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Friday, January 9, 2015

CRIMINAL APPEAL NO.346 OF 2004 VINAYAK NARAYAN DEOSTHALI ...APPELLANT VERSUS C.B.I. ...RESPONDENT

REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                       CRIMINAL APPELLATE JURISDICTION


                       CRIMINAL APPEAL NO.346 OF 2004


VINAYAK NARAYAN DEOSTHALI                       ...APPELLANT

VERSUS

C.B.I.                                                    ...RESPONDENT


                               J U D G M E N T

ADARSH KUMAR GOEL, J.

1.    This appeal has been preferred under Section 10 of the  Special  Court
(Trial of Offences relating to Transactions in Securities)  Act,  1992  (for
short "the Special Court") against the Judgment and Order dated
20th January, 2004 passed by the Special Court constituted  under  the  said
Act in Special Case No.1 of 1997 in R.C. No.9 (BSC)/94/BOM.
2.    In the wake of report of enquiry committee constituted by the  Reserve
Bank of India under the Chairmanship of Shri Janki  Raman  to  enquire  into
the allegation of  unauthorized  diversion  of  public  funds  belonging  to
certain public sector banks and financial institutions by employees of  such
banks and institutions in collusion with some brokers,  the Act was  enacted
for constitution of a Special  Court  for  trial  of  criminal  offences  in
respect of transactions during the period 1st April, 1991  to
6th June, 1992  as provided under the  Act.   The  object  of  the  Act  was
speedy recovery of public money allegedly diverted in security  transactions
and to punish the guilty and to restore confidence and  credibility  of  the
banks and the financial institutions.
3.    The Special Court was to try notified persons jointly with
other connected persons.  One of such named persons was the
broker- Harshad S. Mehta who died  during  the  trial.   The  appellant  was
Assistant Manager of the UCO Bank,  Hamam  Street  Branch  who  was  jointly
tried with Mehta on the allegation that during the period
12th March, 1991 to 24th April, 1991, he diverted funds of  the  Engineering
Export Promotion Council (for short "EEPC") amounting to Rs.7.75  crores  to
the private account of  Harshad  S.  Mehta.   Though  the  said  funds  were
transferred back to the EEPC, conduct of the appellant amounted to  offences
under Sections 120-B, 409, 467, 471 of the Indian Penal  Code  and  Sections
13(1)(c) and (d) of the Prevention of Corruption Act, 1988.
4.    The charge has been held proved by  the  Special  Court.   It  may  be
noted that the appellant's conviction by the Special Court for  abusing  his
official  position  in  relation  to  five  other   transactions   involving
diversion of funds to the account of late Mehta, has been earlier upheld  by
this Court in Criminal Appeal No.1141 of 1999 decided on 14th January,  2003
reported in Ram Narayan Popli vs. Central  Bureau  of  Investigation[1]   We
also find reference to the conviction of the appellant by the Special  Court
in two other cases giving rise to the filing of Criminal  Appeal  No.687  of
2006 and Criminal Appeal No.335 of 2005 in this Court.
5.    In the present case, charges against the appellant as  framed  by  the
Special Court are as follows :
 "FIRSTLY:     That during the period from August, 1990 to April  1991,  you
the accused abovenamed,  working  as  Assistant  Manager,  UCO  Bank,  Hamam
Street Branch, Mumbai did enter into  a  criminal  conspiracy  with  Harshad
Shantilal Mehta, original accused No.1 (since deceased), a Share, Stock  and
Securities Broker, Mumbai, the object whereof was to  illegally  divert  the
funds of Engineering Export  Promotion  Council  (EEPC)  to  the  extent  of
Rs.7.75 crores to the Current  Account  No.1028  of  the  aforesaid  Harshad
Shantilal Mehta (since deceased), maintained with  UCO  Bank,  Hamam  Street
Branch, Mumbai, in the name of M/s Harshad S. Mehta, and thereby  to  obtain
undue pecuniary  advantage  to  the  said  Harshad  Shantilal  Mehta  (since
deceased), by you the accused abovenamed misusing your official position  as
a Public Servant by corrupt or illegal means, under the garb  of  Securities
transactions, camouflaging the same as  if  the  transactions  were  of  UCO
Bank, while knowing or having reason to believe that the  transactions  were
in fact of the said Harshad Shantilal Mehta and that you  thereby  committed
an offence punishable under Section 120-B  of  the  Indian  Penal  Code  and
within my cognizance.

SECONDLY:   That in pursuance of the said criminal  conspiracy  and  in  the
course of the same transaction, on or about  123,  1991,  the  said  Harshad
Shantilal Mehta (since deceased), while purporting to act  as  a  Broker  of
UCO Bank, dishonestly issued two contract notes  to  EEPC,  Mumbai,  showing
purchase of 692 lakh units of UNITS 1964 Scheme at Rs.14.4585  per  unit  on
ready forward basis for the sale of the same  securities  on  22.03.1991  on
their behalf at Rs.14.50628 per unit as also issued  false  Delivery  Orders
to the EEPC instructing them  to  receive  the  delivery  of  the  aforesaid
securities from UCO Bank and also issued  another  Delivery  Order  of  even
date to UCO Bank to deliver the said securities to EEPC  knowing  or  having
reason to believe that UCO Bank could not deliver  the  said  securities  to
EEPC in the absence of the UCO Bank holding any such securities  on  account
of the said Harshad Shantilal Mehta (since deceased) and in  furtherance  of
the said conspiracy, and during the course of the same transaction, you  the
accused abovenamed, being a Public Servant, and having been  entrusted  with
the funds or dominion over the funds of or under the control  of  UCO  Bank,
Hamam  Street  Branch,  Mumbai,  dishonestly  issued  a  Cost   Memo   dated
12.03.1991 in respect of the aforesaid sale of the  said  securities  for  a
total sum of Rs.99,99,988.20, knowing  or having reason to believe that  UCO
Bank had no such transaction with EEPC and also  committed  the  offence  of
forgery by issuing BR NO.111/91 of UCO Bank on the instructions of the  said
Harshad Shantilal  Mehta  (since  deceased)  knowing  or  having  reason  to
believe the same to be false document, by fraudulently signing  and  issuing
the said BR, knowing or having reason to believe that the said  BR  was  not
backed by securities, and in consideration thereof having  received  Bankers
Cheque No.054053 dated 12.03.1991  drawn  on  State  Bank  of  India,  Cuffe
Parade Branch, Mumbai, from EEPC for Rs.1 crore  issued  in  favour  of  UCO
Bank, obtained undue pecuniary advantage  in  favour  of  the  said  Harshad
Shantilal Mehta (since deceased), without any public interest and  committed
Criminal Misconduct by crediting the proceeds of the  said  Cheque  directly
into the Current Account No.1028 maintained by the  said  Harshad  Shantilal
Mehta (since deceased) in the name of M/s Harshad S. Mehta  with  UCO  Bank,
Hamam Street Branch, Mumbai without any instructions  in  that  behalf  from
the issuing Bank, and in furtherance of the  said  criminal  conspiracy  and
during the course  of  the  same  transaction  you  the  accused  abovenamed
dishonestly received the credit of the said amount knowing or having  reason
to believe the same to be stolen property viz, the property  in  respect  of
which an offence of Criminal breach, of Trust had been  committed  and  that
you thereby committed offences punishable under Section 120B of  the  Indian
Penal Code read with Sections 409, 411, 467, 471 of the I.P.C. and  sections
13(2) read with 13(1)(c) and  13(1)(d)  of  the  Corruption  Act,  1988  and
within my cognizance.

