Bishwanath Sinha vs State Of Kerala

R.Narayana Pisharadi, J

The petitioner is the first accused in the case registered as VC.02/2012/CRE by the Vigilance and Anti-Corruption Bureau (VACB), Central

Range, Ernakulam.

There are 12 accused in the aforesaid case. The offences alleged against the accused in the case are punishable under Sections 13(1)(d)(ii) read

with 13(2) of the Prevention of Corruption Act, 1988 (for short 'the Act') and also under Section 120B of the Indian Penal Code.

On the basis of a letter sent by the Registrar of Co-operative Societies to the Government of Kerala, alleging irregularities in sanctioning of loans by

the Kerala State Co-operative Bank (hereinafter referred to as 'the Bank'), a preliminary enquiry was conducted. On the basis of the facts revealed in

the preliminary enquiry, Ext.P1 First Information Report (F.I.R) was registered against the accused for the offences mentioned above.

The first accused was the Managing Director and the second accused was the General Manager of the Bank during the period 2002-2003.

Accused 5 to 12 were the members of the Executive Committee of the Bank. The third and the fourth accused were the partners of the firm

M/s.Geofranc Enterprises at Ernakulam.

The allegation in Ext.P1 F.I.R against the accused is that, accused 1, 2 and 5 to 12 entered into a criminal conspiracy with accused 3 and 4 and

pursuant to such conspiracy, by misusing their official positions and public office and diluting the routine procedure, accused 1 and 2 and 5 to 12

granted a loan of 350 lakhs rupees to the third and the fourth accused and thereby allowed them to obtain undue pecuniary gain and corresponding loss

to the Bank.

After conducting investigation of the case, the VACB filed final report in the Court of the Enquiry Commissioner and Special Judge, Thrissur for

dropping further action in the matter on the ground that there was no scope for a successful prosecution of the accused in the case.

The Special Court did not accept the aforesaid final report filed by the investigating officer. As per Ext.P26 order dated 19.05.2015, the Special

Court rejected the final report and remitted the matter to the investigating officer for conducting further investigation.

After conducting further investigation in the case, the the investigating officer of the VACB again filed Ext.P2 final report in the Special Court,

stating as follows:

“From the above circumstances prosecution may not be recommended as there is no sufficient evidence to prove that A1 had acted with mala fide intention.

MD presented all the facts before the EC and it was the EC which has taken a decision and amended its own circular issued vide ILD/9/2001-2002 dated 06-8-

2001 and sanctioned the loan. However Departmental action is recommended against A1 for not verifying the documents submitted as collateral security against

the loan by A3 and A4 and disbursed the loan which has resulted in litigation before the Hon'ble High Court and created difficulties for the recovery of loans.

As in the absence of evidentiary material available to prove that the accused Sri.Bishwanath Sinha IAS, former MD, Kerala State Co-operative Bank Head Office,

Trivandrum acted with mala fide intention and in violation of rules to sanction the loan in question so as to bring undue gain to A3 and A4 and hence

recommended to final report the case before the Hon'ble Court of Enquiry Commissioner and Special Judge, Muvattupuzha as further action dropped and

recommended a departmental action against A1. Copy of the letter No.E9 (VC.2/12/CRE)12535/12 dtd. 04.06.18 of the Director, VACB, Thiruvananthapuram is

enclosed.

The Final Report may kindly be accepted and final orders of the Hon'ble Court may kindly be issued in this case.â€​

The Special Court did not accept Ext.P2 final report filed by the investigating officer. As per Ext.P3 order dated 09.11.2020, the Special Court

found that the final report cannot be accepted and it has to be returned to the investigating officer for conducting further investigation. Accordingly,

the Special Court returned Ext.P2 final report to the investigating officer for conducting further investigation, after getting approval of the competent

authority under Section 17A of the Act.

This original petition is filed under Article 227 of the Constitution of India by the first accused seeking the following reliefs:

“(i) To set aside the Exhibit-P3 order of the Court of Enquiry Commissioner and Special Judge (Vigilance), Muvattupuzha and accept Ext.P2 final report and

close all further proceedings against the petitioner in VC 02/12/CRE registered by the Vigilance and Anti-Corruption Bureau, Central Range, Ernakulam.

