaid accused. The facilities under Export Packing Credit (EPC), Inland Bill Discounting (IBD), Inland Letter of Credit (ILC) and Term Loan and Working Capital Demand Loan (TC/WCDL) facilities were availed by the Modern Denim Limited. According to the prosecution there was an outstanding amount of Rs. 6,20,00,000/- (Rupees Six Crores and Twenty Lakhs only), Rs. 1,67,00,000/- (Rupees One Crore Sixty-Seven Lakhs Only), Rs. 10,21,00,000/- (Rupees Ten Crores and Twenty One Lakhs only),Rs.12,75,00,000/- (Rupees Twelve Crores and Seventy Five Lakhs Only) and Rs. 6,00,00,000/- (Six Crores only) respectively from all these facilities. In the FIR details have been disclosed as to the way in which the aforesaid offences had been committed. The relevant portion is extracted here under:8(1) Sh. Ranglal Nahar (A3) is working as Vice President, Cotton Purchase Dept., M/s. Modern Denim Ltd. At Moraiya, Ahmedabad. He has been with the M/s. Modern Denim Ltd. since 1991. He was instrumental in mobilizing all the fictitious firms at Mumbai as LC beneficiaries and Drawees of Bills discounted and for which he made Sh. S.K Jhujhunwala (A5) as the nodal person for operating as the authorised signatory apart from other propped up Directors. He is the link for S/Sh. Hari Singh Ranka (A1) and Sachin Ranka (A2) with Sh. S.K. Jhunjhunwala (A-5).(ii) Sh. Dharampal Kalwania (A4), is a partner in M/s. Kalwania Carrying Corporation at Mumbai. M/s. Kalwania Carrying Corporation was registered with I.B.A. (Indian Bank Association) and since the nationalised banks accepted Lrs of such Registered Transport agencies with I.B.A. he took advantage of the facility and misused the same. He sold the Lrs. to M/s. Modern Denim Ltd. for a consideration without actually conducting the transport and these were misused in Inland L.Cs and Bill discounted documents by M/s. Modern Denim Ltd. for obtaining undue facilities from Bank of Baroda, Bhadra Branch, Ahmedabad.(iii) Sh. S.K. Jhunjhunwala (A5), is a Chartered Accountant by Profession. He was one of the Directors of M/s. Intelligent Management Services P. Ltd. engaged in Finance Consultancy. In due course with the connivance of Sh. Ranglal Nahar (A3), he became the common authorised signatory for several LC beneficiary companies and Drawee companies of Bills discounted by M/s. Modern Denim Ltd. and he made some more persons as second authorised signatories for namesake. He was the nodal person for creating false documents in the form of Bills, invoices, Bills of Exchange on behalf of the fictitious companies to be used by M/s. Modern Denim Ltd. for obtaining facilities from Bank of Baroda, Bhadra Branch, Ahmedabad.(iv) Sh. Ram Ratan Maheshwari (A6) is a Director of M/s. Modern Denim Ltd. at Mumbai and he is one of the authorised signatories of M/s. Modern Denim Ltd. account opened at Oman International Bank, Nariman Point, Mumbai, and vide Resolution dated 16.10.1996 Sh. Hari Singh Ranka (A1) had authorised him to operate the account. Further vide resolution dated 29.05.1999 of M/s. Modern Woollens Sh. Hari Singh Ranka (A1) had authorised Sh. R.R. Maheshwari (A6) and others to operate the accounts and this account in turn introduced the LC beneficiaries and Inland Bills Drawees accounts at Oman International Bank, Nariman Point, Mumbai like M/s. Paridhan Commercial & Credit Pvt. Ltd. M/s. Manhattan Traders Pvt. Ltd., M/s. Hobart Trading Pvt. Ltd., M/s. Samray Silk Mills Pvt. Ltd. Etc.(v) Sh. Tarachand Chajera (A7) is a Director of M/s. Modern Denim Ltd., Ahmedabad and he has signed as authorised signatory for M/s. Modern Denim Ltd. on the request letters for the issue of Packing Credit Advances which was in pursuance of the authority given by Sh Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2), similarly he had also signed as authorised signatory for obtaining LC advances and for discounting of Bills which were discounted.(vi) Sh. Vimal Prakash Agarwal (A8) is a Manager looking after accounts Deptt. of M/s. Modern Denim Ltd., Ahmedabad. He has also signed as authorised signatory on behalf of M/s. Modern Denim Ltd. on L.C applications which were in pursuance of the authority given by Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2). He has also signed the Bills of Exchange for Inland L.Cs discounted at the instance of Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2). In the letters of request for advance of Packing Credit Advances also he has signed on the request letters to the Bank for issue of the PC Advances at the instance of Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2) citing the Resolution dated 23.06.1994.