ORDER
M.S. Rane, J.
NATURE AND BACKGROUND OF THIS PROSECUTION:
1. The prosecution herein is sequel to security scam which broke out in the mid of the year 1992 in various types of security transactions alleged to be undertaken in active connivance with the bank officials and brokers. The principal subject matter of this prosecution is alleged fraudulent transactions in Government securities, Units of UTI etc. resorted to by the banks, financial institutions and share and stock brokers with the aim and object of illegally siphoning of the bank funds to concerned and selective brokers for their personal speculative returns and benefits. The amount alleged to be involved as at the end of May, 1992 is estimated to Rs. 434,01,20,354.78. The banks and financial institutions involved are Canbank Financial Services Ltd. (CANFINA), a subsidiary of Canara Bank, Bank of Karad Ltd., Bombay (BOK), and Metropolitan Co-operative Bank Ltd. (MCB).
2. The offences with which the accused in this case are charged principally consist of criminal conspiracy, criminal conspiracy to commit offences of cheating/of criminal breach of trust, forging of the documents and user of such documents under sections 120B, 420 and/or 409, 411, 467, 468, 477A of Indian Penal Code and sections 13(1)(c) and 13(1)(d) read with section 13(2) of the Prevention of Corruption Act. The accused are also charged with aiding and abetting each other. There are 40 charges framed in this case jointly and severally vide Ex. 23 herein.
3. The prosecution is arrayed against 12 accused viz. (1) Shri Mulangi K.S. Ashok Kumar-Accused No. 1, at the relevant time functioning as Senior Vice President as also a Chief Dealer of CANFINA at its registered office at Bangalore, (2) Shri Hiten Prasan Dalal Accused No. 2, Stock and Share Broker operating in Bombay, (3) Shri Abhay Dharamsi Narottam Accused No. 3, Stock and Share Broker and Director of BOK at Bombay at the relevant time, (4) Shri Bhupen Champaklal Dalal Accused No. 4 also Stock and Share Broker and a Director of BOK, Bombay at the relevant time, (5) Shri Tejkumar Balkrishna Ruia Accused No. 5, Director of M/s. Dhanraj Mills Private Limited, Bombay, (6) Shri Jagdish Pannalal Gandhi-Accused No. 6, Stock andShare Broker, Bombay, (7) Shri Chandrashekhar Sitaram Raje Accused No. 7, at the relevant time working as an agent with BOK, Bombay and in-charge of its Security Department, (8) Shri Sudhakar Appu Ail-Accused No. 8, a Clerk at the relevant time working with BOK in Security Department at Bombay, (9) Shri Krishan Kantilal Kapadia Accused No. 9, being the Vice Chairman at the relevant time of MCB, Bombay, (10) Shri Madhusudan Sakharam Kushte Accused No. 10, working as an Accountant at the relevant time in MCB, Bombay, (11) Shri Shankar Narayan Ramaswamy Accused No. 11, the Proprietor of M/s. Excel & Company, Bombay as also a share and stock broker and (12) Shri Sarenathan Mohan-Accused No. 12, at the relevant time a Dealer of CANFINA based in its registered office at Bangalore.
ESTABLISHMENT OF THIS COURT: (BACKGROUND)
1. Two courts have been constituted and established under the Provisions of the Special Court (Trial of Offences relating to Transactions in Securities), Act, 1992 (hereinafter referred to as 'the said Act'). The first Court was established in June, 1992 by the Central Government under Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992 which was promulgated on 6-6-1992. The said Court was established for speedy trial of offences relating to transactions in securities presided over by my brother Judge S.N. Variava.
2. The establishment of the second Court (i.e. the Court herein) came into being by an amendment to the said Act viz. section 5 of the said Act in January, 1997 and by a Notification dated 11-2-1997 issued by the then Chief Justice of this Court, this Court came to be constituted.
3. The Statements of objects and reasons of the said Act clearly brings forth the necessity as also urgency for the enactment of the said Act and establishment of this Court. The same reads as under :---
'In the course of the investigations by the Reserve Bank of India, large scale irregularities and malpractices were noticed in transactions in both the Government and other securities, indulged in by some brokers in collusion with the employees of various banks and financial institutions. The said irregularities and malpractices led to the diversion of funds from banks and financial institutions to the individual accounts of certain brokers.
2. The deal with the situation and in particular to ensure the speedy recovery of the huge amount involved, to punish the guilty and restore confidence in and maintain the basic integrity and credibility of the banks and financial institutions the Special Court (Trial of Offences Relating to Transactions in Securities) Ordinance, 1992 was promulgated on the 6th June, 1992. The ordinance provides for the establishment of a Special Court with a sitting Judge of a High Court for speedy trial of offences relating to transactions in securities and disposal of properties attached. It also provides for appointment of one or more Custodians for attaching the property of the offenders with a view of sic to prevent diversion of such properties by the offenders.
3. The Bill seeks to replace the said Ordinance.'
4. It is thought necessary to briefly advert and/or elaborate the reasons and the circumstances in the background of the enactment of the said Act and the establishment of Special Courts on the basis of contemporaneousrecord in the form of reports which are available such as Report of the Joint Parliamentary Committee (J.P.C.) constituted to enquire into Irregularities in Securities and Banking Transactions in 1992 i.e. shortly after security scam surfaced and the Reports of the Committee appointed by Reserve Bank of India under the Chairmanship of Mr. Jankiraman, the then Deputy Governor to enquire into security transactions of banks and financial institutions.
5. It is noticed that somewhere in the last week of April, 1992, thereappeared, precisely on 23-4-1992 in the Times of India, Bombay Edition, anarticle authored by Sucheta Dalal and R. Srinivasan in respect of securitytransactions put through by one of the brokers with the State Bank of Indiato the extent of Rs. 500 crores. The article also highlighted the modus resorted to by a broker in putting through the transactions in securities. Thisrevelation sent a shock waves and the concerned authorities, mainly theGovernment and the Reserve Bank of India were required to take noticeand cognizance thereof. It also evoked wide reaction in media and the issuewas also raised in both the Houses of Parliament and grave concern wasexpressed on the floors of both the Houses of Parliament. The concernedMinistry and Reserve Bank of India came under severe criticism for theiralleged failure and lapses. It was alleged that the scam was of a real megasize and cleverly engineered involving an approximately estimated amountof Rs. 5000 crores. The appointment of two Committees mentioned abovewas the result of such debate in the Parliament and publicity.
6. It is to be further stated that considering the magnitude of this scam and ingenuous methods and devices deployed in perpetrating the same and siphoning of large public funds into the private pockets of some brokers the Government thought it necessary to entrust investigation of such scam related cases upon the Central Bureau of Investigation (C.B.I.) Accordingly some cases were reported to C.B.I. Further C.B.I on its own investigated various cases involving bank security scam and filed the same before Special Court. The case herein is one of such cases.
FACTUAL ASPECTS:
1. The prosecution herein revolves over three main transactions in security which prosecution has termed as 'ostensible security transactions'. Parties involved therein are CANFINA and BOK. CANFINA is the purchaser and BOK is the seller of the securities in question. A share Broker common in all the three transactions is Accused No. 2-Hiten Prasan Dalal.
2. Three transactions in securities alleged to be ostensible are as under:-
I. FIRST TRANSACTION:
(i) This transactions is stated to have taken place on 6-4-1991. The security involved is 11.5% Government of India Central Loan 2008 face value Rs. 25 crores.
(ii) It is the case of the prosecution that on 6-4-1991 CANFINA purchased the said securities of the face value of Rs. 25 crores from BOK. It is to be stated that although said Security Deal was represented to be between CANFINA and BOK, in fact, as it is apparent from the evidence, that the same was put through and routed into the account of Accused No. 3- Abhay Dharamsi Narottam, Constituent,Broker and then Director of BOK. The said security transaction was struck and finalised either by the Chief Dealer or Dealer of CANFINA, Bangalore i.e. Accused No-1 Mulangi K.S. Ashok Kumar or Accused No. 12- Sarenathan Mohan who conveyed the same over telephone to P.W. 2 Mr. Dhundiraj Gangadhar Vernekar an officer of Canara Bank at Bombay office. Mr. Vernekar who received the said telephonic message made an entry thereof in a Rough Transaction Sheet. The BOK then issue its cost memo and Bank Receipt bearing No. 3259 dated 6-4-1991 favouring CANFINA. It is to be stated that the said Bank Receipt was issued in lieu of physical delivery of the security in question containing recital in a form of undertaking that BOK would deliver the Security in the Deal to CANFINA in future. The representative of the Broker i.e. Accused No. 2- Hiten Prasan Dalal delivered the bank receipt and cost memo of BOK which was received by Mr. Vernekar P.W.2, who then issued banker's cheque for Rs. 25,81,20,354.78 drawn on Canara Bank, Bombay favouring BOK being the consideration/price of the said security. On the same day i.e. 6-4-1981 BOK received the said banker's cheque and first credited proceeds thereof to its account and then credited the same into the account of Accused No. 3 Abhay Dharamsi Narottam. It is significant that neither BR or Cost Memo give any indication to CANFINA that the Deal in question was meant to be in the account of Accused No. 3.
II SECOND TRANSACTION:
(i) The second transaction is dated 22-7-1991. The security involved therein is 16 crore Units of U.T.I. at the rate of 13.30 per unit for total value of Rs. 212,80,00,000/- which CANFINA purchased from BOK.
(ii) The said transaction was also finalized and processed in the same manner as the first transaction of 6-4-1991 mentioned hereinabove. That is to say that either the Chief Dealer or Dealer of CANFINA viz. Accused No. 1 Mulangi K.S. Ashok Kumar or Accused No. 12-Sarenathan Mohan respectively struck and finalized the said security transaction from Bangalore through BOK in Bombay and then communicated the same to Mr. Vernekar P.W. 2 at Bombay who made an entry in the Rough Transaction Sheet. The Broker involved therein was Accused No. 2-Hiten Prasan Dalal. The representative of the Broker came with BOK's cost memo and Bank receipt in respect of the said security favouring CANFINA and handed over the same to Vernekar-P.W. 2 who thereupon issued a banker's cheque of the same date i.e. 22-7-1991 drawn on Canara Bank in the sum of Rs. 212,75,00,000/- favouring BOK in exchange of BOK's Bank Receipt bearing No. 3499 dated 22-7-1991. The said BR was issued as in the first transaction by BOK undertaking to delivery the security in question to CANFINA in due course. Said Banker's Cheque was received and collected by the representative of the Broker i.e. Accused No. 2-Hiten Prasan Dalal. BOK received the same and firstly credited the proceeds thereof in its own account and then credited the same to the O/D account of Accused No. 3 Abhay Dharamsi Narottam with it on the same day. It may be stated that the total consideration of the security is Rs. 212,80,00,000/- whereas the banker's cheque issued by CANFINA is for the sum of Rs. 212,75,00,000/- i.e. a sum of Rs. 5,00,000/- less which prosecution has explained and which aspect will be dealt with later on in the appropriate context and stage.
THIRD TRANSACTION:
This transaction is dated 31-7-1991 and the security involved is 19 crore Units of UTI at the rate of Rs. 13,4442 per unit for total value of Rs. 255,43,98,000/- The said transaction was also processed in all respect like first two transactions such as finalization by the Chief Dealer Accused No. 1 Mulangi K.S. Ashok Kumar and/or Dealer i.e. Accused No. 12 Sarenathan Mohan respectively at Bangalore, communication over telephone to P.W. 2-Venerkar at Bombay, BOK issuing its cost memo and BR of the same date favouring CANFINA, representative of the Broker Accused No. 2-Hiten Prasan Dalal delivering the same to P.W. 2 Vernekar and Vernekar then issuing banker's cheque No. 77750 dated 31 -7-1991 drawn on Canara Bank, Bombay favouring BOK for the sum of Rs. 255,43,98,000/-. BOK received the same and firstly credited the proceeds thereof in its own account and then credited the same to the O/D account of Accused No. 3 Abhay Dharamsi Narottam with it on the same day. It is the case of the prosecution that the decisions in respect of all the three transactions were taken and deals in above transactions were finalized by Dealers of CANFINA i.e. by Accused No. 1 Mulangi K.S. Ashok Kumar and /or Accused No. 12-S. Mohan at Bangalore and then the same were conveyed over telephone to Bombay office for the follow up action of execution etc. The evidence made available shows that CANFINA, Bangalore through its Bank Canara Bank, Bangalore arranged to remit the amounts to Bombay for being paid as consideration of the transactions.
3. As far as the first transaction of 6-4-1991 is concerned the BOK on 18-4-1992 issued its S.G.L. form i.e. Secondary General Ledger form on Reserve Bank of India favouring CANFINA as substitution to its earlier BR dated 6-4-1991. However when CANFINA, Bombay lodged the said S.G.L. with the R.B.I. the same was dishonoured by R.B.I. on the ground of insufficiency of balance of security in the account of BOK account Accused No. 3-Abhay Dharamsi Narottam. Consequently the first transaction of 6-4-1991 remained outstanding in the sense that CANFINA did not receive the security of the said transaction from BOK.
4. In the second transaction dated 22-7-1991 there were two further changes/developments. In that on 15-10-1991 BOK repurchased 1.5 crore Units from CANFINA and on 18-10-1991 BOK again repurchased further 7.5 crore Units of UTI from CANFINA thus reducing the liability from 16 crore units to 7 crore units. Consequently the outstanding security in the second transaction to CANFINA remained to 7 crore units. It is the case of the prosecution and also stands made out from the evidence made available that both these transactions of 15 and 18th October, 1991, were put through and finalized by Accused No. 1-M.K.S. Ashok Kumar and /or Accused No. 12-S. Mohan at Bangalore and were processed in same way as three main Transactions as noticed earlier.
5. As far as third transaction of 31-7-1991 is concerned viz. 19 crore units of UTI the same remained outstanding. In that BOK did not deliver the security to CANFINA .
6. Thus, to sum up, according to the prosecution on account of BOK not honouring its obligations under (I) S.G.L. dated 18-4-1991 which was substitute for its BR dated 6-4-1991 in the first transaction; (ii) not delivering 7 corer Units of UTI in the second transactiondated 22-7-1991 and (iii) 19 crore units in third transaction of 31-7-1991, CANFINA suffered losses to the extent of Rs. 374,35,18,354.78.
7. Eventually BOK went under liquidation on 21-5-1992 without discharging its liability to CANFINA to the extent as mentioned earlier. It is the case of the prosecution that CANFINA after purchasing the securities from BOK as mentioned in the said three transactions and in anticipation and expectation of receiving the securities as purchasers entered into the sale transaction of the said securities with other parties. Since however BOK did not deliver the securities that CANFINA was required to purchase the securities viz. Units at higher rate on 29-5-1992 and 30-5-1992 from Syndicate Bank, National Bank, ANZ Grindlays Bank and Citibank to meet its commitment at higher rates and in that process suffered further loss of Rs. 59,66,02,000/-. The total loss thus suffered as stated earlier by CANFINA comes to Rs. 434,01,20,354.78.