(ii) To issue such other and further reliefs as may be prayed for from time to time.â€​

Â

Heard the learned senior counsel who appeared for the petitioner and also the learned Public Prosecutor. I have also Perused the case diary

produced by the learned Public Prosecutor.

Before examining the merits of the matter, the basic facts relating to the transaction which led to the registration of Ext.P1 F.I.R may be noticed.

The firm Geofranc Enterprises, of which the third and the fourth accused were partners, forwarded a request to the Bank on 21.06.2002 for

granting credit facility of 450 lakhs rupees. As per the letter dated 02.07.2002 sent from the Bank, the firm was informed that the Bank was not in a

position to consider the request as no application for loan and other financial particulars were furnished by the firm.

Thereafter, on 29.07.2002, the firm Geofranc Enterprises sent an application for a term loan of 350 lakhs rupees to the Managing Director of the

Bank. On 08.08.2002, the Executive Committee of the Bank took a decision to sanction a term loan of 350 lakhs rupees to the firm, out of which 250

lakhs rupees was for reimbursement of the loan of the firm outstanding with other financial institutions and 100 lakhs rupees as working capital. The

loan granted was subject to certain terms and conditions. One of the main conditions to be satisfied was getting clearance from the National Bank for

Agriculture and Rural Development (NABARD) and the Reserve Bank of India (RBI).

As per the letter dated 06.09.2002, NABARD informed the Bank that no productive purpose was involved in granting term loan for liquidation of

existing unsecured loan and that clearing external borrowings was not an approved procedure of granting of loans. The Bank was also informed that

granting of term loan for working capital requirements is an undesirable practice.

However, the Executive Committee of the Bank took a decision on 19.09.2002 to grant a term loan of 350 lakhs rupees to the company

M/s.Geofranc Private Limited, instead of granting the loan to the firm M/s.Geofranc Enterprises.

Learned senior counsel for the petitioner invited attention of this Court to the various documents produced by the VACB along with the final report

filed by it in the Special Court and made an attempt to establish that, the petitioner, as the Managing Director of the Bank, had brought to the notice of

the Executive Committee all aspects relating to the application for loan made by the firm. Learned senior counsel also contended that it was the

decision of the Executive Committee of the Bank to grant the loan and it was not the decision of the petitioner. Learned senior counsel submitted that

the petitioner had not made any positive recommendation to the Executive Committee for granting loan either to the firm or the company. Learned

senior counsel further submitted that the loan amount was disbursed after complying with all necessary formalities.

Learned Public Prosecutor, on the other hand, invited the attention of this Court to the various documents contained in the case diary and

submitted that, there was not even an application obtained from the company to which the loan was granted by the Bank. Learned Public Prosecutor

also invited the attention of this Court to the letters sent by the petitioner to the Senior Manager of the Bank insisting on the disbursement of the loan

amount even without complying with the necessary formalities and even threatening disciplinary action against the Senior Manager.

It is true that the petitioner had brought to the notice of the Executive Committee of the Bank all important aspects with regard to granting of loan

to the firm Geofranc Enterprises, before the Committee took its decision on 08.08.2002 to sanction the loan to the firm. Ext.P12 memorandum

submitted by the petitioner to the Executive Committee of the Bank would substantiate the contention of the learned senior counsel for the petitioner in

this regard.

Ext.P13 decision taken by the Executive Committee of the Bank on 08.08.2002 to sanction the loan to the firm was subject to certain conditions.

As already noticed, getting clearance from the NABARD was one of those conditions. The opinion given by NABARD has already been referred to.

Thereafter, the entire circumstances regarding the procedure adopted which culminated in the decision (Ext.P7) of the Executive Committee of the

Bank on 19.09.2002 for granting the loan to the company instead of the firm are suspicious and shrouded in mystery.

The following circumstances are very significant. (1) The loan was sanctioned to the company M/s.Geofranc Private Limited even

without an application submitted by the company (the application for term loan was submitted by the firm Geofranc Enterprises and not by the

company). (2) The valuation of the properties offered as security for the loan, as per the officials of the Bank, was 210.12 lakhs rupees. But this

valuation was ignored and valuation report of a private valuer engaged by the third and the fourth accused was accepted. (3) Even when the Manager

of the Bank at the branch level had pointed out the infirmities which had to be rectified before disbursing the loan amount, the petitioner had insisted

that the Manager shall disburse the loan amount and the petitioner had even threatened him of disciplinary action. (4) The opinion given by the

NABARD, as to the undesirable practice of granting term loan for liquidation of existing loans and for providing working capital requirements, was

totally ignored.

