Vincent Antony vs Delhi Police Establishment

The appellant in Crl.A No.118/2011 is the 1st accused in C.C No.1/2004 of the Special Court (SPE/CBI)-I, Ernakulam and the appellant in Crl.A

No.114/2011 is the 2nd accused therein. The 2nd accused is the Managing Partner of M/s.Mudra Silks and Fashions, Aluva, and the 1st accused was

the Senior Manager of the Aluva Branch of the Bank of Baroda (the Bank) during 1989-2000. The two accused faced trial before the learned trial

Judge under Section 13(1) (d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (for short “the P.C Actâ€), and also under

Sections 420 and 120B I.P.C on the allegation that without authority, and as part of a conspiracy, the 1st accused sanctioned huge amount of

overdrafts to the 2nd accused for business purposes, far in excess of his authority as Senior Manager and consequently, the bank sustained heavy

loss. The crime was registered at the Kochi office of the Central Bureau of Investigation on some source information. After investigation, the CBI

submitted final report in court.

The two accused appeared before the learned trial Judge and pleaded not guilty to the charge framed against them. The prosecution examined

twelve witnesses and proved Exts.P1 to P85 documents in the trial court. When examined under Section 313 Cr.P.C, both the accused denied the

incriminating circumstances and projected a defence that the loan was sanctioned by the 1st accused without any dishonest or mala fide intention, that

overdrawal was sanctioned in dishcharge of his official functions bona fide, that the Bank has not in fact sustained any loss and the Bank has already

initiated proceedings for recovery of the amount due from the 2nd accused. In defence, the accused examined a witness as DW1 and proved Exts.D1

to D35 documents.

On an appreciation of the evidence, the trial court found the two accused not guilty under Section 420 I.P.C in the absence of the required elements

under Section 420 I.P.C, and accordingly, they were acquitted of the said offence charged with the aid of Section 120B I.P.C. However, the first

accused was found guilty and convicted by the trial court under Section 13 (1)(d) read with Section 13(2) of the P.C Act and the 2nd accused was

also convicted thereunder with the aid of Section 120B I.P.C. Aggrieved by the judgmemnt of conviction dated 31.12.2010, the two accused have

come up in appeal.

When the appeals came up for final hearing, the learned counsel submitted that the crime in this case was registered without any basis or complaint,

that the CBI has not so far revealed the information that led to the crime, though the source as such may have to be kept secret, and that just because

the Bank Manager sanctioned business loan in excess of his authority or beyond the permitted limits, a prosecution cannot be initiated under the P.C

Act when nobody is actually unlawfully benefitted.

Finding some substance in the contention raised by the defence as regards the FIR, the court directed the CBI to furnish the details of the

information that led to the registration of the crime. Of course, a crime can be registered on source information and in such case, we will call it a suo

motu crime or a suo motu FIR. Whether the FIR is a suo motu one or on direct information or complaint, there must be a definite complaint or

information disclosing a cognizable offence, and a crime can be registered under Section 154 Cr.P.C only on the basis of such definite complaint or

information. Of course, in cases of suo motu crimes, the Police Officer or the prosecuting agency cannot be compelled or directed to disclose the

source from which information was received. But the actual information will have to be disclosed and revealed by the CBI, because a crime can be

registered only if the information discloses a cognizable offence. In this case, the Bank has admittedly not made any complaint, or the crime was not

registered on the basis of any complaint from any authority of the Bank of Baroda. The Bank Officials examined by the prosecution have no case that

any responsible officer of the Bank of Baroda had made any complaint to the CBI or any other authority against the 1st accused or the 2nd accused.

In such a circumstance, fairness in prosecution demands that the information received by the CBI will have to be disclosed. It is not known whether

the Bank had conducted any inhouse enquiry regarding the factual allegations. In the above circumstances, I find substance in the contention raised by

the accused that the crime in this case was registered without any solid basis, or without any sort of complaint from the Bank of Baroda.

PW1 to PW3 are the material witnesses examined by the prosecution to prove the factual aspects. PW4 and PW7 are two of the partners of

M/s.Mudra Silks and Fashions. PW7 has proved the account opening form signed by him and the 2nd accused, and the bank officials have proved the

loan transaction between the 2nd accused and the Bank. Of course, evidence well proves that overdrawal at various stages was sanctioned by the 1st

accused.