THIRDLY:   That in pursuance of the said criminal conspiracy  -  and  during
the course of the same transaction, on or about 12.03.1991 you  the  accused
abovenamed, acting in your  official  capacity  as  Assistant  Manager,  UCO
Bank, Hamam Street Branch Mumbai, dishonestly and fraudulently issued a  UCO
Bank Cost Memo dated 12.03.1991 in respect of the aforesaid ostensible  sale
of the said securities for  a  total  sum  of  Rs.99,99,980.20,  knowing  or
having reason to believe that UCO Bank had no  such  transaction  with  EEPC
and further,  dishonestly  issued  UCO  Bank  BR  No.111/91  favouring  EEPC
knowing or having reason to believe  that  the  same  was  not  backed  with
securities and that you the accused abovenamed thereby committed an  offence
punishable under Section 120-B read with Section 467  of  the  Indian  Penal
Code and within my cognizance.

FOURTHLY:   That in pursuance of the said  criminal  conspiracy  and  during
the course of the same transaction, on or about 12.03.1991 you  the  accused
abovenamed used the abovesaid forged BR No.111/91 a  genuine  by  forwarding
the same to EEPC and that you thereby committed an offence punishable  under
Section 120-B read with Section 467 read with 471 of the Indian  Penal  Code
and within my cognizance.

FIFTHLY:   That in pursuance of the said criminal conspiracy and during  the
course of the same transaction, on or  about  12.03.1991,  you  the  accused
abovenamed, being a Public Servant and working your  capacity  as  Assistant
Manager, UCO Bank, Hamam Street Branch, Mumbai, and in such capacity  having
been entrusted with the funds or dominion over the funds  of  or  under  the
control of UCO  Bank,  Hamam  Street  Branch,  Mumbai,  having  received  an
Account Payee Banker's Cheque No.054053 payable to UCO  Bank  and  drawn  on
the State Bank of India, Cuffe Parade Branch, Mumbai, for an amount of  Rs.1
crore, in violation of express or implied  contract  touching  the  mode  of
discharge of such  trust,  credited  the  same  directly  into  the  Current
Account No.1028 maintained  by  the  said  Harshad  Shantilal  Mehta  (since
deceased) in the name of M/s Harshad S. Mehta, with UCO Bank,  Hamam  Street
Branch, Mumbai, without any instructions in that  behalf  from  the  issuing
Bank, and that you thereby committed an  offence  punishable  under  Section
120-B read with  Section  409  of  the  Indian  Penal  Code  and  within  my
cognizance.

SIXTHLY:   That in pursuance of the said criminal conspiracy and during  the
course of the same transaction, on or  about  12.03.1991,  you  the  accused
abovenamed, being a Public Servant, by abusing  your  official  position  as
Assistant Manager, UCO Bank, Hamam Street Branch, Mumbai and by  corrupt  or
illegal means, having received an Account Payee  Banker's  cheque  No.054053
for Rs.1 crore, payable to UCO Bank drawn on State Bank of  India,  obtained
for the  said  Harshad  Shantilal  Mehta  (since  deceased)  obtained  undue
pecuniary advantage without any  public  interest,  and  committed  criminal
misconduct by illegally crediting the proceeds of the said  cheque  directly
into the Current Account No.1028 maintained by the  said  Harshad  Shantilal
Mehta (since deceased) with UCO Bank, Hamam Street Branch,  Mumbai,  in  the
name of M/s Harshad S. Mehta without any instructions in  that  behalf  from
the issuing Bank, and that  you  thereby  committed  an  offence  punishable
under Section 120-B of the Indian Penal Code read with  Section  13(2)  read
with Sectin 13(1)(d) of the Prevention of  Corruption  Act,  and  within  my
cognizance.

SEVENTHLY:      That in  pursuance  of  the  said  criminal  conspiracy  and
during the course of the same transaction, on or about 12.03.1991,  you  the
accused abovenamed,  being  a  Public  Servant,  by  abusing  your  official
position as Assistant Manager, UCO Bank, Hamam Street Branch, Mumbai  having
received an Account Payee Bankers Cheque No.054053 for Rs.1  crore,  payable
to UCO Bank drawn on State Bank of India,  dishonestly  misappropriated  the
said funds by crediting the proceeds of the said cheque  directly  into  the
Current No.1028 maintained  by  the  said  Harshad  Shantilal  Mehta  (since
deceased), with UCO Bank, Hamam Street Branch, Mumbai, in the  name  of  M/s
Harshad S. Mehta, without any instructions in that behalf from  the  issuing
Bank, and that you thereby committed and offence  punishable  under  Section
120-B of the Indian Penal Code read with Section 13(2)  read  with  13(1)(c)
of the Prevention of Corruption Act, and within my cognizance.

