Case: N.V. Subba Rao Vs. State, through Inspector of Police, CBI/SPE, Visakhapatnam, A.P

a) According to the prosecution, basing on reliable information, on 23.03.1995, the Inspector of Police, Special CBI, Visakhapatnam registered an FIR in Crime No. RC.03against Shri N.V. Subba Raothe then Branch Manager, Central Bank of India (in short ‘theGuntur, A.P and Shri Attur Prabhakar HegdeProprietor of A.P. Enterprises, Guntur, A.P. for the commission of offence punishable under Sectionread with Section 420 IPC and Sections 420, 468 and 471 read with Section 468 IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (in short ‘the P.C. Act.) alleging thatabused his official position as a public servant and entered into a criminal conspiracy withand defrauded the Bank to the tune of Rs. 1.168 crores by sanctioning temporary over drafts and term loans to various individuals sponsored byAfter completion of the investigation, the CBI, on 08.05.2000, filed charge sheet against both the accused persons in the Court of the Special Judge for CBI Cases at Visakhapatnam which was numbered as CC No. 8 of 1998. In the said charge sheet, it has been alleged thatwhile functioning as Branch Manager was instructed by his Controlling Officers to disburse loans to the employees of Railways and other organisations only after obtaining an undertaking from their employers (borrowers) that the monthly installment of repayment of loan will be deducted from their salaries as primary security and also to obtain a mortgage on the plots sold to the borrowers through M/s A.P. Enterprises.fraudulently and dishonestly disbursed 494 loans of Rs. 10,000/each to various railway employees amounting to Rs. 49,40,000/and credited the proceeds to the account ofwithout obtaining the requisite undertaking from the employers and without proper security of monthly installments to be deducted from their salaries. Out of the above mentioned 494 borrowers, 45 persons have been identified by the prosecution. It also came to light thatafter having received the proceeds of the above 45 borrowers, fraudulently and dishonestly did not get 45 plots registered in their names nor the borrowers get the loan amount from the Bank.(c) The Special Judge for CBI cases, Visakhapatnam, by judgment and order dated 30.04.2001, sentencedto undergo RI for a period of one year for the offence under Sectionof the Indian Penal Code, 1860 (in short ‘theand to undergo RI for a period of 2 years alongwith a fine ofin default, to further undergo simple imprisonment for 3 months for the offence punishable under Section 420 of the IPC. Further, A1 was sentenced to under go RI for 1 year alongwith a fine ofin default, to further undergo simple imprisonment for 2 months for the offence punishable under Section 13(1)(d) read with Section 13(2) of the P.C. Act and also ordered that the sentences shall run concurrently.(d) Against the said conviction and sentence,filed Criminal Appeal Nos. 602 and 617 of 2001 respectively before the High Court of Andhra Pradesh at Hyderabad. By impugned judgment and order dated 29.01.2008, the High Court while dismissing the appeals confirmed the conviction passed by the trial Court but reduced the sentence of rigorous imprisonment (RI) of 2 years imposed under Section 420 of the IPC to 1 year considering the age of the accused.(e) Being aggrieved,preferred these appeals by way of special leave and leave was granted on 20.10.2008.