PW10 has proved the FIR, but he has not proved the actual information that led to the registration of the crime, or that disclosed any cognizable

offence. When the crime is registered on a definite complaint, the complainant will have to prove the complaint and the contents. When a crime is

registered suo motu on direct knowledge or information, or some other source information, the officer, who registered the crime will have to prove the

information that led to the registration of the crime. PW6 was the Senior Manager of the Bank, and he was examined to prove the overdraft details

contained in Ext.P29. Of course, the defence has no dispute regarding the amount of loan sanctioned by the 1st accused to M/s.Mudra Silks. One

contention raised by the defence is that Mudra Silks, as a partnership firm is not an accused, and the other partners, who had active involvement in the

business of the firm are also not made accused by the CBI. Any way, let it be assumed that the entire dealings on behalf of the firm were made by

the 2nd accused, and the loan amount was also received by him from the Bank on behalf of the firm. On factual aspects, there is the evidence of

PW1 to PW3 and PW6. They are the bank officials, including Bank Managers examined to prove the loan transaction between the 2nd accused on

behalf of the firm, and the 1st accused on behalf of the Bank. These officers have also given evidence regarding the lending power of the 1st accused

at the relevant time, or regarding the maximum amount, which he could sanction as loan in exercise of his powers as Bank Manager. In fact the 1st

accused has no dispute regarding the actual amount of overdrawal sanctioned by him, and admittedly, a huge amount was sanctioned by him at

different stages. The prosecution case is that the lending capacity of the 1st accused was only upto Rs.25 lakhs, but far in excess of it huge amount

was sanctioned to the 2nd accused, and a huge amount remained unpaid. PW2 has proved the statements of accounts sent from the Bank to the

superior officers. He has no case that anything wrong on the part of the 1st accused was detected on verification, or at the time of sending statements

of accounts.

It is true that on factual aspects, there is clear evidence, and it stands well proved that overdrawal of huge amount was sanctioned by the 1st

accused to M/s.Mudra Silks, in excess of his authority as Bank Manager. The amount sanctioned initially was within limits, but the total liability went

upto Rs. 82.80 lakhs by March, 2000. It has come out in evidence that the Bank had accepted security deposit by way of Fixed Deposits from the

partners of the firm upto Rs. 31.5 lakhs. It has also come out in evidence that the security deposit was appropriated by the Bank towards the loan

amount due from M/s.Mudra Silks, and after registration of the crime, a huge amount was deposited by the partners of the firm. It is an admitted fact

that the partners of M/s.Mudra Silks had made a deposit of Rs. 54 lakhs before the Debt Recovery Tribunal towards the amount due from the firm,

and the Bank had received more than Rs. 34 lakhs by way of interest from the firm. These things will have much bearing in deciding the issue,

whether the accused can be convicted under the Prevention of Corruption Act (for short, 'the P.C.Act') on the ground of commission of any sort of

criminal misconduct as defined under the P.C.Act.

PW5 is the General Manager of the Bank examined to prove the Ext.P76 prosecution sanction. His evidence shows that he granted the sanction

under Section 19 of the P.C.Act as the officer competent to remove the 1st accused from service, and he granted the sanction after examining the

prosecution records in detail, and also on an application of his mind independently to the facts of the case. Regarding the Ext.P76 prosecution sanction,

or the authority of PW5, the defence has no dispute.

As regards the investigation in this case, the trial court has come to some finding against the prosecution. The defence contention is that the case

was not properly investigated by the CBI, or that there was inexcusable failure on the part of the CBI to seize some important materials. On this

aspect, the learned trial Judge has found, on an appreciation of the facts, that there was some failure on the part of the CBI during the investigation

process. The CBI has produced some documents in court, including a circular of the Bank regarding the lending powers of different categories of

officials. It is pertinent to note that most of the material documents produced by the CBI are photocopies. Marking of these documents was objected

by the defence during trial, but the learned trial Judge allowed the prosecution to mark those documents subject to final decision on merits. Nothing is

seen discussed by the trial court about the admissibility of those documents. The prosecution has no explanation for the production of unauthenticated

photocopies, when the prosecution could have definitely produced the originals or the certified copies. Even the bank circular produced by the