8. It is also to be stated that CANFINA had filed three suits before this Special Court against the Liquidator of BOK, Hiten Prasan Dalal, Bhupen Champaklal Dalal, Abhay Dharamsi Narottam. Jagdish Pannalal Gandhi and Tejkumar Balkrishna Ruia as defendants. The said defendants 2 to 6 are respectively Accused Nos. 2, 4, 3, 6, and 5 in the case herein. The said suits are pending for disposal. Three separate suits have been field being Suit No. 7/1994, 8/1994 and 10/1994 for outstanding dues in transactions respectively dated 22-7-1991, 6-4-1991 and 31-7-1991. As the prosecution case proceeds it is necessary to elaborate the manner and modus operandi of putting through the said three security transactions in question. As noticed earlier the manner and pattern of putting through the said three transactions was similar. However briefly how the same were put through is adverted to hereinbelow:
(i) CANFINA is wholly subsidized company of Canara Bank-a Nationalized Bank. Canara Bank has its registered office at Bangalore. CANFINA had also its registered office at Bangalore. CANFINA was set up somewhere in the year 1987 at the behest of Canara Bank after obtaining requisite permission from Reserve Bank of India with the object of carrying on transaction in Government securities, merchant banking business and allied activities vide letter dated 28-5-1987. It is made available being Ex. A-1 (14). The Board of Directors constituted all officers of Canara Bank as ex-officio members.
(ii) CANFINA, Bangalore had opened an account with Canara Bank, Bangalore for its operation of security transactions. It had also account in Canara Bank, Bombay. P.W. 2 Vernekar was the officer of Canara Bank and at the relevant time was authorized by CANFINA to issued and sign banker's cheques along with other officers posted in Bombay office as also to execute necessary documents in the security dealings.
(iii) CANFINA had its office at Bombay located at Atlanta., Nariman Point, Bombay and its Managing Director used to sit in the said office. However the transactions in securities for and on behalf of CANFINA , Bangalore used to be executed in the office premises of Canara Bank, Bombay situated at Bombay Verma Chambers, Fort, where Mr. Vernekar-P.W. 2 was posted. At the relevant time P.W.25 -Padmanabha Rao Appanna was the Managing Director of CANFINA who used to sit in the office at Atlanta, Nariman Point, Bombay. However the Managing Director of CANFINA at Bombay was not involved at all in finalization and/or execution of transactions in securities undertaken for and on behalf of CANFINA which was done by the Dealers at Bangalore who were, as stated, at the relevant time Accused No. 1 Mulangi K.S. Ashok Kumar and Accused No. 12-Sarentathan Mohan. He was also not informed about the further processing or execution of the transactions by the executing officials at Bombay viz. either by P.W. 2- D.G. Vernekar, P.W. 3 -O.S. Kukian or others, for that matter even about the outstanding BRs etc. and he used to receive periodical statements from Bangalore office relating to security transactions at much later stage. It may be stated that P.W. 3-O.S. Kukian was an employee of CANFINA posted at Bombay and at the relevant time held that post of Secretary and he used to assist and coordinate with P.W. 2 Vernekar and used to maintain the record in respect of security transactions.
(iv) At the relevant time the concerned officials/ employees of CANFINA at Bangalore were P.W. 26-Padubidri Nanyam Narayan Rao, Assistant General Manager, P.W. 29-K Satish Shetty, Senior Project Executive, P.W. 30 Bangalore Narsimhaiah Shrikantha, Secretary, P.W. 32-K. Laxminarayanan, Vice Chairman, P.W. 34 Krishna Balchandra Shenoy, Senior Manager and P.W. 64 Narayanan Balsubramanian, Assistant Vice President. Besides them Accused No. 1 Mulangi K.S. Ashok Kumar who was Executive Vice President at the relevant time was also a Chief Dealer of CANFINA and Accused No. 12-Sarenathan Mohan whose designation was Assistant Vice President and was a Dealer. Both Accused Nos. 1 and 12 used to be in the registered office at Bangalore at the relevant time according to the prosecution both Accused Nos. 1 and 12 were severally authorized to strike deals in security transactions both of sale and purchase for and on behalf of CANFINA and it is only the said Dealers who were authorized to strike and finalize such deals in securities for CANFINA. It is the case of the prosecution that either of the said Dealers used to strike the deals independently and no other officials or employees of CANFINA were involved in the process of such deals and final decision in that respect rested with the said Dealers i.e. Accused Nos. 1 and 12. At the relevant time there were no limits on financial power and both the Accused Nos. 1 and 12 could finalise the deals in securities for any amount as they would do.
(v) Further the other officials of Canara Bank at the relevant time working in its Bombay office and concerned with CANFINA's Security Deals were P.W. 4-K. Dayanand Prabhu and Venugopal who worked with P.W. 2 Vernekar.
9. The prosecution case proceeds that the said Dealers i.e. Accused Nos. 1 and 12 after finalizing the deals used to convey the same to Bombay Central Office of CANFINA over telephone. Such telephone calls were received and attended to by P.W. 2- Vernekar who used to note down the particulars in respect of security deals as would be conveyed by either of Dealers. The instructions conveyed used to be-name of the security, face value there of, rate, name of the broker and name of bank i.e. counter party. The dealerswould also indicate the mode of delivery i.e. whether by means of BRs or S.G.L. or physical delivery. The particulars so received used to be noted in rough sheets known as Rough Transaction Sheets by the recipient of the calls mainly P.W. Vernekar.
10. As far impugned three transactions in securities are concerned, according to the prosecution, the same were finalized, processed and executed as under:-
'(a)(i) The first transaction as stated earlier is of 6th April, 1991. The security involved therein is GOI of face value of 25 crores. According to the prosecution either Accused Nos. 1-Mulangi K.S. Ashok Kumar and /or Accused No. 12 Sarenathan Mohan struck and finalized the said deal at Bangalore. Accused No. 2 Hiten Prasan Dalal was the broker in the said deal for and on behalf of CANFINA.
(ii) The case further proceeds that, either of the dealers i.e., Accused Nos. 1 and 12 conveyed over telephone about the conclusion of the said transaction to its Bombay office.
The said telephone call was answered and attended to by P.W. No. 2 Mr. Vernekar. The particulars which were conveyed consisted of the description of security, face value, rate, broker involved therein and the counter party. In the said transaction CANFINA was the purchaser and BOK i.e. Bank of Karad, Bombay was the seller. P.W. No. 2 Mr. D.G. Vernekar, on receipt of the said telephonic instructions noted down the gist thereof in a rough sheet known as 'Rough transaction sheet'. The prosecution has produced and proved the relevant entry so made which will be referred to later on. The course of events proceeds that the representative of the broker in the said transaction named above thereafter came to P.W. No. 2-Mr. Vernekar with a Cost Memo and Bank Receipt (In short B.R.) issued by BOK favouring CANFINA. The same were handed over by the representative of the broker to P.W. No. 2 who received the same and on scrutiny and verification as he found the same to be order he proceeded to act thereupon.
(iii) P.W. No. 2 then issued the Inter Bank Cheque of Canara Bank, Bombay branch account CANFINA favouring BOK for sum of Rs. 25,81,20,354.38 being the consideration/price of the said security. He i.e. P.W. No. 2 i.e. Mr. Vernekar then handed over the said Pay Order to the messenger of the said broker i.e. Accused No. 2 Hiten Prasan Dalal. The prosecution has made available the relevant documentary evidence namely, the original Cost Memo and B.R. issued by BOK as also the Pay Order issued favouring BOK which will be considered at appropriate stage.
(iv) The case further proceeds that BOK received the credit being proceeds of the said cheque on the same day.
(v) As it transpires, the prosecution proceeds to state that the BOK, after crediting the proceeds of the said Pay Order Banker's cheque into its account on the very day credited the entire amount thereof into the Over Draft account (in short O.D. Account) of Accused No. 3 with it. It is also the prosecution's case that on the very day, the said amount was transferred/diverted on the instructions of Accused No. 3 by BOK to Andhra Bank for being credited into the account of Accused No. 2 Hiten Prasan Dalal. It is thus case of the prosecution that on the very day i.e. on 6th April, 1991 the entireamount which CANFINA paid to BOK as stated hereinabove was passed on to the account of Accused No. 2 Hiten Prasan Dalal in Andhra Bank.
(vi) The B.R. of BOK received by P.W. No. 2 Mr. Vernekar came to be retained in Bombay office. The necessary entries in respect of the said purchase transaction were made in the relevant record kept and maintained at Bombay office by P.W. No. 3 Mr. Omprakash S. Kukian, the employee of CANFINA which record has also been made available before the Court. P.W. 2 Vernekar on the same day informed Dealers of CANFINA about the execution of the said Deal and receipt of B.R. etc.
(vii) At the same time the steps as were taken by and at Bangalore office for which also the prosecution has made available the evidence, would need advertence. In CANFINA's registered office at Bangalore, a cheque was issued in its account with Canara Bank, Bangalore, for the amount involved in the said security transaction. The Canara Bank, Bangalore branch where CANFINA had account for Security Deals then conveyed the same by means of Inter Bank Advice (in short I.B.A.) to its counter party at Bombay. It was necessary for the CANFINA to make requisite funds available being the consideration of the said security to its Bombay office and that is why, according to the prosecution, this mode of remittance was followed. It may be stated that prosecution has made available the evidence which comprises of documents as also oral to indicate how the process of remittance of funds from CANFINA office at Bangalore to Bombay office went through.
(viii) It needs to be stated that the prosecution has also made available the evidence in respect of the said transaction of 6th April, 1991 to show that the Deal of the said Transaction was finalized in Bangalore office. The same is in the form of 'Dealers Pad' and entry as far as this transaction is concerned has been made by Accused No. 12-S. Mohan.
(b) Second Transaction:
(i) The second transaction as stated is of dated 22nd July, 1991. The security involved therein is 16 crores Units of Unit Trust of India (in short UTI). The CANFINA is the purchaser and BOK Bombay is the seller. Accused No. 2 Hiten Prasan Dalal acted as a broker for and on behalf of CANFINA. The total consideration was Rs. 212,80,00,000/-.
(ii) Same procedure and modality was followed while processing and executing the said transaction. According to the prosecution either of the dealers struck and finalized the said deal with BOK Bombay and then conveyed the same to Bombay over telephone. The telephonic call was attended to by P.W. No. 2 Mr. Vernekar as in the case of first transaction who also made entry in the Rough Transaction Sheet, nothing down in brief the details as were conveyed to him by the concerned dealers, such as, description of the security, quantum, rate, name of the counter party, face value, name of the broker, etc. The relevant entry in the Rough Transaction Sheet made by P.W. No. 2 Mr. Vernekar has also been proved and made available.
(iii) As in the first transaction, messenger of the concerned broker i.e. Accused No. 2 Hiten Prasan Dalal came with the Cost Memo and B.R. issued by BOK favouring CANFINA of that date i.e. of 22nd July, 1991 and delivered the same to P.W. No. 2- Vernekar.
(iv) P.W. No. 2- Vernekar, on receipt of the said documents, namely, the Cost Memo and B.R., as usual checked and verified the same and as he found the same to be in order, he issued Inter Bank cheque of Canara Bank, Bombay, favouring BOK, for sum of Rs. 212,75,00.000/ - being the price of the said security on account of CANFINA. He then handed over the said Pay Order to the messenger of the broker.
(v) It is the case of the prosecution that BOK received the said Pay Order of CANFINA on the same date and also received the credit of the proceeds thereof on the same day. Further, on the very day i.e. on 22nd July, 1991 BOK credited the entire amount of the said Pay Order into the O.D. Account of Accused No. 3 Abhay Dharamsi Narottam with it.
(vi) The prosecution further states that, on the very day almost the entire amount credited into the account of Accused No. 3 was transferred to various other banks under the instructions of Accused No. 3 Abhay Dharamsi Narottam. It may be stated that, it is the case of the prosecution that the amounts so transferred were diverted to the accounts of Accused No. 2 Hiten Prasan Dalal and others and were made available for the benefit of Accused No. 2 Hiten Prasan Dalal and others for their security transactions.
(vii) The remittance from Bangalore office of CANFINA in respect of the amount involved in the said transaction came to be processed as was done in the case of first transaction i.e. CANFINA issued its cheque for the said amount on Canara Bank, Bangalore in its account and Canara Bank, Bangalore in turn remitted the amount first by conveying by means of I.B.A. to Bombay office. The relevant evidence such as CANFINA's cheque issued at Bangalore and I.B.A.'s etc. have been made available to prove the same.
(viii) Bombay office, in particular, the P.W. No. 2 Mr. Vernekar who received the B.R. for the said security, kept the same in Bombay office. The necessary entries in respect of the said transaction also came to be made in Bombay office by P.W. No. 3. Mr. Kukian in Security Ledger and other relevant documents. P.W. No. 2 Vernekar also intimated Dealers in Bangalore about the execution of the said Deal, receipt of B.R., etc. on the same day.
(ix) The prosecution has also made available the entry which the dealer, namely, the Accused No. 12 Sarenathan Mohan made in Dealers Pad which was kept and maintained at Bangalore.
(c) Third Transaction:
(i) The third impugned transaction is of dated 31st July, 1991. As in the case of earlier two transactions, CANFINA was the purchaser and BOK Bombay was the selling party. Accused No. 2 Hiten Prasan Dalal was a broker involved therein for and on behalf of CANFINA.
(ii) The security involved was 19 crores Units of UTI. The total consideration was of Rs. 255,43,98,000/-.
(iii) According to the prosecution, the said deal was also struck and finalized by the dealers i.e. by Accused No. 1- Mulangi K.S. Ashok Kumar and/or Accused No. 12-S. Mohan at Bangalore and then conveyed the same to Bombay over telephone to P.W. No. 2- Mr. Vernekar who attended the telephone and took down instructions in respect of the said transaction and made entry in the Rough Transaction Sheet noting down the particulars, such as, the description of the security, quantum, rate, name of the broker andname of the counter party i.e. respectively Accused No. 2 BOK Bombay. The relevant entry in that respect has been made available.
(iv) The case proceeds as in the earlier two transactions, the messenger of the broker i.e. Accused No. 2 came with Cost Memo and B.R. in respect of the said security issued by BOK Bombay favouring CANFINA on that day i.e. on 31st July, 1991. The same was handed over to P.W. No. 2 Mr. Vernekar who received the same and on verification and checking from entry in Rough Transaction Sheet found the same to be in order being in accordance with instructions received from the dealers.
(v) P.W. No. 2 Mr. Vernekar then arranged to issue P.O. of Canara Bank favouring BOK for sum of Rs. 255,43,00,000/- being the consideration of the said security. He then handed over the said banker's cheque to the messenger of the said broker on the same day. He retained the B.R. received from BOK as also the Cost Memo in Bombay office.