EIGHTHLY:     That in pursuance of the said criminal conspiracy  and  during
the course of the  same  transaction,  on  or  about  23.04.1991,  the  said
Harshad Shantilal Mehta (since deceased), while purporting to act as  Broker
for UCO Bank,  dishonestly  issued  two  Contract  Notes  to  EEPC,  Mumbai,
showing, purchase of 35 lakh units of UNITS 1964 Scheme at Rs.1500 per  unit
on ready forward basis for the sale of the same securities on 08.05.1991  on
their behalf at Rs. 15.11096 per unit and also issued false Delivery  Orders
to the EEPC instructing them  to  receive  the  delivery  of  the  aforesaid
securities from UCO Bank and also issued  another  Delivery  Order  of  even
date to UCO Bank to deliver the said securities to EEPC  knowing  or  having
reason to believe that UCO Bank could not deliver  the  said  securities  to
EEPC in the absence of the UCO Bank holding any such securities  on  account
of the said Harshad Shantilal Mehta (since deceased), and in furtherance  of
the said conspiracy, and during the course of the same transaction, you  the
accused abovenamed being a Public Servant, and having  been  entrusted  with
the funds or dominion over the funds of or under the control  of  UCO  Bank,
Hamam  Street  Branch,  Mumbai,  dishonestly  issued  A  Cost   Memo   dated
23.04.1991 in respect of the aforesaid sale of the  said  securities  for  a
total sum of Rs.5.25 crores, knowing or having reason to  believe  that  UCO
Bank had no such transaction with EEPC and also  committed  the  offence  of
Forgery by issung BR No.153/91 of UCO Bank on the instructions of  the  said
Harshad Shantilal  Mehta  (since  deceased)  knowing  or  having  reason  to
believe the same to be false document by fraudulently  signing  and  issuing
the said BR knowing or having reason to believe that the  said  BR  was  not
backed by securities, and in consideration thereof having received  Banker's
Cheque No.054337 dated 23.04.1991  drawn  on  State  Bank  of  India,  Cuffe
Parade Branch, Mumbai, from EEPC for Rs.5.25 crores in favour  of  UCO  Bank
obtained undue pecuniary advantage in favour of the said  Harshad  Shantilal
Mehta (since deceased) without any public interest  and  committed  criminal
misconduct by crediting the proceeds of the said Cheque  directly  into  the
Current Account No.1028 maintained  by  the  said  Harshad  Shantilal  Mehta
(since deceased) in the name of M/s Harshad S. Mehta with  UCO  Bank,  Hamam
Street Branch, Mumbai, without any instructions  in  that  behalf  from  the
issuing Bank, and  that  you  thereby  committed  offence  punishable  under
Section 120-B of the Indian Penal Code read with Sections 409,  471  of  the
Indian Penal Code and Sections 13(2) read with 13(1)(c) and 13(1)(d) of  the
Prevention of Corruption Act, and within my cognizance.

NINTHLY:    That in pursuance of the said  criminal  conspiracy  and  during
the course of the same transaction, on or about 23.04.1991, you the  accused
abovenamed acting in yours  official  capacity  as  Assistant  Manager,  UCO
Bank, Hamam Street Branch, Mumbai, dishonestly  and  fraudulently  issued  a
UCO Bank Cost Memo dated 23.04.1991 in respect of the  aforesaid  ostensible
sale of the said securities for a total sum of Rs.5.25  crores,  knowing  or
having reason to believe that UCO Bank had no  such  transaction  with  EEPC
and further dishonestly issued UCO  Bank  BR  No.153/91  favouring  EEPC  or
having reason to believe that the same was not backed  with  securities  and
that you the accused abovenamed  thereby  committed  an  offence  punishable
under Section 120-B read with Section 467  of  the  Indian  Penal  Code  and
within my cognizance.

TENTHLY:    That in pursuance of the said  criminal  conspiracy  and  during
the course of the same transaction, on or about 23.04.1991, you the  accused
abovenamed used the abovesaid forged BR No.153/91 as genuine  by  forwarding
the same to EEPC and that you thereby committed an offence punishable  under
Section 120-B read with Section 467 read with  Section  471  of  the  Indian
Penal Code and within my cognizance.

ELEVENTHLY:      That in pursuance  of  the  said  criminal  conspiracy  and
during the course of the same transaction, on or about  23.04.1991  you  the
accused abovenamed, being a Public Servant and working in your  capacity  as
Assistant Manager, UCO Bank,  Hamam  Street  Branch,  Mumbai,  and  in  such
capacity having been entrusted with the funds or dominion over the funds  of
or under the control of  UCO  Bank,  Hamam  Street  Branch,  Mumbai,  having
received an Account Payee Banker's Cheque No.054337  payable  UCO  Bank  and
drawn on the State Bank of  India,  Cuffe  Parade  Branch,  Mumbai,  for  an
amount of Rs.5.25 crores,  in  violation  of  express  or  implied  contract
touching the mode of discharge of such trust,  credited  the  same  directly
into the Current Account No.1028 maintained by the  said  Harshad  Shantilal
Mehta (since deceased) in the name of M/s Harshad S. Mehta, with  UCO  Bank,
Hamam Street Branch, Mumbai, without any instructions in  that  behalf  from
the issuing Bank, and that  you  thereby  committed  an  offence  punishable
under Section 120-B read with Section 409  of  the  Indian  Penal  Code  and
within my cognizance.

TWELTHLY:    That in pursuance of the said criminal  conspiracy  and  during
the course of the same transaction, on or about 23.04.1991 you that  accused
abovenamed, being a Public Servant, by abusing your official position as  an
Assistant Manager, UCO Bank, Hamam Street Branch,  Mumbai,  having  received
an Account Payee Banker's Cheque No.054337 for  Rs.5.25  crores  payable  to
UCO Bank drawn on the State Bank of India, dishonestly  misappropriated  the
said funds by crediting the proceeds of the said cheque  directly  into  the
Current Account No.1028 maintained  by  the  said  Harshad  Shantilal  Mehta
(since deceased) in the name of M/s Harshad S. Mehta, with UCO  Bank,  Hamam
Street Branch, Mumbai, without any instructions  in  that  behalf  from  the
issuing Bank, and that you thereby committed  an  offence  punishable  under
Section 120-B read with Section 13(2) read with 13(1) of the  Prevention  of
Corruption Act, and within my cognizance.