prosecution and relied on by the CBI to prove the lending power of the accused is a photocopy not authenticated by anybody. On the basis of these

documents, the CBI would contend that the lending power of the 1st accused was only upto Rs. 25 lakhs. Of course, the Bank Managers, who gave

evidence as PW1 to PW3 have given evidence regarding the factual aspects, and also the lending power of the 1st accused at the relevant time. They

did not rely on any document other than the circular produced by the CBI as a photocopy. Even assuming that the lending power of the 1st accused

was only upto Rs. 25 lakhs, or that he sanctioned huge amount upto Rs. 85 lakhs, the crucial question is whether that by itself would cause a

prosecution under the P.C.Act. PW1 is the Bank Manager, who filed a civil proceeding (OA 32/2002) before the Debt Recovery Tribunal against

M/s.Mudra Silks, represented by the 2nd accused as the Managing Partner. The said civil proceeding was filed for recovery of the amount due from

M/s.Mudra Silks and Fashions, in connection with the loan transaction, which is the subject matter of this prosecution. On an analysis of the provisions

of Section 13(1)(d) of the P.C.Act, and also the judicial pronouncements on the issue, this Court has explained in State v. K. Mohanachandran (IAS)

and Others [2017 (4) KHC 297 = 2017 (4) KLT SN 68], what all things are absolutely necessary for a prosecution under Section 13(1)(d) of the

P.C.Act. This Court has explained the essential requirements for clause (d) of Section 13(1) of the P.C.Act. For a successful prosecution on an

allegation of criminal misconduct, and for a conviction under Section 13(1)(d) of the P.C.Act, the prosecution must necessarily prove that either the

public servant or somebody else had made some gain or pecuniary benefit out of the transaction in question or due to the discharge of functions by the

public servant.

It appears, on an examination of the trial court judgment, that the trial court convicted the accused only because excess overdrawal was

sanctioned by the 1st accused to the 2nd accused. The trial court has not gone into the legal requirements and elements for a conviction under Section

13(1)(d) of the P.C.Act. It is pertinent to note that the prosecution has no case anywhere that the 1st accused had made any pecuniary gain or

advantage by sanctioning huge amount of loan to the 2nd accused, or that the 2nd accused had gained any unlawful advantage or benefit by the loan

transaction with the Bank. The trial court has already found against the prosecution as regards the allegation under Section 420 IPC. There is clear

finding that the 1st accused had no intention to cheat the Bank, or that the 1st accused had no sort of dishonest intention or fraudulent intention when

he sanctioned overdrawal of huge amount to the 2nd accused. Admittedly, the Bank had accepted security from the partners of M/s.Mudra Silks

before sanctioning loan. Admittedly, the Bank has initiated civil proceedings for recovering the amount due from M/s.Mudra Silks, and M/s.Mudra

Silks has made payment of huge amount to the Debt Recovery Tribunal to satisfy the civil claim.

Now, let me see whether the 2nd accused or M/s.Mudra Silks can be said to have been unlawfully benefited by the huge amount of loan

sanctioned by the 1st accused. As already observed, there must be definite allegation by the prosecution, and there must also be evidence in support of

the allegation, that some unlawful gain or benefit or monitory gain was made by somebody by the alleged transaction or discharge of function by the

public servant. The person benefited can either be the public servant or somebody else in whom the public servant is interested. There is absolutely

nothing to show that the 1st accused had made any financial gain or benefit out of the loan transaction. Nobody has got a case that the 1st accused

had accepted any bribe or other benefit from the 2nd accused for sanctioning overdrawal of huge amount. The prosecution has no such case

anywhere in the prosecution records, that the 1st accused had accepted any bribe or unlawful gain or that he had made any benefit out of the loan

transaction. If so, the crucial question is whether M/s.Mudra Silks or the 2nd accused had made any such gain out of the loan transaction. The amount

received by the 2nd accused from the Bank as the Managing Partner of M/s.Mudra Silks is the loan amount. Whether it is within the lending power of

the 1st accused or beyond his power, is not the issue here. That must be a very important issue for departmental action. But, that alone will not be

sufficient for a prosecution under the P.C.Act. For such a prosecution, there must be evidence to show that somebody was benefited illegally or