(vi) On the same day, BOK Bombay received the said Pay Order issued by CANFINA which it sent for clearance and received the credit thereof on the same day. On the same day thereafter BOK credited the amount of the said P.O. into the O.D. Account of Accused No. 3-A.D. Narottam as was done in the case of earlier two occasions.
(vii) It is also the prosecution's case that thereafter under advise/ instructions of Accused No. 3-A.D. Narottam, BOK diverted the said amount to the various other banks. According to the prosecution, such diversion of the funds was for the benefit of Accused No. 2-Hiten Prasan Dalal, Accused No. 4-Bhupen Champaklal Dalal, Accused No. 5-Tejkumar Balkrishna Ruia and Accused No. 6-Jagdish Pannalal Gandhi. It is also further case of the prosecution that the said accused utilized the amounts so transferred for their speculative security transaction. It may be stated that the prosecution has adduced the evidence in respect of the said diversion and same will be dealt with at appropriate stage.'
11. It needs to be stated that, as is evident from the evidence made available by the prosecution that in the case of all three impugned transactions mentioned above, there are Delivery Orders issued by Accused No. 3 Abhay Dharamsi Narottam on BOK directing BOK to deliver the security involved in the aforesaid respective transactions to CANFINA. The said delivery orders have also been produced.
12. At this stage, it needs to be stated and this is the prosecution's case that it was represented to CANFINA that the aforesaid three impugned transactions in securities were between CANFINA and BOK. However, that was not so. In fact, the transactions were routed through the account of Accused No. 3-A.D. Narottam as a constituent of BOK at the instance and with-active connivance of Accused No. 2-H.P. Dalal. The security involved in all the three impugned transactions were not available at all either on the dates of transactions or thereafter either in the account of constituent Accused No. 3 Abhay Dharamsi Narottam or with BOK. It is further the case of the prosecution that all the three BRs issued in the respective impugned transactions were not supported by requisite securities at all. It is also the case of the prosecution that BOK credited the proceeds of the three Pay Orders which were issues by CANFINA on Canara Bank favouring BOK into the account of Accused No. 3 Abhay Dharamsi Narottam in absence of suchspecific instructions either from CANFINA or from Canara Bank. Further, BOK thereafter did not deliver the security as per their commitment and undertaking contained in three respective BRs except 9 crores Units of UTI of the second transaction dated 22nd July, 1991 which BOK repurchased thereby reducing its liability to that extent.
13. It is transpires that on 18th April, 1992 BOK issued its S.G.L. in respect of the first transaction of 6th April., 1991 as a substitute to the earlier BR issued By BOK. The said S.G.L. was received by P.W. No. 2 Mr. Vernekar who then deposited the same with Reserve Bank of India (in short. R.B.I.) and the same was dishonoured by the R.B.I. on the ground of insufficiency of the security. The prosecution has also made available the evidence in that behalf by examining witnesses being the employees of R.B.I.
14. It will be necessary as the prosecution's case stands, how the matter was processed at the end of BOK in its Bombay office. According to the prosecution, the Accused No. 7 Chandrashekhar Sitaram Raje and Accused No. 8 Sudhakar Appu Ail were the concerned officers/employees of BOK working in its Security Department at the relevant time. Accused No. 7 was the Agent/Manager and he was empowered and authorized to sign cheques and BRs and execute security transactions in the accounts of its constituents. According to the prosecution, the Accused No. 7 Chandrashekhar Sitaram Raje would execute such deals in the accounts of the constituents of his own independently. Accused No. 8 Sudhakar Appu Ail at the relevant time worked as a clerk in the Security Department of BOK and it is he who used to prepare the necessary documents in the security dealings, such as, preparation of cost memos, writing of Pay Orders and BRs, etc. He used to also keep and maintain the record in respect of such security transactions, such as making entries in the Security Ledger, etc. The prosecution has made available and proved the relevant record in respect of the three impugned transactions as also the offshoot transactions and proved the same through concerned witnesses.
15. The prosecution case further proceeds that, after conclusion of the last transaction nothing significant has happened till 16th of September, 1991. BRs issued by BOK in all the three transactions remained un-discharged by BOK. In as much as, BOK did not arrange to deliver the securities as undertaken and as involved in the three impugned transactions mentioned above, although CANFINA had paid the entire consideration to BOK as noticed earlier. As stated earlier and as the prosecution case proceeds, that no securities were available to meet the commitments under the said three BRs with BOK in its account or in the account of its constituent Accused No. 3 Abhay Dharamsi Narottam. According to the prosecution, at that stage, the accused Herein adopted manipulative device and involved or dragged in another bank, namely, Mercantile Co-operative Bank (in short M.C.B.) Accused No. 9 Krishan Kantilal Kapadia, Accused No. 10 Madhusudan Sakharam Kushte and Accused No. 11 Shankar Narayan Ramaswamy are the concerned accused who are involved in the said manipulative device. The brief resume as to how the manipulative device was put-through is given hereinbelow:-
(a) As noticed earlier, the last of the impugned transactions was dated 31st July, 1991 which was put through notwithstanding the factthat in earlier two transactions BOK had not discharged its liability under the BRs issued by it. No steps or any action seems to have been taken at the end of CANFINA. As noticed earlier, neither in the account of BOK nor in the account of Accused No. 3-A.D. Narottam the securities in the three impugned transactions existed. However, the BRs were already issued by BOK in the three impugned transactions to CANFINA undertaking to deliver the securities. It is the case of the prosecution that, with the object of manipulating the record in respect of the Security Ledger at the end of BOK that there were securities involved in three impugned transactions in the account of Accused No. 3 A.D. Narottam that M.C.B. was got into scene. As noticed earlier, the M.C.B. was a small bank in the sense that it was the bank registered under the provisions of the Maharashtra Co-op. Societies Act and had very limited financial limits. The prosecution has produced the evidence in a form of Inspection And Audit Reports conducted by the statutory authorities which have classified and graded the said bank as poor.
(b) At the relevant time, Accused No. 9 Krishan Kantilal Kapadia was its Vice Chairman and Accused No. 10 Madhusudan Sakharam, Kushte was its Accountant. One Shri V.C. Desai was a Chairman. Accused No. 11 Shankar Narayan Ramaswamy, sole proprietor of M/s. Excel & Co. was one of the constituents of the said M.C.B. who had his account with M.C.B. in the name of Excel & Co. Accused No. 5-T.B. Ruia had also account with M.C.B.
(c) It is the case of the prosecution that on 16-9-1991, a meeting was held at the office premises of Accused No. 2 Hiten Prasan Dalal which was attended to by Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal, Accused No. 5 Tejkumar Balkrishna Ruia, Accused No. 6 Jagdish Pannalal Gandhi, Accused No. 9 Krishan Kantilal Kapadia and Accused No. 10 Madhusudan Sakharam Kushte, in which the said accused decided to put through transactions as Cover Up Transactions for the three impugned transactions. In accordance therewith, the said accused took the following steps:-
(i) On 16th September, 1991, Accused No. 11 Shankar Narayan Ramaswamy issued his Delivery Order dated 16th September, 1991 on BOK for the security, namely. 11.5% GOI face value 25 crores 2010 for consideration of Rs. 25,92,93,045.55. It is to be noticed that the amount of consideration so also the nature of security was exactly the same as per the first impugned transaction of this case which is dated 6th April, 1991. In pursuance to the Delivery Order of Accused No. 11 Shankar Narayan Ramaswamy, M.C.B. prepared its Cost Memo and B.R. favouring BOK covering the said security, namely, 11.5% G.O.I. face value 25 crores 2010. At the end of BOK Accused No. 3 Abhay Dharamsi Narottam issued his Receiving order addressed to M.C.B. Accused No. 3 also instructed BOK by his letter to issue Pay Order favouring M.C.B. with further instructions that the proceeds thereof be credited into the account of Accused No. 11 with M.C.B. Accordingly, BOK issued its Pay Order and forwarded the same to M.C.B. M.C.B. in turn forwarded its Cost Memo and BR favouring BOK in respect of the said security, namely, 11.5% G.O.I. face value 25 crores 2010.
(ii) Similarly, on the same day, the Accused No. 11 Shankar Narayan Ramaswamy issued his Delivery Order On M.C.B. in respect of thesecurity of 16 crores Units of UTI as having sold the same to BOK. M.C.B. then issued its Cost Memo as also B.R. in respect of the said security favouring BOK. BOK on the basis of receiving order of Accused No. 3 Abhay Dharamsi Narottam as in the case of earlier transaction and on the basis thereof, issued its Pay Order favouring M.C.B. on the same day for a sum of Rs. 212,80,00,000/-. BOK forwarded the said Pay Order to M.C.B. with the covering letter containing instructions that the proceeds thereof be credited into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B. M.C.B. then forwarded its Cost Memo and B.R. to BOK. It is pertinent to note that the amounts involved in the securities in all respects tally and match as obtained in the second impugned transaction of 22nd July, 1991. M.C.B. received the Pay Order from BOK for the said amount and credited the same into the account of Accused No. 11 Shankar Narayan Ramaswamy on the same day.
(iii) On the same day i.e. on 16th September, 1991 Accused No. 11 Shankar Narayan Ramaswamy issued the third Delivery Order in respect of the security, namely, 19 crores Units of UTI showing having been sold to BOK. M.C.B. issued its Cost Memo and B.R. In respect of the said security and forwarded the same to BOK. At BOK's end, Accused No. 3 Abhay Dharamsi Narottam issued his Receiving Order upon M.C.B. in respect of the very security. The BOK issued its Pay Order favouring M.C.B. for a sum of Rs. 252,70,00,000/- being the consideration of the said security. The BOK forwarded the same to M.C.B. on the same day and after clearance credited the said amount into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B.
(iv) The prosecution made available the relevant documents in respect of the aforesaid three Cover Up transactions, such as, Receiving and Delivery Orders issued respectively by Accused No. 11 Shankar Narayan Ramaswamy and Accused No. 3 Abhay Dharamsi Narottam, Cost Memos and B.Rs. of M.C.B. Pay Orders of BOK, debit and credit memos/advice of both banks i.e MCB and BOK.
(v) It is significant to note that on the same day, M.C.B. issued its Pay Orders favouring BOK for exactly of the same amounts of the four Pay Orders issued by BOK on the same day favouring M.C.B. as noticed hereinabove except retaining 15 lacs which amount was credited into the account of Accused No. 11 Shankar Narayan Ramaswamy with M.C.B. It is further significant to note that BOK received the said Pay Order issued by M.C.B. on the same day and on the very day credited the proceeds of the said Pay Orders of M.C.B. into the account of Accused No. 3 Abhay Dharamsi Narottam It is further pertinent to note that on the same day, BOK issued its Pay Order exactly for the same amount favouring M.C.B. which M.C.B. received and credited into the account of Accused No. 11 Shankar Narayan Ramaswamy.
(vi) According to the prosecution, the same operation was done as and by way of square up operation and in the said operation a sum of Rs. 15 lacs came to the credit of Accused No. 11 Shankar Narayan Ramaswamy which he invested into Fixed Deposit with M.C.B. The prosecution has made available the evidence to prove the same in respect of the said cover up operation between M.C.B. and BOK through the concerned witnesses.
(vii) The fall out of the above cover up operation, it is the case of the prosecution that, on the basis thereof Accused No. 7Chandrashekhar Sitaram Raje and Accused No. 8 Sudhakar Appu Ail then manipulated the Security Ledger Account of Accused No. 3 Abhay Dharamsi Narottam with them by showing that there were securities available into the account of Accused No. 3 Abhay Dharamsi Narottam with BOK involved in the three impugned transactions noticed earlier i.e. on 6th April, 1991, 22nd July, 1991, and 31st July, 1991 when as noticed earlier BOK had purportedly sold the same to the CANFINA. It is most important to note as evidence shows, that entries of purchase from M.C.B. and so also sale of the said Cover Up Transactions have been made by Accused Nos. 7 and 8 in the Security Ledger Account of Accused No. 3-A.D. Narottam.
(viii) It is further case of the prosecution that the account of Accused No. 3 Abhay Dharamsi Narottam in the Security Ledger with BOK was came to be manipulated to show that on the dates of the impugned transactions there was adequate security into the account of Accused No. 3. It is the case of the prosecution that Accused Nos. 7 and 8 made the entries in respect of the said three security transactions in the Security Ledger in the respective Heads of the security. The prosecution has made the evidence available wherefrom it is noticed that entries in respect of the three security transactions on the basis of BRs issued by M.C.B. on 16th September, 1991 have been made which is apparently disturbing the chronological sequence of the Security Ledger. For instance, that the entries have been made on the basis of three B.Rs. of M.C.B. in the Security Ledger Account of Accused No. 3 at much later stage. The prosecution has made available the relevant records including the security ledger entries etc.
(ix) It is case of the prosecution that Accused Nos. 9, 10 and 11 also joined the conspiracy with the object of manipulating record in respect of the security ledger of Accused No. 3 with M.C.B. to show and or to make appear that on the respective dates of impugned transactions there existed securities into the account of Accused No. 3-A.D. Narottam, with BOK when in fact it was not the position.
(x) As stated earlier, the M.C.B. was comparatively the small scale Bank and it had no capacity to undertake transactions of higher value to the extend of three impugned cover up transactions as noticed hereinabove. It appears that, as a result of its over dealings, it ran into the adverse clearance balance with R.B.I. culminating into the stoppage of clearance facility by R.B.I. following R.B.I. inspection, etc. The prosecution has made available the report of the inspection of the R.B.I. and also relied upon the joint statement of Accused 9 Krishan Kantilal Kapadia and Accused No. 10 Madhusudan Sakharam Kushte and other employee of M.C.B. P.W. No. 20 Mr. Dilip Pratapray Gandhi.
(xi) It is further the case of the prosecution that Accused No. 11-S. N. Ramaswamy in the process gained Rs. 15 lacs which he invested in the Fixed Deposit in his name and later on M.C.B. advanced him loan of Rs. 10 lacs and accepted the said Fixed Deposit as collateral Security. It is the case of the persecution that the Accused No. 9 Krishan Kantilal Kapadia, Accused No. 10 Madhusudan Sakharam Kushte and Accused No. 11 Shankar Narayan Ramaswamy clearly participated in the cover up operation with the sole object of manipulating the Security Ledger record of BOK and for gain to Accused No. 11-S.N. Ramaswamy.
(xii) It may be stated that the M.C.B. eventually went into liquidation.
16. The prosecution further proceeds that nothing significant happened till 18th April 1992. B.Rs. of BOK issued in the three impugned transactions except the reduction of liability in respect of 9 crores of Units in the second transaction dated 22nd July, 1991 remained outstanding. The CANFINA did not receive the securities from BOK as per the said BRs nor BOK arranged to discharge the liability/commitment to the CANFINA by compensating monetarily. On 18th April, 1992 Accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail issued Secondary General Ledger form as and by way of substitute to its B.Rs. dated 6th April, 1991 which he had issued as noticed earlier in the first impugned transaction favouring CANFINA. P.W. No. 2 received the said S.G.L. from BOK who arranged to lodge it in CANFINA's S.G.L. Account with R.B.I. However. R.B.I. dishonoured the said S.G.L. and for the reason that there was no sufficient balance, to honour the said S.G.L. and the securities mentioned therein and so advised CANFINA. The matter thus rested here. The prosecution has made available the evidence in respect of the said S.G.L. form as also its dishonour, etc.