Court's reasoning:
15) In respect of 45 borrowers identified by the prosecution, there is no certificate of authorization on record given by the Senior Divisional Personnel Officer (DPO) to deduct the salary and remit the same to the bank. Even thoughclaims that all the transactions were genuine, onus shifts on him to show that he had complied with all the requirements/conditions. In fact,knows all the procedures and released the amounts to the credit ofwithout fulfilling the requirements/conditions. We have already stated thatwas the custodian of the Branch and he has to take the entiresuch is the position, the statement made bythat he had obtained undertaking letters from all the loanees is factually incorrect. As a matter of fact, the trial Court and the High Court, after verification of the oral and documentary evidence, has noted that only 122 undertaking letters have been obtained out of 957 loanees. The above factual details show thatfailed to obtain undertaking letters and misrepresented about the same to the higher authorities of the Bank. We have already noted and it was also brought to our notice that obtaining of the undertaking letters was one of the importantfor sanctioning of the loans. The claim ofthat it is only mere dereliction of duty cannot be accepted but as rightly argued by the counsel for the CBI, it was a dishonest representation with intention to cheat causing wrongful loss to the bank and the borrowers/purchasers of the plot and obtaining the undertaking letters was one of thefor sanctioning of loans, which21) From the above materials in the form of evidence, it is clear thatwhich is a mandatory requirement according to the Manual of Instructions of the Central Bank of India, was not carried out by1 being a Branch Manager cannot delegate the responsibility ofand reports thereon to anyone and he was permitted to sanction loans and disburse the amounts only after his satisfaction. About the relationship of5 an employee ofstated in her deposition thatvisited the office ofmany a times. In fact, this has been admitted byin his 313 statement that hevisited the office ofthough for inspectionA perusal of the evidence of PWs 1 and 9 clearly shows that preinspection report is necessary and out of 957 loanees only 463 plots were registered and handed over to the respective employees by obtaining the equitable mortgage. Insofar as 494 loanees in whose names plots were not registered, no collateral security for recovery of loans was created in favour of theThe evidence ofshows that for all the 957 loanees, no Savings Bank accounts were opened at the bank except for few. It is brought to our notice that the letter (Exh.from Senior D.P.O Railways toshows that only after employees consent to the amount being deducted, it can be credited to the bank provided that a bank account is opened for the respective employee. It is the responsibility ofand in fact he did not ensure that bank accounts were opened for the employees which would ensure crediting of installments into the bank account. In view of the materials available, the prosecution has rightly established thathas willfully evaded his duty of opening bank accounts leaving the Bank without any recourse to receive monthly2 that his failure to allot 494 plots was because of the default of the Bank in not releasing 40% of FCNR deposit is not acceptable as the materials placed by the prosecution shows that he has received the entire amount of 957 loan proceeds, though the present case is limited to 45 loanees identified by theThough it is claimed bythat several decrees have been obtained, it is evident from the evidence ofthat suits were decreed against 956 loanees, out of which 494 decrees are simple money decrees and 462 decrees are mortgage decrees. Further, it makes it clear that 126 loanees created equitable mortgage and expressed willingness for sale of plots and credit of the proceeds to their respective loan accounts, which was approved by the Regional office. It is further seen that 30 borrowers sold their plots towards discharge of their loan accounts and only one loanee liquidated the loan. The prosecution established that the bank suffered a loss of interest, despite suits filed were decreed forof the decretal amounts. In such a situation, it is relevant to mention a decision of this Court in K.G. Premshanker vs. Inspector of Police & Anr. (2002) 8 SCC 87  and R. Venkatkrishnan vs. CBI (2009) 11 SCC 737 ) wherein it was held that the claim in the suit cannot override the criminalRegarding payments made toAccountant & Typist of A2, deposed before the Court that Exh.contains information of particulars recorded as per directions ofA perusal of the same shows the details regarding various payments made byon different dates and in different names. It shows that on 06.03.1991, a sum of Rs.25,000/was paid by way of cash to N. Subba RaoAgain on 07.04.1991, another sum of Rs.25,000.was paid by cash to the same person. On 14.05.1991, a sum of Rs. 35,000/was paid by way of cash to N.S. Rao and again on 28.05.1991, a sum of Rs.20,000/was paid by way of cash to N.S. Rao (Both N. Subba Rao and N.S. Rao denotes the same person, i.e.5 has also stated that she was asked byto preserve the document (Ex.which was accordingly preserved by her at her house. The statement ofcoupled with the entries in Ex.makes it clear thatis liable to be prosecuted under Section 13(1)(d) read with Section 13(2) of the P.C. Act and is rightly convicted by the Courts below. 