THIRTEENTHLY:           That in pursuance of the  said  criminal  conspiracy
and during the course of the same transaction, on or  about  23.04.1991  you
the accused abovenamed, being a Public Servant,  by  abusing  your  official
positional as an Assistant Manager, UCO Bank, Hamam Street  Branch,  Mumbai,
having received an Account Payee Banker's  Cheque  No.  054337  for  Rs.5.25
crores, payable to UCO Bank and drawn on the  State  Bank  of  India,  Cuffe
Parade Branch, Mumbai, dishonestly misappropriated the said funds  crediting
the proceeds of the said cheque directly into the  Current  Account  No.1028
maintained by the said Harshad Shantilal Mehta (since deceased) in the  name
of M/s Harshad S.  Mehta,  with  UCO  Bank,  Hamam  Street  Branch,  Mumbai,
without any instructions in that behalf from the issuing Bank, and that  you
thereby committed an  offence  punishable  under  Section  120-B  read  with
Section 13(2) read with 13(1)(c) of the Prevention of  Corruption  Act,  and
within my cognizance.

FOURTENTHLY:           That in pursuance of  the  said  criminal  conspiracy
and during the course of the same transaction, on or  about  24.04.1991  the
said Harshad Shantilal Mehta (since deceased), while purporting to act as  a
Broker of UCO Bank, dishonestly issued to Contract Notes  to  EEPC,  Mumbai,
showing purchase of 10 lakh units of UNITS 1964 Scheme at Rs.15.00 per  unit
on ready forward basis for the sale of the same securities on 29.04.1991  on
their behalf at Rs.15.04110 per unit as also issued  false  Delivery  Orders
to the EEPC instructing them  to  receive  the  delivery  of  the  aforesaid
securities from UCO Bank and also issued  another  Delivery  Order  of  even
date to UCO bank to deliver the said securities to EEPC  knowing  or  having
reason to believe that UCO Bank could not deliver  the  said  securities  to
EEPC in the absence of the UCO bank holding any such securities  on  account
of the said Harshad Shantilal Mehta (since deceased), and in furtherance  of
the said conspiracy, and during the course of the same transaction, you  the
accused abovenamed, being a Public Servant, and having been  entrusted  with
the funds or dominion over the funds of or under the Control  of  UCO  Bank,
Hamam  Street  Branch,  Mumbai,  dishonestly  issued  a  Cost   Memo   dated
24.04.1991 in respect of the aforesaid sale of the  said  securities  for  a
total sum of Rs.1.50 crores, knowing or having reason to  believe  that  UCO
Bank had no such transaction with EEPC and also  committed  the  offence  of
Forgery issuing BR No.16B/91 of UCO Bank on the  instructions  of  the  said
Harshad Shantilal  Mehta  (since  deceased)  knowing  or  having  reason  to
believe the same to be false document by fraudulently  signing  and  issuing
the said BR knowing or having reason to believe that the  said  BR  was  not
backed by securities and in consideration thereof having  received  Banker's
Cheuqe No.054353 dated 24.04.1991 drawn on the State Bank  of  India,  Cuffe
Parade Branch, Mumbai, from EEPC for Rs.1 crore issued in favour of the  UCO
Bank, obtained undue pecuniary advantage without  any  public  interest  for
the said Harshad Shantilal Mehta (since  deceased)  and  committed  Criminal
Misconduct by crediting the proceeds of the said Cheque  directly  into  the
Current Account No.1028 maintained  by  the  said  Harshad  Shantilal  Mehta
(since deceased) in the name of M/s Harshad S. Mehta with  UCO  Bank,  Hamam
Street Branch, Mumbai, without any instructions  in  that  behalf  from  the
issuing Bank  and  that  you  thereby  committed  offence  punishable  under
Section 120-B of the Indian Penal Code read with Sections 409, 467,  471  of
the Indian Penal Code and Sections 13(2) read with 13(1)(c) and 13(1)(d)  of
the Prevention of Corruption Act, 1988, and within my cognizance.

FIFTEENTHLY:       That in pursuance of the  said  criminal  conspiracy  and
during the course of the same transaction, on or about 24.04.1991,  you  the
accused abovenamed, acting your official capacity as Assistant Manager,  UCO
Bank, Hamam Street Branch, Mumbai, dishonestly  and  fraudulently  issued  a
UCO Bank Cost Memo dated 24.04.1991 in respect of the  aforesaid  ostensible
sale of the said securities for a total sum of Rs.1.50  crores,  knowing  or
having reason to believe that UCO Bank had no  such  transaction  with  EEPC
and further dishonestly issued UCO Bank BR No.168791 favouring EEPC  knowing
or having reason to believe that the same was  not  backed  with  securities
and that you the accused abovenamed thereby committed an offence  punishable
under Section 120-B of the Indian Penal Code read with Section  467  of  the
Indian Penal Code and within my cognizance.

SIXTEENTHLY:       That in pursuance of the  said  criminal  conspiracy  and
during the course of the same transaction, on or about  24.04.1991  you  the
accused abovenamed used the abovesaid forged  BR  No.168/91  as  genuine  by
forwarding the same to EEPC  and  that  you  thereby  committed  an  offence
punishable under Section 120-B read with Section 467 read with  471  of  the
Indian Penal Code and within my cognizance.

SEVENTEENTHLY:    That  in  pursuance  of  the  said   criminal   conspiracy
24.04.1991 you the accused abovenamed, being a Public  Servant  and  working
in your capacity as  Assistant  Manager,  UCO  Bank,  Hamam  Street  Branch,
Mumbai, and in such  capacity  having  been  entrusted  with  the  funds  or
dominion over the funds of or under the control of UCO  Bank,  Hamam  Street
Branch, Mumbai, having received an Account Payee  Bankers  Cheque  No.054353
payable to UCO Bank and drawn on the  State  Bank  of  India,  Cuffe  Parade
Branch, Mumbai, for an amount of Rs.1.50 crores, in violation of express  or
implied contract touching the mode of discharge of such trust, credited  the
same directly into the  Current  Account  No.1028  maintained  by  the  said
Harshad Shantilal Mehta (since deceased) in  the  name  of  M/s  Harshad  S.
Mehta, with UCO Bank, Hamam Street Branch, Mumbai, without any  instructions
in that behalf from the issuing Bank, and  that  you  thereby  committed  an
offence punishable under Section 120-B of the Indian Penal  Code  read  with
Section 409 of the Indian Penal Code and within my cognizance.