17. It is the case of the prosecution that accused Nos. 2 to 6 utilised the amounts which the CANFINA paid to BOK in the three impugned transactions as noticed earlier for their own security transactions. The amounts received by BOK from CANFINA vide Pay Orders were credited into the account of Accused No. 3 Abhay Dharamsi Narottam and thereafter diverted to various places. Prosecution has made evidence available to that effect. It will be considered at appropriate stage.
18. On the basis of this factual background, it is the case of the prosecution that the CANFINA did not receive the securities from BOK under the three BRs except 9 crores units of UTI in second transaction and the total outstanding in terms of money as at the end of May, 1992 by BOK to CANFINA was to that extent of Rs. 374,35,18,354.78. The BOK went into liquidation as per order of the Court on 27th May, 1992 and position of outstanding remained there as it was.
19. It is also the case of the prosecution that CANFINA on the expectation of the fulfillment of the three impugned transactions with BOK entered into transactions of sales with various parties of the securities in question. Since however BOK did not honour its commitment and cleared the deals, CANFINA was required to purchased securities from the market at higher rate and in that process it had also suffered heavy loss which is estimated to Rs.59,66,02,000/-.
20. Thus, the total loss, according to the prosecution, suffered by CANFINA is estimated to Rs. 434,01,20,354.78.
21. The case further proceeds that, around April, 1992 there scam insecurity transactions in banks broke out evoking large publicity in the press media. The concerned authorities, the Government and the R.B.I. swung into action and after taking serious note of the same, R.B.I. conducted the inspection and investigation of certain banks and financial institutions including that of CANFINA, BOK and M.C.B.. The issue was also raised in both the Houses of Parliament and members expressed their concern considering the huge magnitude of the scam involved estimated to extent of Rs. 5000 crores. The same was fallowed by R.B.I. setting up Commission headed by itsthen Deputy Governor Janakiraman on 23rd April, 1991 to enquire into the situation which rendered its report after enquiry and submitted it to the Governor of R.B.I. and the Government. Then followed setting up of a Committee known as Joint Parliamentary Committee by both the Houses of Parliament somewhere in the first week of August, 1992 which has also rendered its Report highlighting the manner of manipulating transactions in securities undertaken by various banks, financial institutions with brokers.
22. Continuing narration of the prosecution case it reveals that the higher officials of CANFINA or Canara Bank were not aware of outstanding B.Rs. in respect of security transactions undertaken by CANFINA which included three B.Rs in the impugned transactions of this case. They were never informed about the same. It is suggested that the security transactions by and on behalf of CANFINA were done and finalized by the dealers of CANFINA who at the relevant time were Accused No. 1 Mulangi K.S. Ashok Kumar and Accused No. 12 Sarenathan Mohan. Accused No. 1 was a dealer and it was the responsibility of the dealers to ensure that the security deals went through smooth and all right in all respects. It is only in the month of April, 1992 that the CANFINA's then Managing Director sitting in Bombay P.W. No 25 Mr. Padmanabha Rao Appana learnt from the Inspector of R.B.I. about the outstanding B.Rs. of the BOK. He then made enquiry and got confirmed about the outstanding B.Rs. which included three B.Rs. in the three impugned transactions.
23. The case further proceeds that P.W. No. 25 after coming to know about the outstanding BRs he got in touch with Accused No. 1 Mulangi K.S. Ashok Kumar, the Chief Dealer who came down to Bombay and met him. The case proceeds that, Accused No. 1 Mulangi K.S. Ashok Kumar told P.W. No. 25 Mr. Padmanabha Rao Appana that he would contact concern brokers and would ensure that transactions under the B.Rs. get cleared. It is the case of the prosecution that thereafter Accused No. 1 Mulangi K.S. Ashok Kumar with Accused No. 2 Hiten Prasan Dalal, broker, met P.W. No. 25 when it is alleged that Accused No. 2 Hiten Prasan Dalal promised him that BOK would honour the outstanding B.Rs.
24. The case further proceeds that around the same time Accused No. 1 Mulangi K.S. Ashok Kumar and P.W. No. 28 Manjeshwar Venkateshwara Kamath who had come to Bombay informed P.W. No. 25 about the huge amount involved in the outstanding B.Rs. and about the diversion of the huge amount from BOK into the accounts of some of the brokers. P.W. No. 25 realised the seriousness and gravity of the case and it is the case of the prosecution that thereafter he contacted P.W. No. 33 Shri J.V. Shetty, the then Chairman and P.W. No. 32 Mr. K. Laxminarayanan, the then Executive Director of the Canara Bank and asked them to come to Bombay immediately to decide about the course of action. Accordingly, P.W. No. 32 and P.W. No. 33 came down to Bombay. P.W. No. 25 was also in Bombay. According to prosecution, thereafter meetings were arranged in Taj Mahal Hotel to sort out the problems of outstanding B.Rs. It is the case of the prosecution that the meetings were held in Taj Mahal Hotel in a room which was occupied by P.W. No. 28 Mr. M.V. Kamath and the same was attended by Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal and Accused No. 5 Tejkumar Balkrishna Ruia. Some other brokers also attended the said meetings.
25. The prosecution alleges that in the said meetings the issue of outstanding B.Rs. was discussed and it is further alleged that Accused No. 3 Abhay Dharamsi Narottam admitted having receiving a sum of Rs. 30 crores, Accused No. 5 Tejkumar Balkrishna Ruia admitted having received Rs. 70 crores and Accused No. 2 Hiten Prasan Dalal admitted having received Rs. 30 crores. It is further alleged that as far as Accused No. 4 Bhupen Champaklal Dalal is concerned, he remained non-committal with the assurance that he would look into the matter. The prosecution has sought to rely upon the evidence of P.W. No. 25 Mr. Padmanabha Rao Appana, P.W. No. 32 Mr. K. Laxminarayanan and P.W. No. 33 Mr. Jagannath Venkanna Shetty as also of P.W. No. 31 Mr. Jitendra Ratilal Shroff, one of the brokers, to prove the holding of the meetings in Taj Mahal Hotel and alleged admissions of the receipts of the amounts by accused Nos. 2, 3 and 5 as stated earlier.
26. The case further proceeds that, as allegedly assured by the brokers, there was no positive response and, therefore, the position continued as it was. The CANFINA thereafter decided to report the matter to the police and accordingly by letter dated 19th June, 1992, P.W. No. 1 Mr. Kota Narsimha Kamath, the then Managing Director of CANFINA addressed a letter to the Deputy Inspection General of Police, C.B.I., Bombay, which letter has been produced as Exh. 38. By the said letter, the CANFINA reported to the C.B.I. as to how the three impugned transactions were processed and CANFINA was cheated to the extent of Rs. 435,31,20,354.78. In the said letter CANFINA alleged the commission of offences, such as criminal conspiracy, criminal misappropriation and cheating and requested the C.B.I. for registering the criminal case as also carrying out investigation in detail.
27. It is revealed from the prosecution case that the said complaint letter Exh. 38 was passed on to P.W. No. 76 Mr. Bhupinder Kumar who was the then Deputy Superintendent of Police (Bank Security Cell), who after going through the said letter registered crimes against accused Nos. 1 to 6 i.e. Accused No. 1 Mulangi K.S. Ashok Kumar, Accused No. 2 Hiten Prasan Dalal, Accused No. 3 Abhay Dharamsi Narottam, Accused No. 4 Bhupen Champaklal Dalal, Accused No. 5 Tejkumar Balkrishna Ruia and Accused No. 6 Jagdish Pannalal Gandhi and unknown officials of BOK vide C.R. No. RC-44 (A)/ 1992/ACB/ Bombay, on 20th June, 1992 at Bombay. He then registered offences against those accused named in the said F.I.R. under section 120B I.P.C. r/w 409, 420, 467, 468 I.P.C. and section 13(2) r/w 13(1)(d) of P.C. Act and substantive offences under section 409, 420, 467, 468-I.P.C. and section 13(2) r/w 13(1)(d) of PC Act, 1988 on 22nd June, 1992. The said F.I.R. was forwarded to the Special Court which was then presided over by my Brother Judge S.N. Variava. P.W. No. 76 continued incharge of the investigation of the case till the end of 27-28th July, 1992. He interrogated and recorded the statements of P.W. No. 1 Mr. Kota Narsimha Kamath, P.W. No. 25 Mr. Padmanabha Rao Appana, P.W. No. 35 Mr. Rajam Kalyan Raman, P.W. No. 33 Mr. Jagannath Venkanna Shetty, P.W. No. 32 Mr. K. Laxminarayanan and P.W. No. 28 Mr. Manjeshwar Venkateshwara Kamath. On 29th June, 1992 he arrested Accused No. 1 Mulangi K.S. Ashok Kumar. He also took charge of certain documents under seizure memos. As he was transferred on 27th July, 1992 he handed over the investigation of this case to P.W. No. 80 Mr. Rajendra Kaleshwar Prasad, the then Deputy Superintendent of Police.
28. Thereafter, P.W. No. 80 as incharge of the investigation of this case, conducted and carried out the investigation with the assistance of P.W. No. 78 Mr. Murarji Anna Waydande, Deputy Supdt. of Police, P.W. No. 79 Mr. Ashok Kutty, Inspector, the then C.B.I. Inspector P.W. No. 81 Mr. Dinesh Kumar Rai. P.W. No. 80 Mr. Rajendra Kaleshwar Prasad, during the course of investigation interrogated and recorded the statements and further statements of various witnesses, viz. (1) G.D. Vernekar, P.W. No. 2, (2) Omprakash S. Kuckian, P.W. No. 3, (3) K.B. Shenoy, P.W. No. 34, (4) N. Balasubramainan, P.W. No. 64, (5) B.N. Srikantha, P.W. No. 30, (6) P.N. Narayanrao, P.W. No. 26. (7) P.J. Subbarao, P.W. No. 38, (8) M.S. Krishnaswamy, P.W. No. 74, (9) P.B. Shinde, P.W. No. 73, (10) A.P. Rao, P.W. No. 25, (11) J.V. Shetty, P.W. No. 33, (12) K. Laksminarayan, P.W/No. 32, (13) J.R. Shroff, P.W. No. 31, (14) N.D. Parmeshwaran, P.W. No. 8, (15) S. Nagarajan, P.W. No. 70, (16) Nayan Samant, P.W. No. 6, (17) Rama Iyer Nanjappa, P.W. No. 65, (18) K.S. Rao, P.W. No. 23, (19) Shriram Gopal Khadilkar, P.W. No. 11, (20) R.L. Kulkarni, P.W. No. 13, (21) H.P. Balip, P.W. No. 12, (22) A.S. Kulkarni, P.W. No. 19, (23) M.K. Kher, P.W. No. 14, (24) M.D. Samangedkar, P.W. No. 21, (25) S.B. Mule, P.W. No. 15, (26) M.S. Khandekar, P.W. No. 72, (27) Meena M. Arbune, P.W. No. 16, (28) D.P. Gandhi, P.W. No. 20, (29) N.R. Jagtap Adv. P.W. No. 59, (30) P. Radhakrishnan, P.W. No. 63 and (31) C.R. Kanani, P.W. No. 69.
He also seized with the assistance of assisting officers, documents under various seizure memos. On 10th June, 1993 he also arrested Accused No. 12 Sarenathan Mohan.
29. Since accused Nos. 1 and 12, according to the prosecution, were the public servants being employees of CANFINA, P.W. No. 1 Mr. Kota Narsimha kamath as provided under the provisions of P.C. Act, 1988 passed the sanction order to prosecute the said accused on 8th October, 1993 in his capacity as a Managing Director of CANFINA which order has been produced as Exh. 39.
30. After completion of the investigation, the chargesheet was submitted before the Special Court then presided over by my Brother Judge Variava by the C.B.I. on 26th October, 1993 against 12 accused named hereinabove. The Investigation Officer, P.W. No. 80 thereafter under Panchnama obtained specimen writings of Accused No. 2 H.P. Dalai, Accused No. 3 A.D. Narottam, Accused No. 7 C.S. Raje, Accused No. 8 S.A. Ail, Accused No. 9 K.K. Kapadia, Accused No. 10 M.S. Kushte and Accused No. 11 S.N. Ramaswamy since there were various relevant documents of which, it is alleged that the said accused were authors or signatories thereof and then forwarded the same alongwith specimen handwritings to the Government Examiner. P.W. No. 67 Mr. Naresh Chandra Sood, the Government Examined, examined the said documents and has submitted his report. The said report forms part of the exhibits before the Court.
31. It is noticed that after filing of the chargesheet as above, the accused herein appeared before the Special Court. Some of the accused also presented applications claiming discharge, etc. The said applications were considered and came to be disposed of by rejecting the same. Then on 13th November, 1995, my Brother Judge Variava framed charges against all the accused of this case which is Exh. 8 on record. The accused were read over and explained the said charges when they abjured guilt and claimed to betried and their pleas to that effect were separately recorded which are Exhs. 24 to 35 on record.
32. However, thereafter prosecution submitted an application for amendment of the charges and in particular addition of charges under sections 409 & 411 of Indian Penal Code (in short I.P.C.) which was opposed to by and on behalf of defence, but disallowing such opposition my Brother Judge Variava framed the revised charges with the addition of charges under sections 409 and 411 of I.P.C. on 7th January, 1997 being Exh. 23 on record. The same were read over and explained to all the accused again when they pleaded non-guilty and claimed to be tried. Their pleas have been separately recorded which form part of the record. Order framing charges dated 7th January, 1997 is Exh. 23 on record. It appears that some of the accused thereafter approached the Apex Court challenging the order dated 7th January, 1997 and framing of the charges but without success.
33. It is thought necessary to recapitulate nature of indictment/accusation against the accused of this case. The prosecution has alleged that the accused persons, in pursuance of the criminal conspiracy misrepresented the CANFINA through BRs due to which CANFINA parted with the amounts being amounts involved in the said three impugned transactions to BOK on the basis of false documents prepared and the accused thus used the same as genuine documents. The accused are charged with the offences of criminal conspiracy under section 120B cheating etc. to CANFINA for the sum of Rs. 374,35,18,354.78, under section 420 of I.P.C. and/or alternatively criminal misappropriation under section 409 of I.P.C as also under sections 411, 467, 468 and 471 of I.P.C. Accused Nos. 1 and 12 are also charged under section 13(1)(d) read with section 13(2) under P.C. Act, 1988 being the public servants.
34. Before I proceed to consider the prosecution case and various charges levelled against the accused, it will be useful to spell out the nature of evidence in this case.