(vii) Sh. Pradeep Kumar Jain (A9) is the Vice President looking after Marketing division of M/s. Modern Denim Ltd., Ahmedabad. He has signed several Inland L.C applications for issue of L.Cs and also on Bills of Exchange in the case of Inland Bills Discounted which were done by him as authorised signatory on behalf of M/s. Modern Denim Ltd. At the instance of Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2) who had authorised him by Resolutions passed by the company.(viii) Sh. Sureshchand Maheshwari (A10) an Executive Director of M/s. Modern Terry Towels Ltd., and during the relevant period he was head of finance of M/s. Modern Denim Ltd., Ahmedabad. He has signed the Inland LC applications and also request letters for release of Packing Credit Advances and Bills of Exchange for Inland Bills Discounted, as authorised signatory of M/s. Modern Denim Ltd. at the instance of Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2) who had given him the authority by way of Resolution passed by the Board of Directors of the company.(ix) Sh. Hansmukh Das Sethi (A11) is the Manager looking after accounts dept. Of M/s. Modern Denim ltd., Ahmedabad. He has signed the L.C applications for issue of Inland L.Cs in favour of beneficiaries which were all propped up companies by Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2), Sh. Ranlal Nahar (A3) and Sh. S.K. Jhunjhunwala (A5) and also request letters for grant of packing credit advances as authorised signatories on behalf of M/s. Modern Denim Ltd. At the instance of Sh. Hari Singh Ranka (A1) and Sh. Sachin Ranka (A2) by way of Resolution passed by the Board of Directors of the company.(x) Sh. R.J. Rathi (A12) was one of the authorised signatories of M/s. Modern Woollens Ltd., which is the sister concern of Modern Denim Ltd., Ahmedabad. He had introduced an account by name M/s. Nadi Trading Pvt. Ltd. at Oman International Bank Nariman Point, Mumbai. M/s. Modern Woollens Ltd. in turn introduced several other accounts of propped up companies viz. M/s. Paridhan Commercial & Credit Pvt. Ltd., M/s. Manhattan Traders Pvt. Ltd., M/s Hobart Trading Pvt. Ltd., M/s, Samray Silk Mills Pvt. Ltd., M/s. Abhyudaya Garments Pvt. Ltd. etc. But Sh. R.J. Rathi is reported to have left the services of M/s. Modern Woollens Ltd. and his whereabouts are not known to the authorities of Modern Group. He was not available for investigation also.(xi) M/s. Modern Denim Ltd. (A13) is a company registered under Companies Act 1956 on 23.02.1994 with the Registrar of Companies Rajasthan Jaipur. Sh. Hari Singh Ranka (A1) was appointed as Director on 03/111978 in the erstwhile Modern Suitings Pvt. Ltd. Which subsequently changed into M/s. Modern Denim Ltd. Sh. Sachin Ranka (A2) was appointed as full time Director of the erstwhile Modern Suitings Ltd., on 01.04.1991 which subsequently became Modern Denim Ltd. The company is promoted by the above mentioned two accused and they have personal stake in the said company. The company was used by the 2 accused to defraud the Bank of Baroda, Bhadra Branch Ahmedabad. The company was manufacturing denim fabric at Moraiya Village, Ahmedabad. Its corporate office is located at Worli, Mumbai.9. Investigation disclosed that Export Packing Credit (EPC) is the facility granted by the Bank to enable the borrower to purchase raw material, process them, and export the finished goods. The repayment of EPC is by way of proceeds received by realisation of Export Bills by the Bank. For the purpose of releasing the Export Packing Credit (EPC), the company was obliged to submit to the Bank Confirmed Export orders based upon which the Bank was to release the EPC within the overall sanctioned limit, Investigation revealed that there are 33 such instances wherein S/sh. Hari Singh Ranka (A1) and Sachin Ranka (A2) conspired with the other accused authorised signatories viz.; S/sh. Ram Ratan Maheshwari (A6), Tarachand Chajera (A7), Vimal Prakash Agarwal (A8), Pradeep Kumar Jain (A9), Sureshchand Maheshwari (A10) and Hansmukh Das Sethi (A11), through M/s. Modern Denim Ltd., (A13) and authorised them, to issue request letters to the Bank for release of Packing Credit Advances. The Bank of Baroda, Central Office, Mumbai had sanctioned a limit of Rs. 600 lacs under the Export Packing Credit Advances and after the interchangeability was allowed on 06.05.1997 which was to the tune of 20% from Export Packing Credit to Foreign Bills Purchase/Foreign Bill Discount (FBP/FBD)and vice versa for a maximum period up to 90 days. M/s. Modern Denim Ltd. Was already sanctioned Rs. 500 lacs under FBP/FBD limit with the result the company could enjoy combined Packing Credit Advances and FBP/FBD limit to the tune of Rs. 1000 lacs. It was also allowed Rs. 100 lacs interchangeability from FBP/FBD limit to PC limit and Rs. 200 lacs was earmarked in Bill Discounting limit against corresponding amount in the sanctioned FBP/FBD limit of Rs. 500 lacs. Accordingly the operative limit in PC and FBP/FBD was Rs. 800 lacs keeping Rs. 200 lacs under Inland Bills Discounting. The above said