unlawfully by the discharge of functions by the public servant. There is no doubt that the amount received by the 2nd accused by way of loan is

repayable with interest to the Bank. Under the contract, the firm is bound to repay the amount with interest, and when the firm failed in discharging

the debt, or when the account became non-operative, the Bank initiated civil action against M/s.Mudra Silks. This aspect is proved by PW1. When the

amount of loan received by the 2nd accused on behalf of M/s.Mudra Silks is repayable as loan with interest as a contractual liability, which can be

enforced under the law, and when the Bank has already initiated civil action to recover the amount due with interest, it cannot be said that the 2nd

accused or M/s.Mudra Silks is unlawfully benefited by the loan transaction. Availing loan, whether it is within limits or beyond limits, cannot be said to

be an unlawful benefit. When there is failure or breach of contract in making payment, the right and the legal remedy is only to recover the amount in

enforcement of the contractual liability. The Bank has already done this, and the Bank has also received huge amount from M/s.Mudra Silks by civil

judicial process. When the Bank has already initiated civil action, and has also realised substantial amount by enforcing the civil contractual liability, the

benefit made by M/s.Mudra Silks or the 2nd accused by way of loan under a contract cannot be said to be an unlawful benefit or unlawful gain. No

amount was given by the 1st accused to the 2nd accused otherwise than under a loan contract.

In a loan transaction, where the Bank Manager has exceeded his limits and sanctioned huge amount of loan in excess of his lending capacity, the

Bank Manager can be prosecuted under Section 13(1)(d) or Section 7 of the P.C.Act, 1988 only if the Bank Manager had accepted any bribe or

illegal gratification for such an act. Sanctioning huge amount of loan beyond capacity cannot by itself be a ground to prosecute a public servant under

Section 13(1)(d) or Section 7 of the P.C.Act. If the 1st accused sanctioned loan without accepting any such gratification, or without making or

expecting any such unlawful gain, and he only acted in excess of his capacity as Manager and sanctioned huge amount of loan, what is possible is only

departmental action against the Bank Manager. In this case, the Bank has already initiated civil action, and has also accepted or recovered substantial

amount from the business concern of the 2nd accused. This payment made by M/s.Mudra Silks was considered by the trial court in deciding the

quantum of sentence. Money was paid by M/s.Mudra Silks to satisfy the civil claim made by the Bank, and not to escape from prosecution. The

business concern or the individual, who has not paid any bribe or illegal gratification for getting excess amount of loan sanctioned by the Bank

Manager cannot be said to have facilitated any criminal misconduct by abetment when he has not acutally gained anything unlawfully or when he is

liable under the law to repay whatever amount received by him as loan, with interest. Whatever be the amount received by the 2nd accused or

M/s.Mudra Silks by way of loan; whether it is within or in excess of lending capacity of the Bank Manager, it is liable to be repayed with interest, and

it is a civil liability under the contract in between the Bank and the firm. To cause a prosecution under the P.C.Act, or to punish the 1st accused under

the P.C.Act on the ground of sanctioning huge amount of loan without authority, the transaction must involve some criminal element by way of

dishonest intention or by accepting any unlawful benefit or bribe for the discharge of function in excess of his powers or in breach of the circulars and

instructions from the Bank. Here, the prosecution has no such case. Admittedly, the 1st accused had not accepted any bribe, or has not made any

unlawful gain by sanctioning overdrawal of huge amount in excess of his capacity. In the given factual situation, a prosecution is not possible under the

P.C.Act. This finding will not in any manner prejudice the administrative action taken by the Bank against the 1st accused. I find that the factual

aspects in this case, proved or rather admitted, will not cause a prosecution under Section 13(1)(d) of the P.C.Act, 1988, and so, both the accused are

entitled for acquittal.

In the result, both the appeals are allowed. Accordingly, the two appellants are found not guilty of the offence under Section 13(1)(d) read with

Section 13(2) of the P.C.Act and under Section 120B of the Indian Penal Code, and they are acquitted of those offences in appeal under Section

386(b)(i) Cr.P.C. Consequently, the conviction and sentence against them in C.C.No.1/2004 of the court below will stand set aside, and the appellants

will stand released from prosecution. The bail bonds executed by them will stand discharged.