As per Ext.P26 order dated 19.05.2015, the Special Court had found that, there were clear materials to assume hatching of criminal conspiracy

between the petitioner and the third and the fourth accused but no meaningful investigation was conducted into that area. The final report filed then

was rejected by the Special Court for this reason and further investigation was ordered.

It was pursuant to Ext.P26 order that the VACB conducted further investigation and filed Ext.P2 final report before the Special Court. A perusal

of Ext.P2 final report would show that, inspite of the direction given by the Special Court in Ext.P26 order, no meaningful investigation was conducted

with regard to the conspiracy alleged to have been hatched between the petitioner and the third and the fourth accused. Ext.P2 report only contains

the factual details of the transaction which ultimately led to the sanctioning of the loan by the Bank to the company instead of the firm.

The sum and substance of the findings made by the Special Court in Ext.P3 order, by which it rejected Ext.P2 final report, is that the VACB did

not conduct any investigation with regard to the conspiracy hatched among the accused. This finding cannot be considered as one made by the Special

Court without any basis.

25 At this juncture, the limitations in exercising the jurisdiction of this Court under Article 227 of the Constitution of India have to be kept in mind.

Even if another view than the one expressed by the lower court is possible, this Court cannot, in exercise of its jurisdiction under Article 227 of the

Constitution, substitute it in place of the view taken by the lower court.

It is well-settled that the power of superintendence available to the High Court under Article 227 of the Constitution of India is extremely vast but

at the same time the Court cannot exercise that power on the drop of a hat. In addition, in exercise of its power of superintendence, the High Court

cannot correct mere errors of law or fact merely because another view is possible. This power of superintendence conferred by Article 227 of the

Constitution is to be exercised most sparingly and only in appropriate cases in order to keep the subordinate courts within the bounds of their authority

and not for correcting mere errors. In the exercise of jurisdiction under Article 227 of the Constitution of India, it is not open to this Court to review or

re-assess the facts and materials and reach another possible conclusion.

When a report made under Section 173(2) of the Code of Criminal Procedure, 1973 (for short 'the Code') comes up for consideration by the

Magistrate, one of the two different situations may arise. The report may conclude that an offence appears to have been committed by a particular

person or persons and in such a case, the Magistrate may do one of the three things : (1) he may accept the report and take cognizance of the offence

and issue process or (2) he may disagree with the report and drop the proceeding or (3) he may direct further investigation under sub-section (3) of

Section 156 of the Code and require the police to make a further report. The report under Section 173(2) of the Code may on the other hand state

that, in the opinion of the police, no offence appears to have been committed and where such a report has been made, the Magistrate again has an

option to adopt one of the three courses : (1) he may accept the report and drop the proceeding or (2) he may disagree with the report and taking the

view that there is sufficient ground for proceeding further, take cognizance of the offence and issue process or (3) he may direct further investigation

to be made by the police under sub-section (3) of Section 156 of the Code (See Bhagwant Singh v. Commissioner of Police : AIR 1985 SC 1285).

In the instant case, Ext.P2 report under Section 173(2) of the Code was filed by the VACB, stating that commission of any offence by the

accused was not made out. On consideration of such report, the Special Court found that further investigation was required in the matter. The Special

Court has also given reasons for ordering such further investigation. On factual grounds, I find no sufficient ground to interfere with Ext.P3 order

passed by the Special Court.

Now, the legal points raised by the petitioner to challenge Ext.P3 order shall be examined.

Learned senior counsel for the petitioner has relied upon the decisions of the Apex Court in Anil Kumar v. M.K.Aiyappa : (2013) 10 SCC 705 and

L.Narayana Swamy v. State of Karnataka : AIR 2016 SC 4125 to contend that the Special Court had no power to order further investigation without

sanction granted by the competent authority under Section 19 of the Act.