30) Regarding the value of the land, it is seen thatwithout any enquiry, allowedto represent higher value which was subsequently discovered by the evidence ofto be Rs.35,000/ch is much lesser to the value of Rs.90,000/as quoted. On the other hand, the evidence ofbroker of house plots, in hishas also stated that the value of lands is Rs.35,000/to Rs. 50,000/2, in his statement under Section 313 of the Code has stated that the value of the land is Rs.80,000/er acre and not Rs.35,000/er acre. The above details also establish the joint role played byand their connivance. It also establishes the active collusion ofin cheating the bank and the borrowers.31) Thoughhas claimed that as requested by the authorities of the Central Bank of India, he has provided FCNR deposits to the Bank, in fact, provided FCNR deposits to a tune of more than Rs. 8 crores for a period of 3 years for which the Bank earned enormous interests. In view of the fact that the land was not approved by the authorities concerned, neither transferred in the name of the loanees nor mortgaged in favour of the Bank though entire sanctioned loan amount had been credited to his account, we are satisfied that the evidence led in by the prosecution establishes the active collusion ofin cheating the bank and the borrowers. Further, it cannot be claimed bythat he has no fraudulent and dishonest intention to cheat the bank. In view of the statement byunder Section 313 of the Code that he remitted the amount of all the loanees into the account ofand of the fact thathas admitted the same, i.e., he received the amount @ Rs. 10,000/and not making the house plots ready to the remaining employees for the purpose of allocation and execution of the sale deed approached the Bank for release of the loan amounts with the connivance ofwhich, as rightly pointed out, show that both were having the intention to cheat the bank at everyis settled principle that for the purpose of reaching one conclusion, the Court can rely on a factual presumption. In the case on hand, from those proved facts, the Court can legitimately draw a presumption that in connivance with1 caused monetary loss to the Bank by sanctioning loans without following the established procedure which we have discussed in the earlier part of ourthe case on hand, we have already noted that the prosecution has established its charges beyond reasonable doubt by placing acceptablehave gone through the factual details in the above decision. The case relates to initiation of departmental enquiry after acquittal in criminal prosecution. It is not in dispute that on the same set of facts, the delinquent shall not be proceeded in a departmental proceeding and in a criminal case simultaneously. When there was an honourable acquittal of the employee during the pendency of the proceedings challenging the dismissal, the same requires to be taken note of. However, each cause must be determined on its own facts. On going through the factual details in the said decision, we are of the opinion that the same is not helpful to the case ofconspiracy has been defined under Sectionof IPC. It is an independent offence, hence, the prosecution for the purpose of bringing the charge of criminal conspiracy read with the provisions of the P.C. Act was required to establish the offence by applying the same legal principles which are otherwise applicable for the purpose of bringing a criminal misconduct on the part of the accused. In order to establish the guilt what is necessary is to show the meeting of minds of two or more persons for doing or causing to be done an illegal act or an act by illegal means. Conspiracy is hatched in secrecy and for proving the said offence substantial direct evidence may not be possible to be obtained. An offence of criminal conspiracy can also be proved by circumstantial evidence.36) We have already referred to the evidence led in by the prosecution, particularly, the evidence of Typist ofwhich shows several meetings between2, acceptance of money byon many occasions, transfer of sanctioned loans to the credit of the account ofetc.37) Insofar as the charge under Section 13(1)(d) read with Section 13(2) of the P.C. Act is concerned, the ingredients of that offence are, viz., (a) that the accused should be a public servant; (b) that he should use some corrupt or illegal means or otherwise abuse his position as a public servant; (c) he should not have obtained a valuable thing or pecuniary advantage; and (d) for himself or any other person and we have already noted the materials placed by the prosecution to substantiate for the abovet is held by this Court in a number of decisions including in the case of Kashinath Mondal vs. State of West Bengal, (2012) 7 SCC 699  that irregularities or deficiencies in conducting investigation by the prosecution is not always fatal to the prosecution case. It was held that if there is sufficient evidence to establish the substratum of the prosecution case then irregularities which occur due to remissness of the investigating agency, which do not affect the substratum of the prosecution case, should not weigh with the Court.