NATURE OF EVIDENCE ADDUCED IN THIS CASE:
35. The evidence adduced by the prosecution consists of oral as well as documentary. In as much as the prosecution has examined 81 witnesses to bring home the charges in support of their case. Besides, they have also produced voluminous documentary evidence of as many as 800 exhibits.
36. The witnesses examined hail from various agencies being their officers or employees, tike, CANFINA, Canara Bank, Bank of Karad, M.C.B., Reserve Bank of India, Andhra Bank, ANZ Grindlays Bank, Citi Bank, Bank of America, State Bank of India, Syndicate Bank, Standard Chartered Bank, ABN Amro Bank, American Express bank, C.B.M.F. and National Housing Bank as also employees of Indian Bank Association (IBA). The prosecution has also examined one broker as also Notary before whom, it is alleged one of the accused, namely, Accused No. 2 H.P. Dalai made an affidavit, Handwriting Expert panch and Investigating Officers of C.B.I have also deposed.
37. The officers and employees of Canara Bank and CANFINA are from both the places i.e. from Bangalore as well as from Bombay. The officers include right from the then Chairman, Managing Director to down level to the Clerk. Such officers and employees have been examined who deposedhow the transactions in Government securities on behalf of CANFINA were dealt with and processed, how the deals were finalized and so on. Through the same witnesses voluminous documents have also been made available which were relevant and involved in the processes of execution of security transactions. More or leas, same is the position as far as BOK and M.C.B. are concerned. The employees of other banks named above have been examined in support of the charge of diversion of the amounts. Whereas, the officers and employees of R.B.I. have been examined to prove the operation of S.G.L. Accounts and guidelines of the R.B.I. in the matter of security transactions which were to be followed by the banks and financial institutions and issued by R.B.I. from time to time. This is done as the prosecution case stand that the impugned security transactions were done in violation of the R.B.I. guidelines.
38. The documentary evidence principally comprises of the contemporaneous relevant documentation in the process of and relating to the impugned transactions in question as well as sub-transactions which flew therefrom. There are large number of documents because as far as Canara Bank and CANFINA are concerned, such documentation used to be done at four different centres, registered office of Canara Bank at Bangalore and its branch at Bombay, registered office of CANFINA at Bangalore and its head office in Bombay.
EVIDENCE ADDUCED ON BEHALF OF THE DEFENCE;
39. (i) It is necessary and pertinent to note that the evidence has also been adduced on behalf of the accused. Accused No. 3 A.D. Narottam, in particular has himself testified on oath and given evidence as provided under section 315 of Code of Criminal Procedure (in short Cr.P.C). He has also examined witnesses in support of his defence. He has also produced various documents. The witnesses examined are mostly the employees of various banks.
(ii) Some of the accused have produced and/or caused to be produced various documents from prosecution witnesses.
(iii) The trend and tenure of defence as revealed from the cross-examination of prosecution witnesses and written submissions filed, by and large, runs like this:-
(a) Accused Nos. 1 M.K.S. Ashok Kumar and Accused No. 12 S. Mohan both have denied having struck the impugned deals. They have also denied that they were only competent or authorized to strike and finalize deals in the transactions in securities. It is suggested that the impugned deals were struck with approval and to the knowledge of the concerned superiors. It is also pleaded that the transactions in question were done in a regular and normal course of business and as a part of duty and there is nothing amiss about the same. The said accused Nos. 1 and 12 sought to suggest that the impugned transactions were not meant for the account of Accused No. 3 A.D. Narottam. It is also pointed out by the accused Nos. 1 and 12 that the BRs of the impugned securities remained outstanding because of the failure of the concerned employees of CANFINA to take proper follow up action and that they were unaware that such BRs remained outstanding. They also have questioned the validity and efficacy of the sanction order of the prosecution against them.
(b) As far as Accused No. 2 is concerned, while not disputing he having acted as a broker for and on behalf of the CANFINA in the saidimpugned transactions, has denied various allegations made and charges levelled against him. He denies having diverted the fund for his own benefit. He also asserts that the impugned transactions are in regular and normal course of business and there is nothing amiss. In short, according to him, he is not responsible for the alleged loss to CANFINA or otherwise.
(c) As far as Accused No. 3-A.D. Narottam is concerned, as stated earlier, there is a peculiar factor in his case as he has chosen to testify on oath before this Court by exercising the option as provided under section 315 of the Cr.P.C. He has also examined certain witnesses and also produced certain documents. It may be noted that as the prosecution case stands it shows that the proceeds of the Pay Orders issued by CANFINA favouring BOK being the consideration of the three impugned transactions in securities were credited to his account, he has tried to explain how and in what circumstances said proceeds of the said Pay Orders were credited to his account and who are or were responsible or forced him to do so. In as much as, he says that he had not received any benefit of even a single pai from the proceeds of the said Pay Orders and that the entire amount with the last rupee was transferred or paid to Accused No. 2-H.P. Dalai, Accused No. 4-B.C. Dalai, Accused No. 5-T.B. Ruia and Accused No. 6-J.P. Gandhi. According to him, he was compelled to allow to route the said three impugned transactions in securities in his account because of prevalence and insistence of Accused Nos. 2, 4, 5 and 6. He has also made reference to certain liability of Accused No. 5 T.B. Ruia in respect of L.I.C. Mutual Fund and that in order to rotate the said liability which was very large in few crores that accused Nos. 2, 4, 5 and 6 evolved a scheme for rolling over the said liability and with that object the fictitious transactions in securities were put through in his account with BOK. According to him, he did not possess the securities in question involved in three impugned transactions and yet at the insistence of the said accused the BRs were issued by BOK. The BRs favouring CANFINA were issued by BOK which were not supported by the requisite securities. He also makes reference to the operation as and by way of Cover Up which was attempted by involving M.C.B. by the said accused. He suggests that the said cover up operations and transactions purportedly put through were entirely fictitious being on paper only as a device to manipulate his Security Ledger Account with BOK in order to show that the securities in the three impugned transactions existed in his account. In short, he denies his culpability and complicity and hence claims to be innocent and pleads having been made scapegoat and being a victim of circumstances. He has set out his case in his W/S in Civil Suits which are produced and contents will be noticed later on.
(d) Accused Nos. 4, 5 & 6:-- As far as said accused are concerned, they have denied their complicity and involvement in the various offences of which they are sought to be indicted asserting and pointing out there being no evidence made available by the prosecution to bring home the various charges against them.
(e) Accused No. 7, Agent of BOK :-- While not disputing being the author and/or signatory of various documents issued at the end of BOK in security transactions as also cover up operations, he pleads thathe did so under the instructions of Accused No. 3 who was the Director at the relevant time of BOK.
(f) Accused No. 8 :- The defence of Accused No. 8 more of less proceeds on the similar line that of Accused No. 7 as mentioned hereinahove. In addition, he pleads that he being an ordinary Clerk acted under and upon the instructions of Accused No. 7 who was his superior.
(g) Accused No. 9 :- It may be recalled that his involvement in the prosecution case is confined to the cover up operation put through M.C.B. According to him, he was the Vice Chairman at the relevant time, of the said M.C.B. but it was a honorary post. He was not concerned nor did he take active part in the day-to-day working of the said M.C.B. much less in security transactions. He states that the then Chairman Mr. V.C. Desai was managing and attending to the affairs of the said M.C.B. including security transactions. As far as joint statement (Exh. 352) produced by the prosecution and which the officer of the R.B.I. Mr. K.S. Rao, P.W. No. 23 has proved and before whom the said joint statement was alleged to be made/given, he says that the same should not be relied upon and read in evidence against him. He states that the said statement was obtained under duress and under compulsion by the said R.B.I. Officer. In that, the R.B.I. stopped the clearing facility at the relevant time of the M.C.B. and as a result, there was a chaotic position and confusion as also commotion because M.C.B. was not in a position to satisfy its customers/clients. In that circumstances, he was required to sign the said statement so that R.B.I. lifted the stoppage of the clearing facility of the said bank.
(h) Accused No. 10 :-- More or less, he is also adopting the same stand as that of Accused No. 9 as above. In addition, he states that whatever he did, namely, preparation of the documents in the transactions in question, was done by him under the instructions of the then Chairman Mr. V.C. Desai.'
(i) As far as Accused No. 11 is concerned, while he admits he being constituent and account holder of the M.C.B. and he being proprietor of Excel & Co. he denies various charges leveled against him. According to the three transactions in securities dated 16-9-91 put through in his account in M.C.B. were in normal course.
40. Having considered broadly the prosecution's case, nature of indictment against each of the accused the nature of evidence made available by and on behalf of the prosecution as also by the defence, the following points arise for determination :---
41. The points for determination and the finalization thereof are as follows:--
Transaction dated 6-4-1991
POINTSFINDINGS
1)Whether Accused No 1 Mulangi Krishna Swamy Ashok Kumar and Accused No. 12-Sarenathan Mohan were respectively the Chief Dealer and Dealer of CANFINA in its registered office at Bangalore at the relevant time?
Yes2)Whether Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan being dealers as such of CANFINA at the relevant time i.e. between April 1991 to May 1992 possessed authority to negotiate and finalize transactions in Government securities both for sale and purchase for and on behalf of CANFINA severally /independently and that each one of them thus were competent to take decisions independently in striking the deal in security transactions for and on behalf of CANFINA without there being any financial limits.?
Yes3)Whether Accused No. 1 M.K.S. Ashok Kumar and Accused No. 12-S. Mohan were public servants under the provisions of Prevention of Corruption Act, 1988?
Yes4)Whether sanction order is required and/ or whether the sanction order to prosecute Accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan is valid?
Yes5)Whether Accused No. 1-M.K.S. Ashok Kumar and/or Accused No, 12-S. Mohan struck and finalized at Bangalore the transactions in Government Securities viz. transaction dated 6-4-1991 in respect of purchase of 11. 50% Government of India Central Loan 2008 securities of the face value of Rs. 25 crores from Bank of Karad, Bombay on account of A,D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA on the same date i.e. 6-4-1991?
Yes6)Whether Accused No. 2-Hiten Prasan Dalal was involved and acted as a broker in the said transaction for and on behalf of CANFINA?
Yes7)Whether Accused No. 3-A.D. Narottam constituent of the Bank of Karad issued his Delivery Order being Ex. 191 dated 6-4-1991 to Bank of Karad in respect of the aforesaid securities directing BOK for delivering the said securities to CANFINA and whether he held/possessed the said securities in his account with Bank of Karad to meet the commitment of the said Deal?
Yes. Accused No. 3 issued his Delivery Order without holding or possessing in his account the security in question. 8)Whether accused Nos. 7 and 8 C.S. Raje and S.A. Ail respectively issued cost memo in respect of the said securities viz, 112% GOI F. V. 25 crores being Ex. 188 favouring CANFINA and its Bank Receipt Ex. 189 for the sum of Rs. 25,99,23,8 I8/- in respective of said securities favouring CANFINA without being backed up by the said securities?
Yes9)Whether CANFINA paid and parted with sum of Rs. 25,81,20,354.38 as price of the said securities by its Pay Order dated 6-4-1991 Ex 41 favouring Bank of Karad to Bank of Karad on the strength of said Cost Memo & BR and whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 184?
Yes10)Whether Bank of. Karad credited the sum of Rs, 25,81,20,354/38 being the proceeds of the said pay order Ex, 41 into the O/D account No. 301 of Accused No. 3-A.D. Narottam with Bank of Karad on the same day i,e. on 6-4-1991 in absence of instructions of CANFINA/Canara Bank in that behalf?
Yes11)Whether on the same day said amount of Rs. 25,81,20,354.38 being the sale proceeds of Pay Order Ex. 41 was diverted from the said account of Acc^ used No, 3-A.D. Narottam with Bank of Karad to other banks for being credited into account of Accused No. 2-H.P. Dalai and other accused Nos. 3, 4, 5 and 6. Only against Accused No. 2 in his account.
Yes12)Whether Accused No. 1-M.K-S. Ashok Kumar and/or Accused No, 12-S Mohan struck and finalized the transactions in Government Securities viz. transaction dated 22-7-91 in respect of purchase of 16 crore Units of UTI from Bank of Karad, Bombay on account of A.D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA?
Yes13)Whether Accused No. 2-H.P. Dalai was involved and acted as a broker in the said transaction for and on behalf of CANFINA?
Yes14)Whether Accused No, 3-A.D. Narottam, Constituent of the Bank of Karad issued the Deliver Order being Ex. 194-A dated 22-7-91 to Bank of Karad in respect of the aforesaid securities directing BOK for delivering the said securities to CANF1NA held/possessed the said securities in his account with Bank of Karad?
Yes. Without holding or possessing the security in question in his account.
15)Whether accused Nos. 7 and 9 C.S. Raje and K.K. Kapadia respectively issued cost memo in respect of the said securities being Ex. 195 favouring CANFINA and its Bank receipt Ex. 196 for the sum of Rs. 212,80,00,000/- in respect of said securities favouring CANFINA without being backed up by the said securities?
Yes16)Whether CANFINA paid and parted with sum of Rs, 212,75,00,000/- as price of the said securities by its pay order dated 22-7-91 Ex. 52 favouring Bank of Karad to Bank of Karad and whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 196?
Yes17)Whether Bank of Karad credited the sum of Rs. 212,75,00,000/- being the proceeds of the said Pay Order Ex, 52 into the O/D account of Accused No. 3-A.D. Narottam with Bank of Karad on the same day i,e. on 22-7-1991 in absence of specific instructions of CANFINA or Canara Bank?
Yes18)Whether on the same day said amount of Rs. 212,75,00,000/- being the sale proceeds of pay Order dated 22-7-1991 Ex. 52 was is diverted from the said account of Accused No. 3-A.D. Narottam with Bank of Karad to other banks for being credited into account of Accused No. 2 and other accused Nos. 4, 5 and 6.
Yes. i) As far as Accused No. 2 is concerned, there is direct transfer/credit of sum of Rs. 9,73,46,938.38 into his joint account in Andhra Bank without there being any consideration and that accused No. 2 utilized the said amount for his own security transaction.
ii) As far as other accused Nos. 4, 5 and 6 are concerned it is held to have not been proved against them.
19)Whether Accused No. 1-MK.S. Ashok Kumar and/or Accused No. 12-S. Mohan struck and finalized the transactions in Government Securities viz. transaction dated 31-7-91 in respect of purchase 11.50% Government of India Central Loan 2008 securities of the face value of Rs. 25 crores from Bank of Karad, Bombay on account of Accused No. 3-A.D. Narottam, Constituent, Broker and Director of Bank of Karad for and on behalf of CANFINA?
Yes20)Whether Accused No. 2-H.P. Dalai was involved and acted as a broker in the said transaction' for and on behalf of CANFINA?
Yes21)Whether Accused No. 3-A.D. Narottam Constituent of the Bank of Karad issued the Deliver Order being Ex. 265-A dated 31-7-91 to Bank of Karad in respect of the aforesaid securities viz. 19 crores Units of UTI directing BOK for delivering the said securities to CANFINA and whether he held/ possessed the said securities in his account with Bank of Karad to meet the commitment thereof?