The dictum laid down in Anil Kumar (supra) is that, in the absence of sanction under Section 19(1) of the Act given by the competent authority, a

complaint filed against a public servant alleging commission of an offence specified in Section 19(1) of the Act cannot be forwarded by the Special

Court under Section 156(3) of the Code for investigation.

One of the questions of law that arose for consideration in Narayana Swamy (supra) was whether an order directing further investigation under

Section 156(3) of the Code can be passed in relation to public servant in the absence of valid sanction granted under Section 19(1) of the Act.

Following Anil Kumar (supra), it was held that an order directing further investigation under Section 156(3) of the Code cannot be passed in the

absence of valid sanction.

In Manju Surana v. Sunil Arora : (2018) 5 SCC 557, the question that was considered was whether prior sanction for prosecution against a public

servant was required before setting in motion even the investigative process under Section 156(3) of the Code. The Apex Court referred the question

to be decided by a Larger Bench.

The decisions in Anil Kumar (supra) and Narayana Swamy (supra) have been rendered by the Apex Court in the context of ordering investigation

under Section 156(3) of the Code in respect of private complaints filed in the court. The dictum laid down in these decisions does not apply to a report

filed by the investigating officer under Section 173(2) of the Code.

Learned senior counsel for the petitioner has contended that it was not open to the Special Court to order further investigation for a second time

after rejecting the closure report. Learned counsel relied upon the decision of the Apex Court in Vasanti Dubey v. State of Madhya Pradesh : (2012)

2 SCC 731 in support of this contention.

On a perusal of the decision in Vasanti Dubey (supra), I cannot find any dictum laid down by the Apex Court to the effect

that further investigation cannot be ordered by the Special Court on a second time after rejecting the second closure report. In Vasanti Dubey (supra),

the Apex Court has held that the order passed by the Special Judge directing the investigating agency to file a charge-sheet was illegal. It is to be

noted that it was a case where the complainant had alleged in the complaint given to the police that the accused demanded bribe from him but he gave

statement to the police during the investigation that he had made a false complaint at the instance of another person.

The discussion above leads to the conclusion that Ext.P3 order passed by the Special Court, directing further investigation in the matter, is not

liable to be set aside by this Court by invoking the power under Article 227 of the Constitution of India.

Learned Special Judge has directed that further investigation shall be conducted by the VACB only after obtaining approval under Section 17A of

the Act.

Section 17A was introduced in the Act by way of amendment, as per Act 16 of 2018, with effect from 26.07.2018. The bar under Section 17A of

the Act operates against a police officer. It prohibits a police officer from conducting any enquiry or inquiry or investigation into any offence alleged to

have been committed by a public servant under the Act without the previous approval of the prescribed authority. The bar under the provision

operates or applies only when the offence allegedly committed by a public servant under the Act relates to any recommendation made or decision

taken by such public servant in discharge of his official functions or duties.

The amendments made to the Act, by Act 16 of 2018, are prospective. The provisions of the Act, as amended, have no application to cases

registered prior to amendment and pending under various stages of investigation and to cases in which investigation has been completed and are

pending trial (See Ramesh v. C.B.I : 2020 (4) KHC 220). Therefore, Section 17A of the Act has no application to the further investigation ordered to

be conducted in the present case.

Further investigation means continuation of the investigation already conducted and not fresh investigation. The investigation in the present case,

having commenced prior to the date of introduction of Section 17A in the Act, no question of obtaining 'prior approval' for such investigation arises.

Since it is a matter which affects the career of the petitioner, the further investigation in the case has to be expedited. At the same time, as the

petitioner had sought and obtained an interim stay of all proceedings pursuant to Ext.P3 order, it is not proper to give a direction to complete the

investigation in a hasty manner. Having regard to the circumstances of the case, I find that a direction can be given to the investigating officer to

complete the further investigation of the case within a period of three months from today.

Consequently, the prayer for setting aside Ext.P3 order is rejected. The investigating officer is directed to conduct the further investigation of the

case, without waiting for any approval of the competent authority under Section 17A of the Act and to complete such investigation within a period of

three months from today. The original petition is disposed of accordingly.

All pending interlocutory applications are closed. The case diary produced by the learned Public Prosecutor shall be returned forthwith.