accused persons through their company M/s. Modern Denim Ltd. (A13) availed 33 Packing Credit Advances for exporting denim fabric to 10 Foreign Buyers by submitting orders in the form of sale contracts of M/s. Modern Denim Ltd. itself instead of a firm order of the company. The sale contracts are not of Foreign Buyers and they are in the letter head of Modern Denim Ltd. Itself. The identity of authorised signatory on the sale contract of the letterhead of Modern Denim Ltd. is not known and so also the authorised signatory who has signed on behalf of the Foreign buyer. The document is as such a fake export order. In 5 instances even the purported sale contracts are only photocopies and the original were not submitted to the Bank authorities. No LC was opened for any guarantee for realization of funds. Finally against all these 33 instances of packing credit Advances, no Export was made by the accused persons through M/s. Modern Denim Ltd. Consequently, since no foreign bills were sent for collection or discount, no money could be realised by the Bank. However, it was revealed during investigation that the Export Packing Credit Advances obtained by the accused persons were never utilized for the purchase of raw material for export and instead, the funds were used for liquidating/clearing off the dues that were outstanding in respect of certain earlier Inland L.Cs which had got devolved. Many of these Inland L.Cs was also drawn in favour of propped up companies who were Inland LC beneficiaries like M/s. Paridhan Commercial & Credit Pvt. Ltd., M/s. Manhattan Traders Pvt. Ltd., and M/s Modfab Marketing Pvt. Ltd. The said 33 Export Packing Credit Advances were obtained during the period 5.6.98 to 11.6.99 such that the drawings never crossed the limit of Rs. 600 lacs limit of Packing Credit. Whenever a Foreign bill was realised and credited in the PC account an equivalent amount of PC advance was immediately obtained but by keeping within the overall limit of Rs. 800 lacs. A chart in the form of Annexure -I showing the 33 Export Packing Credit Advances which were fraudulently obtained by the accused persons and the end use of these funds is enclosed to the charge-sheet. The accused persons were fully aware and had no intention to export against the said Packing Credit Advances being obtained and they dishonestly misrepresented by enclosing the fake sales contracts and used the same as genuine. The end use of the said funds substantiate the allegation that such funds were misused.6. The trial court while discharging the accused persons opined that there is no allegation that the documents were forged and the loss was caused. Apart from this, the OTS has been mainly relied upon. It has also been opined that there was no material indicating that the accused persons had acted in collusion between them to cheat the Bank using the documents alleged to be forged. The settlement reached between the parties prima facie indicates that there was no intention of the accused persons to cheat the Bank by producing alleged forged documents. There is no sufficient material to proceed further with the case. Prima facie it appears that the dispute is of civil nature and the Bank has already exhausted the civil remedy for recovery of the amount. The material placed on record falls short for constituting the offence under Sections 420, 467 and 468 of the I.P.C. The prosecution has quoted in all 33 instances of LPCL advances showing mis-utilization of the sum of monies by the accused persons. The Bank, however, did not say that there is non-compliance with the documents required to be furnished for the purpose of the release of the amount. The basic offence is that of cheating and other offences are ancillary to it. Hence the trial court has discharged the accused persons vide order dated 6.2.2008.7. The CBI filed a Criminal Revision Application bearing No. 500 of 2008 in the Court of Principal Session Judge, City Civil Court, Mumbai against the aforesaid order. The Revision had been dismissed vide order dated 9th January 2009. The OTS has been relied upon by the Revisional Court.8. The CBI had filed Criminal Writ Petition bearing No. 1309 of 2009 in the High Court under Section 482 Cr.P.C. The High court had affirmed the orders by impugned order dated 11th July 2011.

Reasoning:
12. We have gone through the orders passed by the High court and the orders passed by the trial court and the revisional court. The order passed by the trial court indicates that it has treated the main offence being that of cheating and it has also been observed that there is no such allegation that documents are forged and pecuniary advantage has been obtained on that basis. The trial court had heavily relied upon the OTS. Its observation that forged documents had not been used to defraud the Bank in our opinion is a palpably incorrect and perverse finding and cannot be sustained. There is overwhelming material placed on record along with charge sheet which indicates that a large number of documents had been forged in the instant case and accused persons thereby have induced the Bank for disbursing the working capital limits to M/s. Modern Denim Ltd. The accused persons had availed credit facility from the Bank in 33 specific instances during the period 19th June 1998 to June 1999 by submitting forged purchase orders purportedly placed on M/s Modern Denim Ltd. by the foreign buyers.13. There is also the allegation supported by documents that sales contract (purchase order) were prepared on the letter head of M/s. Modern Denim Ltd. It is further the case of the prosecution that the advances obtained by the accused persons were never utilized for the purchase of the material thereto to execute the aforesaid purchase orders, but were diverted by the accused persons to liquidate the outstanding dues of M/s. Modern Denim Ltd. against the L.Cs which has devolved. The banks had suffered the loss of Rs. 599.08 lakhs in the aforesaid 33 instances where packing credit was availed on the basis of false and forged purchase orders.14. It was further alleged by the CBI that in the case of FBP/FBD facility the accused persons discounted 12 bills during the period March, 1997 to July, 1998 which were returned unpaid by the foreign banks and remained unrealised. The banks thereby suffered a loss to the tune of USD 629.410 = INR 2,47,56,323/-.15. It was further alleged by the prosecution that during the period 25.5.1999 to 12.08.1999, M/s. Modern Denim Ltd.- Accused No.13, submitted 24 Inland Bills for discounting to the Bank which was supported by the false and forged lorry receipt purportedly issued by M/s. Kalwania Carrying Corporation (Transport firm of Dharmpal A. Kalwania (A-4). The CBI alleged that no supply of materials (denim fabric) was made by M/s. Modern Denim Ltd. against the aforesaid 24 bills drawn on eight paper companies. The forged nature of the lorry receipt is evident from the fact that vehicle numbers were mentioned, the LR were found to be those of tractors and two wheelers, it was also the case of the prosecution that the facilities disbursed by the Bank were used to liquidate the remaining outstanding dues of the accused against the earlier L.Cs in these 24 instances the Bank suffered a loss to the tune of Rs. 1,61,51,052/-.16. It was further alleged by the CBI that M/s. Modern Denim Ltd. - Accused No.13, got established 17 letters of credit in favour of three paper suppliers during the period of 7.9.1997 to 12.8.1999. The aforesaid L.Cs were opened for supply of raw materials to M/s. Modern Denim Ltd. However, no supplies were made instead false documents purported to was submitted which were supported by false and forged lorry receipts issued by M/s. Kalwania Carrying Corporation. It was further alleged that aforesaid L.Cs were discounted by the accused persons. On the respective due dates M/s. Modern Denim Ltd. did not arrange funds for payment of the LCS. In the aforesaid 17 instances, the bank suffered a loss of Rs. 356.00 lakhs.17. In the aforesaid backdrop of facts, we take into consideration the effect of OTS. It is apparent that a large number of documents were filed by the CBI along with the Charge sheet. There are serious allegations in the instant case leveled against the accused persons of using fabricated documents whereas there was no supply or no such transactions took place. The letter head of M/s. Modern Denim Ltd.- Accused 13 had also been used. It passes comprehension how the trial court has given a clean chit that offence falls short of constituting the conspiracy under Section 120B I.P.C. The trial court has not cared to refer to the aforesaid various materials which have been alleged to be fabricated /forged and as to how the misuse of bank funds was made. In our considered opinion, in the facts of the instant case, the manner in which the trial court has discharged the accused persons, in spite of the overwhelming materials on record, could not be said to be legally justified order at all. The OTS merely deals with the civil liability that too by making of payment of Rs. 25 crores whereas outstanding liability was Rs. 44 crores though it was submitted loss caused was approx. 