V. Hariharan and M.G. Radhakrishnan vs State by CBI

A.K. Rajan, J.—These are the appeals filed against the order of conviction of A2 and A1, respectively, for offences under

Sections 120B, 420, 409 of Indian Penal Code and Section 5(2) read with 5(1)(d) of Act II of 1947, on various charges and sentencing them to

undergo rigorous imprisonment for three years and also to pay a total fine of Rs.5000/- and Rs.10,100/-, respectively.

Originally, there were three accused before the trial Court. The trial Court acquitted A.3 of all the charges. A.1 was the Manager of the State

Bank of Hyderabad. A2 was the friend of A.1 and customer of the bank. A.3 was the wife of A.2.

The case of the prosecution is that A1 to A3 along with some other persons entered into criminal conspiracy during the year 1975-76 to cheat

the State Bank of Hyderabad, Indra Nagar Branch and others, to commit criminal misconduct by abuse of official position by corrupt or illegal

means or by otherwise and obtain pecuniary advantage, and to commit criminal breach of trust in respect of the funds of the State Bank of

Hyderabad, Indira Nagar Branch by A.2 and A.3, by opening accounts on various names and in various banks, including the State Bank of

Hyderabad, Indra Nagar Branch in the name of fictitious persons and cheques issued by such fictitious persons were credited into the account of

A.2 and A.3, in the names of friends of A2 and A.3 and also in the name of certain fictitious firms and thereby they committed offence punishable

u/s 120B read with Section 420 and 409 of Indian Penal Code, Section 5 (2) read with Sections 5 (2) (d) of Act II of 1947.

The trial Court framed about 39 charges under various heads. After trial, the trial Court found A.1 not guilty of certain charges (ie) charge Nos.

10,11,14,15 and 18, but convicted him in respect of other charges. The trial Court acquitted A.3 of all the charges. A.2 was found guilty of the

charges punishable u/s 120B read with Section 420 IPC, Section 5 (2) read with 5 (2)(d) of Act II of Act 1947 and consequently, imposed

sentence of imprisonment for three years RI and a fine of Rs.5000/- and Rs.10,100/-, respectively.

From the evidence of the prosecution witnesses, it is found that accounts were started in fictitious firms'' names, viz, M/s. Growell IndusTries

showing as one ""S. Radhakrishnan"" as the proprietor, M/s. Balajee Industries, M/s. Ramesh Enterprises, M/s. Versatile Plastice and M/s. Seagul,

etc.

On 15.03.1976 and 16.03.1976, two cheques under Exs. P.148 and P.149 for sum of Rs.31,000/- and Rs.41,000/-, respectively were

credited into the accounts of A2 before it was being cleared. A.2 gave different cheques which were credited to the accounts of M/s. Growel

Industries & M/s. Ramesh enterprises etc.

The modus operandi of the accused is that the cheques were issued by fictitious persons either in the name of M/s. Growel Industries or M/s.

Ramesh Enterprises, were credited into the accounts of A.2 and A.3 by Ex.A.1 even before it was sent for collection and passed by the other

banks. By using such method of crediting the cheques issued by those persons, A.1 facilitated A.2 and A.3 to make use of those amounts credited

into their accounts. Subsequently, some of the cheques sent for collection were not honoured; few cheques have been repeatedly sent for

collection, remained dishonoured for a considerable period. By this process of ""kite flying"", A.2 and A.3 had the advantage of cash liquidity to the

tune of Rs.1.5 lakhs in the year 1975 The lower Court found A.1 guilty of charges u/s 120-B read with Section 420 and 409 of Indian Penal

Code.

Learned counsel appearing for the appellants submitted that there is no loss incurred by the bank . Entire amount has been realised. A.1 was

only doing the act in accordance with the procedures followed in the bank. Discounting a cheque is one of the recognised services rendered by the

banks, that is what A.1 did in this case also. It was only bona fide action not with any intention of cheating the bank. Therefore, A.1 cannot be held

to be guilty of offence. It is seen from the evidence that A.1 had not discounted the cheques. The entire amount as found in the cheques has been

credited. In case of discount, a commission has to be deducted, which would go as income to the bank. But this was not done. Therefore, it is not

a regular service rendered by the banks. Further, these cheques were local cheques which cannot be discounted as spoken to by P.W.24.

Therefore, the argument of the learned counsel for the appellants that it is only an innocuous act which is one of the service rendered to the

customers, is not acceptable.

Learned counsel further argued that the entire amount together with interest on the dishonoured cheques have been collected. Therefore, there is

no loss caused to the banks at all and, therefore, the charge under Sections 5(2) read with 5(2)(c) & (d) of Act II of 1947, cannot be said to have

been made out. Since the amount has been repaid, the charge u/s 420 of Indian Penal Code also cannot be sustained.

It is true that ultimately the bank has not sustained any loss since the entire amount has been credited to the bank account together with interest.

At the same time by indigenous method followed by A.1, namely by crediting the cheques issued in fictitious names, immediately without even

discounting the cheques, is not permissible under the rules of the banks. Further, local cheques cannot be discounted at all; local cheques cannot be

credited unless it has been passed by drawee the bank. This is spoken to by P.W.24. It is proved by the records that A.1 has credited cheques in

the account of A.2 without waiting for any reply from the other bank, and ultimAtely, those cheques were dishonoured. Therefore, immediately the

bank did not get the amount credited into the account of A.2 by A.1, thereby the bank was made to sustain a loss during the period when the

amount was not actually honoured by other banks and thereby the bank has been made to suffer a loss over a period of time. This action of A.1

definitely attracts Section 420 of Indian Penal Code since it is found that all the six concerns in whose names cheques were issued and credited in

the account of A.2, were fictitious and non-existence and this fact was known to A.1. But yet he has credited these amounts in the account of A.2.

Therefore, the charges u/s 120B read with Sections 420 and 409 IPC are proved beyond any reasonable doubt. The lower appellate Court was

right in convicting the accused under these sections. Therefore, the conviction of these accused under these offence is legal and valid.

Learned counsel appearing for the accused submitted that regarding sentence of A.1 is concerned, he has been dismissed from service and

further more, he underwent open heart surgery. A.2 is aged about 60 years and is also sick. Since the occurrence took place in the year 1975-76,

and also taking into account the fact that entire amount has been repaid by them with interest, some indulgence should be shown regarding

sentence.

The occurrence took place in this case some time in the year 1975-76, we are now after 26 years. Considering this fact and also the fact that

entire amount had been paid to the bank by the accused together with interest, since there is no loss sustained by the bank and A.1 has been

dismissed from service already, and he had also underwent open heart surgery, this Court is of the view that they need not be sent back to jail

again; therefore, the imprisonment imposed by the trial Court is reduced to imprisonment till the raising of the Court. In view of the reduction of

sentence, an additional fine of Rs.5000/-(Rupees five thousand only) each is imposed on A.1 and A.2. The accused are directed to appear before

the X Special Sessions Judge/Additional Special Judge, CBI Cases, on or before 19th of August, 2002 and pay the above said A.K. RAJAN, J.

additional fine before the said Court.

With these modifications, the appeal is dismissed.