EIGHTEENTHLY:           That in pursuance of the  said  criminal  conspiracy
24.04.1991, you that accused abovenamed, being a Public Servant, by  abusing
your official position as Assistant Manager, UCO Bank, Hamam Street  Branch,
Mumbai, and by corrupt or illegal means having  received  an  Account  Payee
Banker's Cheque No.054353 for Rs.1.50 crores, payable to UCO Bank and  drawn
on the State Bank of India, obtained undue pecuniary advantage  without  any
public interest for the said Harshad Shantilal Mehta  (since  deceased)  and
committed criminal misconduct by illegally crediting  the  proceeds  of  the
said cheque directly into the Current  Account  No.1028  maintained  by  the
said Harshad Shantilal Mehta (since deceased) with UCO  Bank,  Hamam  Street
Branch,  Mumbai,  in  the  name  of  M/s  Harshad  S.  Mehta,  without   any
instructions in that behalf from the issuing  Bank,  and  that  you  thereby
committed an offence punishable under Section  120-B  of  the  Indian  Penal
Code read with Sections 13(2)  read  with  13(1)(d)  of  the  Prevention  of
Corruption Act, and within my cognizance.

NINETENTHLY:           That in pursuance of  the  said  criminal  conspiracy
24.04.1991 you the accused abovenamed, being a Public  Servant,  by  abusing
your official position as Assistant Manager, UCO Bank, Hamam Street  Branch,
Mumbai, having received  an  Account  Payee  Banker's  cheque  No.054353  of
Rs.1.50  crores,  payable  to  UCO  Bank  drawn  on  State  Bank  of  India,
dishonestly misappropriated the said funds by crediting the proceeds of  the
said cheque directly into the Current  Account  No.1028  maintained  by  the
said Harshad Shantilal Mehta (since deceased) with UCO  Bank,  Hamam  Street
Branch,  Mumbai,  in  the  name  of  M/s  Harshad  S.  Mehta,  without   any
instructions in that behalf from the  issuing  Bank  and  that  you  thereby
committed an offence punishable under Section-120B of the Indian Penal  Code
read with Section 13(2) read with 13(1)(c) of the Prevention  of  Corruption
Act, and within my cognizance."

6.    The EEPC was set  up  to  promote  export  of  engineering  goods  and
services under the Ministry of Commerce.  It was operating a  scheme  called
the International Price Reimbursement Scheme (for  short  "IPRS")  with  the
object of neutralizing price of steel for domestic exports at par  with  the
international  market  where  prices  were  lesser.   The  scheme  envisaged
compensating the exporters by way of reimbursement of the price  difference.
 The funds received by the EEPC through Joint Plan  Committee  ("JPC")  were
kept with the State Bank of India at  Calcutta.   PW-3,  Girish  Chandra  an
officer of EEPC was running the scheme.  Apart from the  said  funds,  other
source of available funds with the EEPC was  sale  of  premises  at  Tardey,
Mumbai to shift the office to rented premises in World  Trade  Centre  which
was considered to be more suitable.  Sale proceeds were kept with the  State
Bank of India, Cuffe Parade Branch.  During the period between  12th  March,
1991 and 24th April, 1991, PW-3 issued three cheques in favour  of  the  UCO
bank where the appellant was posted.  Without instructions  from  EEPC,  the
said amount was transferred to the private account of  late  Mehta.   Though
the EEPC received contract notes and  delivery  orders  in  respect  of  the
three transactions and the documents were  signed  by  PW-3,  but  this  was
under a mistaken thought that he was merely signing a format  prescribed  by
the Bank.  Thus, the appellant abused his position in collusion  with  Mehta
resulting in transfer of public funds to private account  of  an  individual
unauthorisedly.  Forged Bank Receipts (BRs) were issued by the Bank to  EEPC
in lieu of physical delivery of securities, without  such  securities  being
in  existence.   PW-4,  Arup  Mohan  Patnaik,  an  officer  of  CBI,   after
investigation, lodged the FIR on 30th  November,  1994.   Investigation  was
further conducted by PW-13, Mr. S.K. Sareen, Inspector  CBI,  who  collected
documents from EEPC, UCO Bank and State Bank  of  India  and  also  recorded
statements of witnesses.  He filed charge sheet against late Mehta  and  the
appellant.
7.    Apart from producing the documents, the prosecution  relied  upon  the
oral evidence of Mr. Chhadisingh-PW-1, Mr. Maitra-PW-2,
Mr. Girish Chandra-PW-3, Mrs. Sudha Kubal-PW-4, Mr. Ankur
Gupta-PW-5 and Mr. Babaji Firoz-PW-6, all of them working with EEPC  in  the
Regional Office at Mumbai in different capacities; Mr. B.D.
Raut-PW-7; Mr. Aarsiwala-PW-8 working with State Bank of India;
Mr. Anjaria-PW-9; Mr. Pinjani-PW-10 and Nilam Keni-PW-12  working  with  UCO
Bank, Hamam Street Branch, Mumbai, in different  capacities.   Rest  of  the
witnesses are Mr. Jain-PW-11, the Hand Writing Expert;
Mr. Patnaik-PW-14, who lodged the FIR  and  Mr.  S.K.  Sareen-PW-13  is  the
Investigating Officer and had filed charge sheet against the accused.
      The accused led defence evidence and examined DW-1-Mr.  Atul  Manubhai
Parekh, who was working in the office of Harshad Mehta at the relevant  time
and Mr. Pradeep Anant Karkhanis-DW-2, who was working in the UCO Bank  as  a
Senior Manager at the relevant time.
8.    Stand of the appellant is that the deposit  in  the  account  of  late
Mehta was not on account of dishonest intention of the appellant.  The  Bank
had been offering facility to brokers for security transactions by  charging
commission.  Transactions were between brokers and the counter  party.   All
the documents were prepared in normal course of banking.
9.    The Special Court rejected the defence of the accused  and  held  that
transfer of  funds  to  private  account  of  late  Mehta  was  without  any
authorization by the EEPC.  It was observed:-
"The entire evidence in this regard has gone  unchallenged.     The  defence
of the accused is, however, that Hamam Street Branch of UCO Bank was  having
such securities transactions on behalf of the clients and  they  were  going
on since 1987, much before he joined the said branch in 1989.  According  to
him there  were  eighteen  brokers  getting  such  routine  facility.   This
facility was temporarily stopped  for  the  period  between  May,  1991  and
March, 1992 and in March, 1992, similar facility was continued to  be  given
to the brokers.  His defence is that the aforesaid three  transactions  were
between EEPC and HSM.   No contract notes were ever sent to UCO  Bank.   The
Head Office was aware of such transactions.   While admitting that  all  the
vouchers, cost memos and BRs related to  the  aforesaid  three  transactions
were prepared at his instance in his branch.   His  defence  is  that  those
were performed in normal course of banking business.  He states that  he  is
innocent and acting as per the procedure adopted by the bank.