Yes. Without holding / possessing security in question in his account.
22)Whether Accused Nos. 7 and 8 C.S. Raje and S.A. Ail respectively issued cost memo in respect of the said securities being Ex. 229 favouring CANFINA and its Bank Receipt Ex. 228 for the sum of Rs. 255,43,98,000/- in respect of said securities favouring CANFINA without being backed up by the said securities?
Yes23)Whether CANFINA paid and parted with sum of Rs. 255,43,98,000/-as price of the said securities by its pay order dated 31-7-91 Ex. 66 favouring Bank of Karad to Bank of Karad on the strength of said cost memo and BR and Whether Bank of Karad received proceeds of the said Pay Order on the basis of the said Bank Receipt Ex. 228?
Yes24)Whether Bank of Karad credited the sum of Rs. 255,43,98,000/- being the proceeds of the said Pay Order Ex. 66 into the O/D account of Accused No. 3 A.D. Narottam with Bank of Karad on the same day i.e on 31-7-1991 in absence or instructions from CANFINA of Canara Bank?
Yes25)Whether on the same day said amount of Rs. 212,75,00,000/- being the sale proceeds of Pay Order Ex. 52 was diverted from the said account of Accused No. 3 A.D. Narotttam with Bank of Karad to other banks for being credited into account of accused No. 2-H.P, Dalai and other accused Nos. 4-B.C, Dalai, 5-T.B. Ruia and 6-J.P. Gandhi.
Yes. But only as far as Accused No. 2-H.P. Dalai is concerned, as under:
i) Rs. 13,25,00,000/- BOK by its Pay Order Ex. 272 dated 31-7-91 paid to Bank of America sum of Rs. 13,69,58,0007-without there being any security transaction/ consideration and Bank of America paid the sum of Rs, 13,25,00,000/ -by its Pay Orderdated 2-8-91 being Ex. 545 to Andhra Bank which amount was credited into the joint account of Accused No. 2 with Andhra Bank, without there being any consideration.
ii) A sum of Rs. 20,00,00,000/- by pay order of BOK being Ex. 270 to Andhra Bank directly credited into the joint account of accused No. 2-H.P. Dalai, without there being any consideration.
iii) Rs. 9,94,92,500/-as per debit voucher of BOK dated 31-7- 1991 being Ex. 283 for the being of Rs. 9,94,92,500/-and credit voucher of Andhra Bank dated 1-8-1991 for the sum of Rs. 9,94,92,5007- being Ex. 419, the said amount is directly credited into the joint account of accused No. 2 in Andhra Bank, without there being any consideration.
26)Whether accused Nos. 1 and/or 12 struck and finalized the sub-transaction on 15-10-91 in respect of sale of 1.5 crores Units of UTI from Bangalore by CANFINA to BOK, Bombay ?
Yes27)Whether accused Nos. 1 and/or 12 struck and finalized the sub-transaction on 18-10-1991 in respect of sale of 7.5 crore Units of UTI from Bangalore by CANFINA to BOK, Bombay ?
Yes28)Whether Accused No. 2-H.P. Dalai, 4-B.C. Dalai, 5-T.B. Ruia and 6-J.P, Gandhi utilized the amounts so diverted/received as aforesaid mentioned in point Nos. 11, 18 and 25 for their own benefits in their own security transactions ?
Yes.In so far as accused No. 2 is concerned. In case of other accused not proved.
29)Whether CANFINA was fraudulently and dishonestly induced to part with moneys covering the aforesaid three transactions ?
Considered not necessary in view of findings on point Nos. 30, 31 & 32. Yes. To the extent of Rs. 374,35,18,354-78 only.
30)Whether accused Nos. 1-M.K.S. Ashok Kumar and/or 2-H.P. Dalai in their capacity as public servants abused their positions as such public servants and by corrupt and illegal means obtained pecuniary advantage to Bank of Karad account A.D. Narottam and others to the extent of Rs. 374,35,18, 354.78 and dishonestly and/or fraudulently have put CANFINA to wrongful loss of Rs. 434,01,20,354.78?
Yes31)Whether accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan respectively as employees of CANFINA being the Chief Dealer and Dealer respectively have dominions over the property viz. security/ funds of CANFINA and were entrusted with the same as such ?
Yes32)Whether there is dishonest misappropriation of property viz, a sum of Rs, 374,35,018,354,78 of CANFINA?
Yes33)Whether bankers receipts issued by Bank of Karad and signed by accused No. 7-C.S. Raje being
(i) No. 3259 dated 6-4-91 Ex. 189.
(ii) 3499 dated 22-7- 1991 'Ex. 196.
(iii) 3425 dated 31-7-1991 Ex. 228 and one SQL Transfer Form dated 18-4-1992 Ex. 190 were forged documents?
Yes34)Whether Bankers Receipt No. 12, Ex. 344 in respect of security of 1 12% GOI 2008 face value 25 crores at the rate of 101%, No. 13, Ex. 343 in respect of security of 16 crore Units of UTI face value Rs. 16 crores at the rate of 13.30% and No. 14, Ex. 345 in respect of security of face value of Rs. 19 crores at the rate of 13.30% all dated 16-9-1991 issued by and on behalf of MCB favouring Bank of Karad were issued and/or brought into existence with the object of showing bogus purchase of securities thereunder by Bank of Karad from MCB to manipulate and to cover up lack of securities with Bank of Karad under its bankers receipts 3259 dated 6-4-91, 3499 dated 22-7-91, 3425 dated31-7-91 being Exs. 189, 196 and 228 respectively referred to above and issued in favour of CANFINA?
Yes35)Whether the said bankers receipts of Bank of Karad bearing Nos. 3259, 3499, 3425 respectively Exs. 189, 196 and 228 and of MCB bearing Nos. 12, 13 and 14 respectively being Exs. 344, 343 and 345 were forged for use of as 'genuine documents'.
Yes36)Whether there existed criminal conspiracy during April, 1991 to May, 1992 between the accused-conspirators?
Yes. In so far as accused Nos. 1, 2, 3 and 7 to 12 are concerned. Not proved against accused Nos. 4, 5 and 6.
37)Whether it is proved that Accused Nos. 2-H.R Dalai and No. 3-A.D. Narottam, No. 4-B.C. Dalai, 5-T.B. Ruia 6-J.P. Gandhi and 11-S.N. Ramaswamy dishonestly received and retained the part of the said amount and used for their own security transactions
Yes.i) Accused No. 2-H.P. Dalai as held in point Nos. 11, 18 & 25 i.e. Rs. 78, 91, 27, 715.15.
ii) Yes, against accused No. 3 A.D. Narottam i.e. Rs. 295, 28, 90, 639.63.
iii) Yes. Against accused No. 11S.N. Ramaswamy a sum of Rs. 15 lakhs.
38)Whether the accused herein or any of them have committed offences with which they are charged and if so, what offences
against accused Nos. 4, 5 and 6. i) Accused Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalai, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A., Ail 9-K.K, Kapadia, 1Q-M.S. Kushte, 11-S.N. Ramaswamy and 12-S. Mohan are held to be guilty being parties to a continuing criminal conspiracy between April, 199 land May, 1992 at Bangalore and Bombay, the object whereof, was to 'commit criminal breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,354.78' punishable under section 120B read with section 409 of I.RC.
ii) Accused Nos. 1-M.K.S. Ashok Kumar and 12-S, Mohan are held guilty of offences under section 409 r/w section 109 of I.P.C. for the offence of committing breach of trust in respect of the property of CANFINA viz. Rs. 374,35,18,354.78.
iii) Accused Nos. 2- H.P. Dalai, 3-A.D.Narottam, 7-C.S.Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy are held guilty under section 409 read with section 109P.C. Purushothama Reddiar v. Perumal, reported in : [1972]2SCR646 has posited by referring to section 35 of the Evidence Act in particular its first part that Reports made by the public officials in discharge of their official duties are relevant and hence admissible. In that case before the Supreme Court it is noticed that the police officials made reports in respect of election meetings addressed by the contesting candidate which were held relevant and hence admissible in the context of issue of corrupt practices. Head Note (F-G) states:
'(F-G) In an issue whether the returned candidate has arranged certain election meetings on certain dates, the reports made by the police officers, who have been deputed by their superiors to cover the meetings in question, are extremely relevant and in the absence of anything to show that the officials are inimically disposed towards the candidate or his party the reports carry greatest possible weight'
This ratio has been reiterated by the Apex Court in its later judgment in the case of Shri Kanwar Lal Gupta v. Amar Nath Chawla & others, reported in : [1975]2SCR259 . Usefully reference be also made to the decision of the Calcutta High Court in the case of Octavious Steel Co. Ltd. v. Endogram Tea Co. Ltd., reported in : AIR1980Cal83 in which the documents sought to be tendered related to the papers in the custody of the C.B.I. and contained inter departmental communication between Reserve Bank of India and other concerned parties which was objected to by the defence in the case which was registered under FERA. Relying upon the decision of the Supreme Court in the case of Kanwar Lal Gupta, : [1975]2SCR259 (supra) it was observed in para 13 as under :
'13. The rule of hearsay may not stand in the way of proving public documents because once it is proved that the documents are official records or official correspondence the Court has to raise the presumption under section 114(e) of the Evidence Act. The question of 'hearsay' was not expressly taken in : [1975]2SCR259 but the Counsel for the respondent did expressly object against the admissibility of the chart on the ground that he would not be able to cross examine the writer or the person who used to maintain the public records out of which the charge was prepared. But the Supreme Court overruled the objection by saying 'That is no argument.' This establishes that in the opinion of the Supreme Court, the facts that the C.I.D. officer was not on oath and was no cross examined, were immaterial for the purpose of admitting in evidence the contents of that chart. It has been expressly held by the Supreme Court in this case that the contents of a public document will be admissible in evidence in spite of the fact that the writer is not called as a witness. In respectful agreement with this decision I hold that the documents sought to be tendered by Mr. Bhabra are admissible in evidence without calling the writers thereof but this evidence being very weak in its probative value can be treated as corroborative evidence only. If however the writer is called as a witness, there the contents can be treated as an independent piece of evidence. In view of my finding 1 overrule the objections taken on behalf of the plaintiff against the admissibility of the contents in Exts-120-A, 120-B and 120-C and direct that these documents should go in as Exhibits unconditionally.
The conspectus of the above decision makes it abundantly clear that the report prepared and maintained by the public officer if relevant will be admissible in evidence. However as cautioned by the Apex Court the same will have a corroborative value and it is a weak type of evidence. This Court is conscious of the same.'
243. I may also make a reference to the judgment of my Brother Judge Variava, presiding over other Special Court rendered on 9th/10th February, 1995, in Civil Suit No. 13 of 1991 on the file of this Special Court. There, the question was of admissibility of the report known as Janakiraman Committee Report which Committee was appointed by the R.B.I. for enquiring into the irregularities committed by certain banks and financial institutions in the transactions in Government securities. The said Committee submitted three or four of its reports. The Committee was appointed by the Governor of R.B.I. When the said report was sought to be tendered, objection was raised on various grounds, including the grounds dealt with hereinabove. My Brother Judge, in his said judgment rejected the objection holding and observing that the report in question was prepared under the statutory authority, namely, the statutory powers given to R.B.I. under section 35 of the Banking Regulations Act, 1949, in respect of matters which were of the great public importance and with which public was very much concerned and interested. It is further held that the said report was a document forming the acts and records of acts of a official body viz. R.B.I. and its officers and, therefore, it is a statutory report as also public document. The view taken by my Brother Judge in the said case is also in consonance with the view that this Court has taken.
STATEMENT BEFORE R.B.I.
RECEPTION IN EVIDENCE-
244. In this context, there is one more aspect which would need due consideration and i.e. with reference to the Joint Statement dated 22nd May, 1992, given by accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and P.W. No. 20 D.P. Gandhi respectively being at the relevant time, Vice Chairman, an Accountant and an Officer of MCB. The relevant part of the said JointStatement has already been referred to by this Court as also reproduced certain portion thereof while considering point No. 34- The same is Exh. 352 on record. This Court has already held the said report as also the contents thereof having been proved by the prosecution. P.W. No. 20-D.P. Gandhi one of the signatories thereof as also P.W. No. 23-Mr. K.S. Rao, the R.B.I. Officer to whom the said statement was handed over by its makers, have proved the same. It needs to be stated that the said statement clearly shows how the operations in security transactions as and by way of 'Roil over' was undertaken and put through between the said MCB and BOK and other Bank, namely, Standard Chartered Bank. We are not concerned with Standard Chartered Bank. It is in the evidence and stands clearly proved that MCR put through the cover up transaction and consequent issue of its BR to BOK without there being any securities to back up such transaction. The said joint statement also makes reference to the issuance of BR by MCB favouring BOK at the instance and at the behest of Accused No. 2-H.P. Dalai, Accused No. 3-A.D. Narottam, Accused No. 5-T.B. Ruia, accused No, 6-J.P. Gandhi and accused No. 11-S.N. Ramaswamy. The statement also makes reference to accused No. 7-C.S. Raje and accused No. 8-S.A. Ail. It also refers to the meetings and how the roll over or cover up operations, including the issuance of BRs etc. were resorted to. It would be recalled that as far as this case is concerned, the cover up operation of 16th September, 1991, between MCB and BOK, being the subject matter of discussion of Point No. 34, has relevance and in that context, the roles attributed to the accused figured therein in particular, accused Nos. 2-H.P. Dalai. Accused No. 3-A.D. Narottam, accused No. 5-T.B. Ruia, Accused No. 6-J.P. Gandhi, Accused No. 7-C.S. Raje, accused No. 8-S.A. Ail & Accused No. 11-S.N. Ramaswamy have become relevant in the back ground of their indictment in various charges in this case.
245. The question that arises for consideration is whether the said statement will offend the provisions as contained in Clause 3 of Article 20 of the Constitution of India, viz. accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte, they being the makers of the said statement one also signatories thereto. Sub-Clause 3 of the said Article provides :--
'No person accused of any offence shall be compelled to be a witness against himself.'
The said clause gives protection to the person accused of any offence against compulsion to be a witness against himself. There is thus complete immunity which Constitution has mandated to the accused of being a witness against himself.
246. It is to be noted that this aspect is no more res integra as far as this Court is concerned in view of enunciation of law on this topic by the Apex Court in the case reported in : [1961]1SCR417 between Raja Narayanlal Bansilal v. Maneck Phiroz Mistry & another, which arose from the decision of this Court rendered by Division Bench reported in : AIR1959Bom320 .