13 crores. Be that as it may, we are not on the civil liability. Ultimately, the amount which has been settled in OTS Scheme cannot be legally sufficient to wipe out the criminal liability of the accused persons. The OTS could wipe off only the civil liability, of the accused not the criminal one. However, this may not be taken to be the ultimate conclusion on merits of the case, it would be open to the trial court to record any finding after the trial of the case.18. In Rumi Dhars case (supra), this court has observed that when settlement is arrived at between the creditors and the debtor, the offence, if committed, as such does not come to an end. Even a judgment rendered in the civil proceedings, when it is rendered on the basis of a settlement entered into between the parties, would not be of large relevance as per criminal offence required of Section 49 of the Evidence Act. The judgment of the civil court is admissible only for limited purposes.22. The principles laid down by this court in Gian Singh decision (supra) indicate that while exercising the power of quashing, when the offences are not compoundable, the facts and circumstances of each case have to be seen, and thereafter the power is to be exercised. In the instant case, considering the aforesaid principle and the facts and circumstances projected above, the power to discharge or that of quashment under Section 482 Cr.P.C. could not have been exercised at all. Where as the power of discharge exercised by the learned trial judge virtually amounts to the exercise of power under Section 482 Cr.P.C. which was not available to it and was totally uncalled for exercise that too without adverting to the materials on record.24. In Ashok Sadaranganis case (supra) offence was registered by the CBI. Allegation was that they had secured the credit facility by submitting forged documents as collected, and utilized such facilities in a dishonest and fraudulent manner by obtaining letters of credit in respect of foreign suppliers of goods without actually bringing any goods but inducing the bank to negotiate letters of credit in favour of the foreign suppliers and also by exercising the cash credit facility.25. This court has considered the various decision in Sushil Suris case (supra) and Gyan Singhs case (supra). This court also considered whether when the dispute has been settled by the bank, the continuance of criminal proceedings would be a futility. This court distinguished the decision of Nikhil Merchant (supra) as the case projected larger conspiracy then this court refused to grant the relief in the prayer of quashing of the case.26. In Sushil Suri v. Central Bureau of Investigation & Anr. [(2011) 5 SCC 708] this court made following observations;23. It is manifest from a bare reading of the Charge sheet, placed on record, that the gravamen of the allegations against the appellant as also the co-accused is that the Company, acting through its directors in concert with the Chartered Accountants and some other persons: (i) conceived a criminal conspiracy and executed it by forging and fabricating a number of documents, like photographs of old machines, purchase orders and invoices showing purchase of machinery in order to support their claim to avail hire-purchase loan from PSB;(ii) on the strength of these false documents, PSB parted with the money by issuing pay orders & demand drafts in favour of the Company; and(iii) the accused opened six fictitious accounts in the banks (four accounts in Bank of Rajasthan and two in Bank of Madura) to encash the pay orders/bank drafts issued by PSB in favour of the suppliers of machines, thereby directly rotating back the loan amount to the borrower from these fictitious accounts, and in the process committed a systematic fraud on the Bank (PSB) and obtained pecuniary advantage for themselves. Precise details of all the fictitious accounts as also the further flow of money realised on encashment of demand drafts/pay orders have been incorporated in the Charge-sheet. Additionally, by allegedly claiming depreciation on the new machinery, which was never purchased, on the basis of forged invoices, etc. the accused cheated the public exchequer as well.This court considered the modus operandi noted in afore-extracted para 23. Considering the allegations that accused had obtained pecuniary benefit by producing forged documents. The case was dismissed and the trial court was directed to decide the case expeditiously. The facts of the instant case are more or less similar.28. Learned senior counsel has also relied upon CBI v. Narendra Lal Jain (2014) 5 SCC 364  in which also this court dealt with the question where quashing of criminal proceeding in respect of not compoundable offence on the basis of compromise is warranted.This court dealt with the offence under Section 420 I.P.C. which is a compoundable offence under Section 320 I.P.C. and other sections which were non-compoundable offence. The monetary loss suffered by the Bank has been mutually settled between the parties and both had accepted liability in this regard. The ratio of B.S. Joshis case (supra) and Nikhil Merchants case (supra) was applied and in the peculiar facts of the case, the order passed by the High Court was upheld. The facts of the instant case are totally different and quite serious.