The charge against the accused  is  that  he  had  conspired  with  HSM  for
diverting the funds of the EEPC, the public money,  to  HSM  with  dishonest
and fraudulent intention, the object of which was to give  benefit  of  such
diverted money to HSM.   It is also the charge against the accused  that  he
had no authority either from the  EEPC  or  from  the  Bank  Authorities  to
credit the amount of the aforesaid three bankers' cheques issued by  SBI  in
favour of the UCO Bank, to the HSM's account  No.1028  and,  therefore,  the
accused had misused his official position as a public servant,  namely,  the
Manager in Securities Department of Hamam Street  Branch  of  UCO  Bank,  at
Mumbai.

The accused is also charged for having  issued  BR's  in  respect  of  these
transactions without there being any  backing  of  physical  securities  for
issuing such BRs  and,  therefore,  it  is  alleged  that  the  accused  had
prepared the documents like cost memos  and  BRs  by  forging  them  and  by
using them as genuine.

Since all the three transactions have been proved having taken place in  the
manner aforesaid, it is clear that EEPC had  transferred  their  funds  from
their account in SBI to UCO  Bank  for  the  purpose  of  their  short  term
investments.  The evidence of Girish Chandra-PW 3 clearly shows that as  per
the instructions and circulars issued by  the  Central  Government,  he  had
authority to make investments of  the  surplus  funds  of  EEPC,  either  in
nationalized banks  or  in  Government  Securities  or  Government  approved
securities and he had no authority to transfer the funds  of  the  EEPC  for
the  benefit  of  any  individual,  including  HSM.   From   the   aforesaid
transactions, it is clear that all the  three  bankers'  cheques  issued  in
favour of the UCO Bank were credited into the account of HSM, being  Account
No.1028.  The transactions also show that the accused had issued cost  memos
against EEPC for the transactions  of  sale  of  securities  shown  therein.
When the cheques were received the amount were credited to  the  account  of
HSM.   There were instructions under the delivery notes  issued  by  HSM  to
the UCO Bank that UCO Bank should deliver to EEPC certain  number  of  units
1964 scheme, as shown in the delivery orders, at the indicated rates to  UCO
Bank.  The accused, therefore, had acted as  pr  the  instructions  of  HSM.
However, this was  contrary to the contract notes issued  by  HSM  to  EEPC,
which clearly indicated that in all the three transactions  HSM  was  acting
as broker.  Indication in the contract  notes  is  that  HSM  had  purchased
certain number of units of 1964 scheme for and on behalf  of  the  EEPC  and
the delivery orders issued to EEPC as also  to  UCO  Bank,   indicated  that
EEPC has to receive the said Units from UCO Bank and UCO Bank  had  to  hand
over those units to EEPC.  This clearly indicates that HSM was acting  as  a
Broker and he  was  not  the  principal  nor  the  counter  party  to  those
transactions.  Even then,  UCO  Bank  had  treated  HSM  as  principal  i.e.
counter party having direct contact  with  EEPC.   The  accused,  therefore,
credited the amount received from SBI on behalf of the EEPC to  the  account
of HSM.   In any event, the bankers' cheques drawn  on  SBI,  Account  EEPC,
were in fact in favour of the UCO Bank only and not in favour of  any  other
party.  Therefore, the accused could only have credited those amounts  under
those three cheques only in UCO Bank  account  and  nobody  else's  account.
There were apparently  no  instructions  from  EEPC  in  that  behalf.   It,
therefore, clearly shows the meeting of mind  of  the  accused  and  HSM  in
illegally diverting the EEPC's funds  to  HSM's  account  and  giving  undue
pecuniary advantage to HSM.   Therefore,  the  prosecution  has  established
that it is a criminal conspiracy between the two, the object  of  which  was
to illegally divert the funds of EEPC, totally amounting to  Rs.7.75  crores
to the current account of HSM  in  Account  No.1028,  enabling  the  HSM  to
obtain undue pecuniary advantage of  the  same  and  that  the  accused  had
misused  his  official  position  as  public  servant  by  camouflaging  the
transaction as securities transaction.

It is also established that the accused issued BRs in lieu of  the  physical
delivery of securities, when the securities  were  not  available  with  the
Bank at all.  The burden to prove that  the  BRs  were  not  backed  by  the
physical securities is on  the  prosecution.   However,  it  is  a  negative
burden to be discharged and it is therefore  lighter  burden  to  discharge.
The witnesses namely, PW 10 Pinjani and Mrs. Kini-PW  12  have  stated  that
they used to maintain register for sale  and  purchase  of  the  securities.
But they did not state that there were securities physically available  with
the bank when cost memos and BRS were issued by the accused.   Investigating
Officer has spoken about no securities being physically available  with  the
bank.  The evidence of Anjaria-PW 9  also  indicates  that  no  register  of
Units 1964 Scheme was maintained either security-wise or broker  clientwise.
 This established non existence of securities where accused  issued  BRs  to
back them.  Above evidence is sufficient to discharge  the  burden.   It  is
pertinent to note that even it is not the defence that  physical  securities
were available to back the BRs.   Therefore,  it  is  established  that  BRs
were issued without the backing  of  physical  securities  and  in  lieu  of
physical securities.