247. In that case, the position was somewhat similar and identical as obtained in the matter in hand. The provisions of the statute, namely, the Indian Companies Act, 1956, were for consideration before the Apex Court which were para materia with the provisions as obtained in the R.B.I. Act and Banking Regulations Act, namely section 45N of R.B.I. Act and section 35 of Banking Regulations Act. The provisions for consideration before theApex Court in the said matter were section 235 and 240 of the Companies Act. In that case, as provided under sections 235 and 240 of the Companies ; Act, the Government was empowered to appoint competent persons as Inspectors to investigate into the affairs of the Company registered under the . provisions of the Companies Act and report thereon in such matter to the Central Government. Section 240 of the Companies Act provided for an appointment of the Inspector for such investigation and who was authorized to examine on oath concerned person in relation to the affairs of the Company. The Inspector so appointed under section 240 of the Companies Act could issue notice requiring the concerned official of the Company to produce certain documents, etc. After inspection and enquiry, under section 240 the said Act provides for initiation of appropriate action for offences against those found having breached certain provisions of the Companies Act in relation to the conduct of affairs of the Company and on that back ground the objection was raised by one of its Directors against whom criminal prosecution was launched. It is to be noted that provisions as contained under section 240 of the Companies Act and that of section 35 of the Banking Regulations Act and section 45N of the R.B.I. Act as stated earlier proceed almost on similar line.
248. The Apex Court rejected the objection raised in the context of provisions as contained in Article 20 Clause 3 of Constitution of India. In fact, this was also repelled by this Court and the Apex Court upheld the said decision of this Court. The Apex Court has luminously posited and explained the principles as it appears in para 24 which are reproduced hereinbelow :
Thus the scope of the enquiry contemplated by section 234 is clear; wherever the Registrar has reason to believe that the affairs of the company are not properly carried on he is empowered to make an enquiry into the said affairs. Similarly under section 235 inspectors are appointed to investigate the affairs of any company and report thereon. The investigation carried on by the inspectors is no more than the work of fact finding commission. It is true that as a result of the investigation made by the inspectors it may be discovered that the affairs of the company disclose not only irregularities and malpractices but also com* mission of offences and in such a case the report would specify the relevant particulars prescribed by the circular in that behalf. If, after receiving the report, the Central Government is satisfied that any person is guilty of an offence for which he is criminally liable, it may, after taking legal advice, institute criminal proceedings against the offending person under section 242(1); but the fact that a prosecution may ultimately be launched against the alleged offender will not retrospectively change the complexion or character of the proceedings held by the inspector when he makes the investigation. Have irregularities been committed in managing the affairs of the company; if yes, what is the nature of the irregularities? Do they amount to the commission of an offence punishable under the criminal law? If they do who is liable for the said offence? These and such other questions fall within the purview of the inspector's investigation. The scheme of the relevant sections is that the investigation begins broadly with a view to examine the management of the affairs of the company to find out whether any irregularities have been committed or not. In such a case there is no accusation, either formal or otherwise, against any specified individual; there may be a general allegation that the affairs are irregularly, improperly or illegally managed; but who would be responsible for the affairs which are reported to be irregularly managed is a matter whichwould be determined at the end of the enquiry. At the commencement of the enquiry and indeed throughout its proceedings there is no accused person, no accuser and no accusation against anyone that he has committed an offence. In our opinion a general enquiry and investigation into the affairs of the company thus contemplated cannot be regarded as an investigation which starts with an accusation contemplated in Article 20(3) of the Constitution. In this connection it is necessary to remember that the relevant sections of the Act appear in Part VI which generally deals with management and administration of the companies.'
249. In my view, the principles as laid down would squarely apply to this case also vis-a-vis Joint Statement Exh. 352. The said statement is dated 22nd May, 1992, when there was no complaint lodged in this case before the C.B.I. or the Police. As noticed earlier, the complaint was lodged first time on 22nd June, 1992 by CANFINA with the C.B.I. Bombay. Even in the said complaint dated 19th June, 1992 being Exh. 38 Accused No. 9-K.K. Kapadia and accused No. 10-M.S. Kushte did not figure as accused. So also in F.I.R. which came to be registered by the C.B.I. on the basis of the said letter. Therefore, at the material time i.e. on 22nd May, 1992 when the said statement Exh. 352 was handed over by Accused Nos. 9 and 10 and another, they were not accused as such and that being so, the question of offending Clause 3 of Article 20 of the Constitution of India would not arise. It is held therefore, that joint statement Ex. 352 having been duly proved, can be read in the evidence in support of prosecution case.
250. section 315 Cr.P.C. - Evidence of Accused No. 3 A.D. Narottam; One point of considerable importance as also of implications is required to be dealt with in this case, which is somewhat peculiar and unique. As mentioned earlier, Accused No. 3-A.D. Narottam has exercised his right and option of examining himself on oath before the Court as available under section 315 of Cr.P.C., 1973. Accused No. 3 has been appearing throughout in person. He is an aged person of about 67 years old. He chose to conduct his defence in person. Considering his advanced age as also intricate and complicate nature of the case, there being voluminous evidence, both oral and documentary. Court, on number of occasions, during the course of trial, suggested accused No. 3 A.D. Narottam that it would be appropriate for him to engage Advocate to defend him in this matter. But same did not find favour with him. Court also informed him that he would be entitled to the assistance of an Advocate under the Legal Aid Scheme and that he should apply for the same. But he declined the said offer. Court also indicated for the appointment of an Advocate to defend him as an amicus curie. Even then he remained firm in conducting his defence himself.
251. The Accused No. 3 thus conducted his defence all throughout. He cross-examined various witnesses and got produced from some of them certain documents.
252. When the stage of recording of statement under section 313 of Cr.P.C. reached in this trial, as required under the said section, various incriminating circumstances on the basis of prosecution evidence were put to him, to which also he offered his explanations. At the concluding stage of section 313 Statement, Accused No. 3 was asked, as was done in the cases of other co-accused, whether he wanted to examine him on oath and adduced evidence in his defence as also to file written statement, to which he answeredin affirmative. Thus indicating that he wanted to exercise option of adducing evidence in his defence by testifying on oath, in disproof of the charges made against him. This accused so indicated on 6th July, 1998, in the open Court. At that stage, the relevant questions put to this accused No. 3-A.D. Narottam by the Court, under section 313 of Cr.P.C. and answers given by him are Q. Nos. 755 and 757 which proceed in this manner:-
'Q.755. Do you wish to examine yourself as a witness on oath?
A. Yes. I request to defer my examination on oath at the end i.e. after completion of recording of the statements of other co-accused in this case.
Q.757. Do you wish to lead any evidence or examine any other witness onyour behalf ?
A. I will examine some witnesses. I will furnish the list of such witnesses in the next week i.e. on Monday, the 13th July, 1998.'
253. Thereafter accused No. 3 presented written application dated 30-7-1998 being Ex. 823 before this Court in consonance with his earlier indication of availing of the option as provided under section 315 of Cr.P.C.
254. At that stage, some of the accused, in particular, Accused No. 2-H.P. Dalai, Accused No. 4-B.C. Dalai, Accused No. 5-T.B. Ruia presented Miscellaneous Applications bearing Nos. 359 to 363 of 1998, vehemently Opposing the said application of Accused No. 3 A.D. Narottam. In as much as, almost all the accused strenuously opposed the move of accused No. 3-A.D. Narottam to adduce evidence on oath. Inter-alia, it was contended on behalf of the accused, in support of their oppositions that (the points of opposition as were summarized in the order dated 31st July, 1998, of this Court are reproduced hereinbelow) :-
'(i) Accused No.3-Abhay Dharamsi Narottam is not the competent witness for the defence so as to give evidence on oath in disproof of the charges made against him by reason of the fact of admission made by him in his explanation offered by him in the statement recorded under section 313 of the Code:
(ii) It is stressed that because of the admissions made by him there is no scope left for him to disprove the charges made against him as envisaged under the provisions of section 313 of the Code;
(iii) It is apprehended, I would say, so strongly expressed and highlighted, by all the applicants with one voice that the said accused No. 3 may give evidence which will be adverse and prejudicial to other co-accused and which would jeopardize their interest/defence.
(iv) Therefore the consent of the other co-accused for accused No. 3 for giving such evidence is necessary.
(v) Fear and apprehension is expressed that prosecution in the cross-examination of accused No. 3, after he gives evidence may elicit something incriminating against the other co-accused and that will provide an opportunity to the prosecution to fill in the lacuna left in their case. It is submitted that at the threshold itself this Court should clarify that the accused No. 3 be not permitted to give incriminating evidence against the other co-accused and if given the same must not be relied upon and the same should be excluded and ignored;
(vi) It is emphasized that accused No. 3 is offering himself to be examined as defence witness with some ulterior purpose, not to lead evidence in his defence for disproving the charges but giving evidence against the co-accused; and
(vii) That the Court should impose strict restrictions or fetters upon the scope of the evidence which accused No. 3 proposes to give. In that it is hintedthat such evidence should be confined only to his defence in disproof of the charges against him and nothing more.'
255. This Court, on consideration of the objections raised and submissions made by and on behalf of the applicants-accused in the said applications proceeded to reject the said applications observing in paras 40 & 41 as under:
'40. 1 may further add that there is a definite underline principles behind the said provision. In a criminal trial, it is imperative for the prosecution to establish its case in accordance with charges levelled against the accused beyond reasonable doubt. For variety of reasons, without imputing any motive, prosecution may not place before the Court all the material relevant in its case in support of charges. Such material kept away may be helpful to accused in a trial before the Court. It is in such situation, it is reasonable to think, that section 315 of the Code would come into play. Just as the prosecution has to establish and prove its case/charges against the accused, equally it is also to the accused to disprove the charges levelled against him by the prosecution. It is this aim and object that this section 315 of the Code seeks to achieve and statutorily confers the said right upon the accused. It is the same right that Accused No. 3 is wanting to exercise, which it is pertinent to note, is opposed by the applicants herein who are co-accused.
41. Therefore taking into consideration all these facts, I do not find any merits in the objection raised or even apprehension expressed by and on behalf of the applicants accused. No fetters or restrictions can be imposed as have been repeatedly and vehemently canvassed before this Court upon Accused No. 3 when he would step into the witness box as witness. Apart from the fact that same will be most unjust and unreasonable it will be contrary to the statute. In as much as, as noticed earlier, section 315 of the Code as it reads does not call for such imposition, or restrictions or fetters as sought to be urged. To do so would be contrary to the statute and will be denying accused No. 3 the exercise of the statutory right. In dispensing criminal justice the Court is conscious of its duty in order to discover the truth and to advance the course of justice in impartial manner. The various provisions in the Code are aimed to ensure that an accused person gets complete and fair trial. It has to strike balance while dealing with conflicting claims. In case in hand, as noticed earlier, the accused No. 3 who is an aged person, is defending himself without aid or assistance of the trained legal expert. That itself, it must be clarified, is no reason or justification to give him different treatment as such which may not accord with Rules of procedure and may operate as prejudicial to the other co-accused. As noticed earlier, in this case, he has been exercising his statutory right to examine himself on oath and volunteered to relegate himself to the position of the witnesses, subjecting himself bound to the rules tike any other witnesses. This being the position, on so called assumption, apprehension and speculation to deny or deprive him to exercise an option which he has opted for would be most unjust and injudicious. None of the grounds put forth by the applicants-accused justify the grant of relief sought for by them in their above applications.'
What is stated in these paras 40 and 41 while disposing of the miscellaneous applications, this Court wishes to reiterate and reaffirm the same position even in this final judgment which spells out the underlined principles behind the said statutory provisions, namely section 315 of Cr.P.C.
256. It is necessary to mention that this Court while rejecting the said miscellaneous applications and recording its reasons as appearing in paras 40and 41 of the said judgment reproduced hereinabove relied upon the decision of the Apex Court in the case of Tribhuvan Nath v. The State of Maharashtra, reported in A.I.R. 1973 S.C. 450, which is squarely on the point in issue. More on this judgment of the Apex Court later on.
257. It is further to be noted that there were stiff opposition by the co-accused in particular by Accused Nos. 2-H.P. Dalai, 4-B.C. Dalai, 5-T.B. Ruia, 6-J.P. Gandhi, 7-C.S. Raje and 8-S.A. Ail at every stages when Accused No. 3-A.D. Narottam commenced his deposition on oath. Court was required to deal with the same then and there, making clarificatory notes wherever necessary in the matter of precautions and prudent norms of rules of evidence. Court would observe while appreciating evidence so adduced by Accused No. 3 and assigning reasons by overruling the objections and allowing Accused No. 3 to proceed ahead with his evidence. It may be stated that Accused No. 3 also examined few witnesses in his defence and got produced certain documentary evidence also.
258. In fairness, Court, at that stage, in view of stand and apprehensions expressed by the defence indicated that evidence of the accused No. 3-A.D. Narottam will be considered, evaluated and assessed as like any other witness. That is to say, that evidence as a whole will be considered including how he fared in the cross-examination. It needs to be stated that accused No. 3 was cross-examined on behalf of almost all the accused. It is to be noted that accused No. 3 has not been subjected to cross-examination by and on behalf of the prosecution.
259. This Court while considering, assessing and sifting the evidence made available by the prosecution in the background of various charges against the accused herein and particularly in view of there being charge of criminal conspiracy, against all the accused, has made reference to the evidence of accused No. 3 so made available. But this Court has so done keeping and bearing in mind at its fore-front the most salient principle that the same was not read as being substantive evidence as such. That is to say, the Court has exercised caution in giving credence to the evidence so adduced by accused No. 3 keeping in mind that accused No. 3 is very much accused in this case facing the charge of criminal conspiracy alongwith co-conspirators.
260. The legal position which permits the accused of any offence and gives option to him to be a competent witness appears in section 315 of Cr.P.C. The relevant part of the said section reads as under :--
'315. Accused person to be competent witness.---(1) Any person Accused of an offence before a Criminal Court shall be a competent witness for the defence and may give evidence in oath in disproof of the charge made against him or any person charged together with him at the same trial:
Provided that -
(a) he shall not be called as a witness except on his own request in writing;
(b) his failure to give evidence shall not be made the subject of any comment by any of the parties or the Court or give rise to any presumption against himself for any person charged together with him at the same trial.'
261. This section 315 first time came to be inserted in the Cr.P.C. in the year 1995 giving option to the accused by amending 342(A) of the Old Code. In the new Code, the provision in that respect is to be found in the separatesection, namely, section 315 of Cr.P.C. By this section, the competency of an accused to testify on his own behalf is recognized which existed in England.