It is undisputed position that HSM was dealing in  securities.   DW  1  Atul
Parekh has spoken about the delivery orders  having  been  issued  from  the
office of HSM in respect of all the three transactions and that  those  were
the transactions of HSM.  He has also stated that the  letter at Exhibit  A-
2(3) was written by Girish Chandra-PW 3 to  Pankaj  Shah,  along  with  this
letter he had also sent bankers' cheques drawn in favour  of  the  UCO  Bank
for Rs.1 crore.  Girish Chandra - PW3 has  admitted  to  have  written  this
letter.  He however, states that the cheque was issued in favour of the  UCO
Bank and not in favour of HSM.  The letter mentions  about  discussion  with
Pankaj Shah and Girish Chandra-PW3  on  11.3.1991  regarding  investment  of
Rs.1 crore, for the period between  12.3.1991  and  22.3.1991  @  14%.   The
letter also mentions about reversal of  the  transaction  on  22.3.1991  and
sending back  the  bankers  cheque  along  with  accrued  interest.   It  is
submitted on behalf of the accused that this indicated that the  transaction
was between EEPC and HSM as counter party.  However, the fact  remains  that
the cheque of Rs.1 crore was not issued in favour  of  HSM  but  it  was  in
favour of UCO Bank only.  It is further  to  be  noted  that  EEPC  had  not
issued any instructions to UCO Bank for debiting the amount  of  Rs.1  crore
in the account of HSM. In absence of these details, it cannot be  said  that
HSM  was  the  counter  party  or  principal  with  whom  EEPC  had   direct
transactions.  On the contrary it indicated that the payment of  the  cheque
of Rs.1 crore was to be made to UCO Bank.  If this; is so, at the  most  HSM
can be said to be only broker and nothing else.  Even then the  accused,  on
receiving the cheques in respect of these three transactions,  credited  the
amount to the account of HSM, was totally illegal.

Under these circumstances, the accused could have  credited  the  amount  of
three cheques into the account of UCO Bank only and not in  the  account  of
HSM.  In this regard it is  also  vehemently  submitted  on  behalf  of  the
accused that there is an indication  from  letter  dated  12th  March,  1991
written by Girish Chandra to Pankaj Shah, who was working in the  office  of
HSM that there were some talks between Girish Chandra- PW  3  and  HSM  with
regard to their short term  investment  and  in  respect  of  the  said  two
transactions also there appears to have been  some  talk  between  the  two.
Even so, there is no evidence to indicate that EEPC or Girish  Chandra-PW  3
for that matter,  had  direct  dealing  with  HSM  as  a  counter  party  or
principal.  All the bankers' cheques issued by  EEPC  through  SBI  were  in
favour of the UCO Bank alone, without any further instruction  to  UCO  Bank
for depositing those amounts in the account of HSM.  There  is  no  evidence
to show that the EEPC had direct transactions with HSM, as a counter  party.
 This being so, the accused did not have  any  authority  to  divert  EEPC's
funds to the account of HSM and in doing so  he  had  committed  illegality.
The accused similarly did not have any authority to act for  or  on  account
of HSM with the EEPC as counter  party.   The  contract  note  and  delivery
orders issued by HSM, on the contract note and  delivery  orders  issued  by
HSM, on the contrary indicate that UCO  Bank  was  principal.   The  cheques
issued by EEPC were also in favour of UCO Bank.   Under  the  circumstances,
it was clear that the cheques issued by EEPC in favour of the UCO Bank  were
in favour of the UCO Bank alone and were not to be  transferred  to  anybody
else's account, including HSM.  Therefore, the accused had no  authority  to
transfer or divert EEPC's funds to the account of  HSM  and,  therefore,  he
had committed illegality, obviously with an  intention  to  give  HSM  undue
pecuniary  advantage  of  those  funds.   These  circumstances,   therefore,
clearly establish the criminal conspiracy between the  accused  and  HSM  as
also.  The object of illegally diverting the EEPC's funds to the account  of
HSM enabling HSM to obtain undue  pecuniary  advantage  by  the  accused  by
misusing his position  as  public  servant  by  corrupt  or  illegal  means,
showing  the  transactions  to  be  the  securities  transactions   of   HSM
camouflaging the same as if the transactions were of UCO Bank."

10.   We have heard learned counsel for the parties.
11.   The contentions  raised  on  behalf  of  the  appellant  is  that  the
documents in question were prepared by Mehta and the money was  handed  over
by the EEPC to Mehta.  No loss was suffered by the EEPC  nor  any  gain  was
made by the appellant.  The appellant had no dishonest intention  and  acted
as officer of the Bank in routine.
12.   Learned counsel for the CBI supported the impugned order.
13.   The question for consideration is whether conviction of the  appellant
is sustainable on the basis of evidence on record.
14.   We find that the following facts  are  undisputed  and  clearly  stand
established on the record :
"(i)  The EEPC is functioning under the control of Ministry of  Commerce  to
help  export  of  engineering  goods  and  services.    It   was   operating
International  Price Reimbursement Scheme with  a  view  to  neutralize  the
price of Steel for domestic  exporters.   It  had  funds  for  disbursement.
Further it had funds on account of sale of office. IPRS was  being  operated
by PW 3, Girish Chandra.  He made a deposit of a sum of Rs.7.75 crores  with
the UCO Bank by way of three cheques in favour of the UCO Bank.

(ii)      The  appellant  acting  as  Assistant  Manager  of  the  UCO  Bank
transferred the amount to the account  of  Mehta  which  was  apparently  in
collusion with  Mehta  without  any  authority  by  EEPC.   He  issued  Bank
Receipts in lieu of physical delivery of securities without such  securities
being in existence.

(iii) The EEPC never instructed purchase of  securities  through  Mehta  nor
allowed the transfer of the amount in question to Mehta  but  the  EEPC  was
made to sign documents under a  mistaken  belief  at  the  instance  of  the
appellant."

15.   PW-3, Girish Chandra who represented  the  EEPC  fully  supported  the
prosecution version of having made deposit with  the  Bank  and  having  not
authorized the diversion of the said amount in favour of any private  party.
 The said evidence has  been  duly  accepted  by  the  Special  Court.   The
appellant unauthorisedly credited the amount to Mehta's account  by  abusing
his position in  conspiracy  with  Mehta.   The  accused  also  issued  bank
receipts for security transactions without physical existence of  securities
which amounted to forgery.  It is thus, safe to infer the abuse of  position
by the accused-appellant in conspiracy with and to  the  benefit  of  Mehta.
Diversion of public funds by the accused  amounted  to  criminal  breach  of
trust by committing forgery/use of  forged  documents  as  well  as  offence
under the provisions of the Corruption Act.  PW-10, Pinjani and PW-12,  Mrs.
Kini who were maintaining register  for  sale  and  purchase  of  securities
could not show that the securities in  question  were  physically  available
with the Bank when the bank receipts were issued by the accused which  could
be done only if securities were available.  The Special Court  thus  rightly
held the charge to be proved.  It  was  not  necessary  to  prove  that  the
accused had derived any benefit or caused any loss to the  Bank.   The  fact
remains that action of the appellant  involved  unauthorized  conversion  of
public funds to private funds of an individual.  Issuing  of  Bank  receipts
for securities without  existence  of  securities  could  not  be  justified
except for illegal benefit  to  a  private  individual.   Patent  illegality
cannot  be  defended  in  the  name  of  practice  or  direction  of  higher
authorities.  Mens  rea  is  established  from  the  fact  that  false  Bank
Receipts were issued for non-existent securities.
16.   Thus,  the  offences  of  conspiracy,  forgery,  misappropriation  and
corruption  stand  established.   It  is  not  necessary  to   discuss   the
ingredients of the said offences in detail as the matter has been gone  into
earlier by this Court in respect of the appellant himself  in  the  reported
judgment in Ram Narayan Popli (supra).    We may only quote the  conclusions
arrived at in the said case:

"About the offence of conspiracy :

356. After referring to some judgments of the United  States  Supreme  Court
and of this Court in Yash Pal Mittal v. State of Punjab [(1977) 4  SCC  540]
and Ajay Aggarwal v. Union of India [(1993) 3 SCC 609] the  Court  in  State
of Maharashtra v.  Som  Nath  Thapa  [(1996)  4  SCC  659]   summarized  the
position of law and the requirements to establish the charge of  conspiracy,
as under: (SCC p. 668, para 24)

[pic]"24. The aforesaid decisions, weighty as they are, lead us to  conclude
that to establish a charge  of  conspiracy  knowledge  about  indulgence  in
either an illegal act or a legal act by illegal means is necessary. In  some
cases, intent of unlawful use  being  made  of  the  goods  or  services  in
question may  be  inferred  from  the  knowledge  itself.  This  apart,  the
prosecution has  not  to  establish  that  a  particular  unlawful  use  was
intended, so long as the goods or service in question could not  be  put  to
any lawful use. Finally, when the ultimate offence consists of  a  chain  of
actions, it would not be necessary for  the  prosecution  to  establish,  to
bring home the charge of conspiracy, that each of the conspirators  had  the
knowledge of what the collaborator would do, so long as  it  is  known  that
the collaborator would put the goods or service to an  unlawful  use."  [See
State of Kerala v. P. Sugathan [(2000) 8 SCC 203]  (SCC p. 212, para 14)]


358. Much has also been submitted that repayment has been made. That  itself
is not an indication of  lack  of  dishonest  intention.  Sometimes,  it  so
happens that with a view to create confidence the  repayments  are  made  so
that  for  the  future   transactions   the   money   can   be   dishonestly
misappropriated. This is a part of the scheme and the  factum  of  repayment
cannot be considered  in  isolation.  The  repayment  as  has  been  rightly
contended by the Solicitor-General can be a factor to  be  considered  while
[pic]awarding sentence, but cannot be a ground for proving innocence of  the
accused.

xxxxxxxxxx

About the offence of criminal breach of trust :

361. To constitute an offence of criminal breach of trust, there must be  an
entrustment, there must be misappropriation or conversion to one's own  use,
or use in violation of a legal direction or of any legal contract;  and  the
misappropriation  or  conversion  or  disposal  must  be  with  a  dishonest
intention.  When  a  person  allows  others  to  misappropriate  the   money
entrusted to him, that amounts to a criminal breach of trust as  defined  by
Section 405. The section is relatable to property in a positive part  and  a
negative part. The positive part deals  with  criminal  misappropriation  or
conversion of the property and the negative  part  consists  of  dishonestly
using or disposing of the property in violation of any direction and of  law
or any contract touching the discharge of trust.

xxxxxxxxxx

About the offence of forgery :

374. In order to constitute an offence of  forgery  the  documents  must  be
made dishonestly or  fraudulently.  But  dishonest  or  fraudulent  are  not
tautological. Fraudulent does not imply the deprivation of  property  or  an
element of injury. In order to be fraudulent, there must be  some  advantage
on the one side with a  corresponding  loss  on  the  other.  Every  forgery
postulates a false document either in whole or in part, however small.

xxxxxxxxx

377. The accused persons have tried to take shelter behind  what  they  have
described as "market practices". Such practices  even  if  existing,  cannot
take the place of statutory and regulatory functions.  There  is  no  public
interest involved in such practices and they  cannot  be  a  substitute  for
compliance with the regulatory or statutory prescriptions.  An  attempt  was
made to show that there was subsequent disapproval of the market  practices;
at the point of time when the transactions took place there was no  embargo.
It is their stand that the practices were a part of accepted  norms.  We  do
not find anything plausible in these explanations. A practice  even  if  was
prevailing, if wrong, is not to be approved. The  subsequent  clarifications
do not in any way put seal of approval  on  the  practices  adopted  in  the
past, on the other hand it condemns it.

xxxxxxxxxxx

About the Corruption Act :

379. Section 13(2) of the PC Act is intended to  deal  with  aberrations  of
public servants. In  view  of  the  finding  that  A-1,  in  furtherance  of
criminal conspiracy,  in  his  capacity  as  a  public  servant  abused  his
position by causing and/or allowing MUL's  funds  to  be  utilized  for  the
wrongful gain of A-5, provisions  of  Section  13(1)(c)  read  with  Section
13(2) are clearly applicable. Similar is the position
vis--vis A-3."

17.   In view of above, we are unable to interfere with  the  conviction  of
the appellant.  The same is affirmed.  However, having  regard  to  totality
of circumstances, we are of the view that ends of justice  will  be  met  if
sentence of imprisonment is reduced to the  period  already  undergone.   We
order accordingly.
18.   The appeal is disposed of.

          ................................................................J.
                                               (SUDHANSU JYOTI MUKHOPADHAYA)




          ................................................................J.
                                             (ADARSH KUMAR GOEL)

NEW DELHI
DECEMBER 2, 2014



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[1]     (2003) 3 SCC 641

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