262. The Apex Court has occasion to consider this aspect in the case of Tribhuvan Nath v. State of Maharashtra and another), reported in A.I.R. 1973 S.C. 450. That was a case which arose under the Old Criminal Procedure Code, of 1898, relevant provision being section 342(A) which is identical to section 315 of the new Code. In that case, the criminal conspiracy was one of the charges and there were more than one accused. One of the accused exercised the option of testifying himself on oath in his defence. The trial Court allowed the said accused to do so. The said accused was also subjected to cross-examination by the other accused so also by the prosecution. Objection was raised by the other co-accused as done in this case but without success before the trial Court as also before the High Court. When the matter was taken up before the Apex Court, contention was raised that the trial Court was not justified in reading the evidence given by the accused who exercised the option as a witness in his defence. However, the Apex Court rejected the said contention positing and enunciating the principles on the point as appear in para 29 of the said judgment. The Apex Court proceeded to lay down as under :
'29. The first question is, whether the trial Judge was right in using theevidence given by accused 3 which he gave as a witness in his defence?The position with regard to such evidence is that when a person, accused alongwith others voluntarily steps in the witness box as a witness in defence, he is in the same position as an ordinary witness seePeoples Insurance Co. Ltd. v. Sardar Sardul, and Jibachh Shah v. The State, : AIR1965Pat331 and is thereforesubject to cross-examination by the prosecution Counsel and evidencebrought out in such cross-examination can be used against his co-accused. See The King v. James Paul, (1920)2 K.B. 183. Ifsuch a witness incriminates his co-accused the other accused, jointlytried with him, has the right to cross-examine him if he wants so to do.Rex v. Hadwen, (1902)1 K.B. 882. This has been theposition in England after 1898 when accused persons were made competent witnesses. The same consequences must also flow after accusedpersons have been made competent witnesses for the defence undersection 342-A of the Code of Criminal Procedure. As Counsel for theappellant informed us, since accused 3 volunteered to enter the witness box as a witness in his defence he was in fact cross-examined notonly by the prosecution but also by Counsel for the other accused. Ofcourse, an accused person cannot be compelled to give evidence as aprosecution witness in view of the expression 'in disproof of the charges'in section 342-A. But once his evidence as a witness for the defence ison record, under section 10 of the Evidence Act, 1872, evidence, as tothe communications between one conspirator and the other during thetime that the conspiracy is going on and relating to implementing thatconspiracy, is relevant evidence. The statements by one accused toanother and the evidence as to the acts done by him disclosing participation by the other accused in the conspiracy are also relevant. As to whether they merit reliance or not is another question depending upontheir credibility.'
263. The position and the principled underlined said section 315 of Cr.P.C. has been so luminously explained by the Apex Court needing no further elaboration.
264. Usefully I may also refer to the recent judgment of the Apex Court in the case of Gajendra Singh & others v. State of Rajasthan, reported in : (1998)8SCC612 , directly on the point. In that case, as the facts disclosed, the Trial Court allowed the accused to examine him on oath in his defence. However, the said accused was not permitted to produce certain documents and application made by the accused was rejected. The accused approached the High Court but without success. Then he moved the Apex Court. The position as explained by the Apex Court in para 3 so far relevant, meets the point in question. Para 3 reads as under --
'We have heard the learned Counsel for the appellant as well as the State of Rajasthan. Once the Court allowed the application of the accused to be examined as a defence witness and commenced recording of his evidence, we fail to appreciate why he was not allowed to produce the documents on which he desired to rely. Merely because he did not produce the documents before his evidence was recorded is no reason why once the Court permitted him to step into the witness box he was denied the opportunity to produce the documents on which he desired to rely to support his evidence.'
265. It is true that in the said judgment of the Apex Court, the Apex Court was only required to consider the right of the accused of exercising option to adduce evidence in his defence and which right has been upheld by the Apex Court without imposing any fetters as such. The said judgment of the Apex Court recognizes the statutory right of accused to exercise option under section 315 of Cr.P.C.
266. Certain submissions were advanced during the course of the arguments as was done at the time when this Court heard the miscellaneous applications referred to earlier opposing the permission to accused No. 3 to examine himself as a defence witness. But in view of the legal position and the principles as laid down by the Apex Court as noticed earlier, this Court holds that there are no merits in the contentions of the defence. The position in this respect has also been more lucidly and succinctly stated in the Commentary on the Treaty, Sarkar on Criminal Procedure, VII Edition Reprint 1998 and which appears on page 957 under said section 315. In my view, the same also makes the position very explicit and which I propose to quote :-
'In disproof of the charges made against him & c'. - These words do not appear to have any special significance other than that the accused has the right to examine himself as a defence witness for himself or his co-accused at the same trial. When an accused examines himself as a defence witness, he does so of course with the object of clearing himself of the charge. Any argument that if the evidence of the accused be not in disproof of the charges against him or the co-accused, he cannot be a competent witness would only be legalistic quibbling. An accused coming as a witness is in the same position as that of any other witness and the evidence given by him may help his or the co-accused defence, or it may amount to an admission of incriminating facts or of guilt going against him; or his evidence may also go against the co-accused. In many cases it may well be that in trying to disprove the charge against him, an accused may throw the entire blame on the co-accused- By electing to give evidence like any other witness, he impliedly waives his rights as an accused and he must take the consequences of his action if the statements in his evidence are self-criminative.'
267. To sum up, therefore, it is held that option exercised by Accused No.3-A.D. Narottam to testify on oath and adduce evidence is in complete accord with the provision of section 315 of Cr.P.C. and that evidence which he has adduced can be read in evidence, applying the test as is done in the case of any other witnesses under the Rules of Evidence. He is like any other witness competent to testify unless he suffers from any disqualification or handicaps as provided under section 118 of the Evidence Act.
268. The Court wishes to clarify once again that while evaluating, assessing and sifting the evidence of Accused No.3-A.D. Narottam, the Court has first taken into consideration the evidence that the prosecution has made available and then has referred to the evidence of Accused No.3 - A.D. Narottam as and by way of corroborative evidence as far as this case is concerned.
ISSUANCE OF BANK RECEIPTS (BRS) SECONDARY GENERAL LEDGER TRANSFER FORMS (SGLTFS) IN SECURITY TRANSACTIONS SO CALLED PRACTICE. etc.
269. As noticed and discussed earlier that three impugned security transactions of this case were between CANFINA and BOK put through by means of issuance of Bank Receipts (BRs). In the said three transactions of 6-4-91, 22-7-91 and 31-7-91, CANFINA was the purchaser and BOK was a selling party of the Security in question. In case of purchase the purchasing party pays consideration of the security to the selling party accompanied by simultaneous delivery of the security by the selling party to the purchasing party. However, in three impugned transactions BOK did not deliver the security and instead issued its BRs favouring CANFINA. There are three BRs so issued by BOK favouring CANFINA. Later on, BOK substituted its BR dated 6-4-1991 with SGLTF on 18-4-1992.
270. There are three more BRs figuring in this case, which as noticed earlier, were issued by MCB on 16-9-91. Apparently it is tried to be made out that BOK was a purchasing party of the securities mentioned in three BRs and MCB was a selling party. As seen earlier, MCB was brought into picture at a stage, what is described earlier as 'Cover Up Operations'. The evidence discussed earlier proves that in three security transactions, BOK paid the consideration to MCB by its pay orders. However instead of delivering the Security physically, MCB issued and passed on its Bank Receipts favouring BOK.
271. Thus it would be noticed that there are six BRs in this case which the prosecution has made available-three issued by BOK being Ex. 189, 196 and 228 favouring CANFINA and three issued by MCB being Ex. 343, 344 and 345 favouring BOK.
272. The said BRs issued by BOK and MCB are in a printed formats on the letter head of respective parties i.e. of BOK and MCB and content identical recitals. It is therefore, thought appropriate to notice as illustration, contents of the BR, so as to understand what for the instrument seek to achieve and purpose of which the same is issued in security transactions like in this case. Let us take BR of BOK being Ex. 189 dated 6-4-91 :--
NOT TRANSFERABLE
Registered Office:
Raviwar Peth,
Karad, (Dist :Satara)
THE BANK OF KARAD LTD. Revenue
BOMBAY OFFICE Stamp
Nagindas Master Road, Fort.
Bombay-400 001.
G.P.D. No. 003259/ADN Date : 6-4-1991.
RECEIVED from Canbank Financial Services Limited the sum of Rupees25,99,23,818.11 being the cost of Securities/Debentures/Bonds of 11.5%Central/Central Loan 2008 face value of Rs. 23-11-90 @ Rs. 100.05% withinterest from 23-11-90 to date. The Securities/Debentures/Bonds of the facevalue of Rs. ................. are delivered herewith and Securities/Debentures/Bonds of the face value of Rs. 25,00,00,000/- will be delivered when ready inexchange for this receipt duly discharged and in meantime the same will beheld on account of Canbank Financial
FOR THE BANK OF KARAD LTD.
Rs. 25,99,23,818.11
Agent/Accountant.
As far as MCB is concerned as an example let us see BR Ex. 344 dated 16-9-91 for the same security as mentioned in BOK's BR noticed earlier:
NOT TRANSFERABLE.
67, Hanuman Bldg.,
Mumbadevi Road, Tambakanta,
Bombay-400 003
Phone:33 51 01/33 59 58.
METROPOLITAN
Co-operative Bank Ltd.
BOMBAY
No.012. Date 16-9-91
RECEIVED from Bank of Karad Ltd. the sum of Rupees Twenty Five Crores NinetyTwo Lacs Ninety Three Thousand Forty Five and Paise Fifty Five being the cost ofSecurities /Debentures/Bonds of 11.5% Central /GOI Loan 2008 face value of Rs.25,00,00,000/- @ Rs. 101/-% with interest from 23-5-1991 to date. The Securities/Debentures/Bonds of the face value of Rs. ------------are delivered herewith and securities /Debentures/Bonds of the face value of Rs. 25,00,00,000/- will be deliveredwhen ready in exchange for this receipt duly discharged and in the meantime thesame will be held on amount of Bank of Karad Ltd.
For THE METROPOLITAN CO-OP BANK LTD.
Rs. 25,92,93,045.55
Accountant/Manager/.
Both the BRs relate to the Security Transaction of 6-4-91 between
CANFINA and BOK.
273. It will be noticed from both the BRs that both contained recitals to the effect-'Securities/Debentures/Bonds of the face value of Rs. 25,00,00,000/-will be delivered when ready in exchange for this receipt duly discharged and in meantime the same will be held on account of Canbank Financial.' The said recital would clearly show that there is a definite commitment made by the institutions issuing BR that the Security as described in the said BRwould be delivered when ready in exchange for BR duly discharged and in the mean time the same was to be held on account of the selling party. It is in the evidence that such BRs were issued by the respective institutions and were also received by the parties in whose favour the same were issued and on the strength of receipt thereof, purchasing party, paid the consideration to the selling party. It is pertinent to note P.W. No. 2 -Mr. Vernekar, in his evidence stated that he handed over Pay Orders of Canara Bank made out favouring BOK on receipt of BRs in all the three impugned transactions as he considered the same i.e. BRs as valuable securities.
274. The plea of almost all the accused is that at the relevant time security deals in Government securities were permissible by means of issuance of BRs. There was thus practice in the market to that effect and institutions like Banks and financial bodies were freely undertaking their security transactions by means of their BRs.
275. It is also suggested that two parties involved in impugned three transactions, CANFINA and BOK had many such security transactions, in which BRs were issued and exchanged. It is therefore sought to be made out that there was nothing wrong putting through three impugned transactions by means of BRs. Market practice then allowed such course. That being so, there is no question of committing any offences or there being illegality as such. It is further contended that the impugned transactions were put through in usual course of business by these two institutions i.e. CANFINA and BOK and there was nothing wrong. It is further suggested that the transactions failed because BOK who had issued its BRs favouring CANFINA on receipt of consideration of the security, failed to honour its commitment under the respective BRs. At the most, according to the defence, same would involve civil liability and that there will be no commission of criminal offences as such.
276. The prosecution has through various witnesses brought evidence with regard to the use of BRs in the security Transactions put through by the financial institutions, such as BOK and MCB. The evidence is to show when and in what circumstances, course of issuance of BR in Security transactions was permissible. In what conditions same i.e. BR can be issued, etc. Such witness are some of the officials of the concerned institutions as also officials of RBI and Indian Banks Association (IBA). Reference to certain circulars issued by RBI laying down guidelines in that respect have also been made. The officers of the R.B.I. have also deposed about such RBI's circulars containing guidelines.
277. First witness is P.W. 2 Mr. Vernekar who as stated earlier was one who received the BRs of BOK in three impugned transactions. In his evidence he has stated (refer para 24 on page 55 of the notes of evidence) that BRs were in the nature of acknowledgement of the BR issuing bank of the receipt of the consideration of the Security from the purchasing bank and undertaking that it possessed the security and would deliver the same to the purchasing party at later stage.
278. It is to be noted that the recital in the BRs in questions which are reproduced hereinabove also lends corroboration to the said testimony of this witness i.e. P.W. No. 2 -Mr. Vernekar. It is also in the evidence of this witness that such BRs were considered to be the valuable security and thuskept and retained by the bank receiving it with it till discharge thereof by the issuing party as undertaken.
279. It is most crucial and important to note that this part of the evidence of this witness has not been impeached at all in the cross-examination. In fact not touched at all.
280. It is, therefore, most crucial and important factor that emerges from the evidence of P.W. No. 2 D.G. Vernekar, as adverted to hereinabove, that the said witness accepted BRs issued by BOK favouring CANFINA in respect of securities of three impugned transactions of this case because of the recital contained in the B.Rs. whereby issuing Bank gave undertaking 'to deliver the securities in physical form at later date'. Further, the BRs also acknowledged the receipt of the payments of the consideration made by the purchasing bank to the selling bank i.e by CANFINA to BOK.
281. The above referred evidence of P.W. 2-D.G. Vernekar, who is the key and star witness of the prosecution since it is he from whose hands the CANFINA'S funds were made over and parted with and paid to BOK in three impugned transactions. This is so on the back ground of offences with which the accused herein are indicted. Offences are under section 409 -Criminal Misappropriation and section 420- Cheating and section 477A of I.P.C. The said witness, as his evidence shows, received and accepted the B.Rs. issued by BOK in three impugned transactions as a valuable security as such and only on receipt of the said B.Rs that he made the payment to BOK. The evidence of P.W. No. 2 -D.G. Vernekar, as noticed earlier, which as stated, has remained absolutely unimpeached, clearly bears out the same. The said evidence also, as noticed earlier, spells out the significance of the document, namely, BR, its value, its importance and its implications as was taken and understood by the said witness. His evidence in the Trial spells out the object of issuance of BR in lieu of actual delivery of the security in a physical form.
282. What Mr. Vernekar, P.W. No. 2 has deposed and has spelt out the relevance of B. Rs in a security transaction also receives sufficient corroboration and credence from the evidence made available by the prosecution by examining the officers from R.B.I. The said officers are (1) P.W. No. 8-Mr. N.D. Parmeshwaran, an ex-employee pf the R.B.I. and who at the relevant time worked as a Chief Officer in the Department of Banking Operation and Development which department used to regulate and supervise the operations of the Commercial Banks. (2) P.W. No. 23-K.S. Rao, General Manager, Inspection Department, Central Law Office of R.B.I. and who at the relevant time worked as Joint Chief Officer in the Bombay regional office and which department used to look after all the operations as well as conduct inspections of Co-operative Urban Banks in Maharashtra. It may be stated that this is the officer who has conducted inspection of M.C.B. and produced report of his findings as noticed earlier; and (3) P.W. No. 65 Rama Iyer Nanjappa, who at the relevant time worked as Joint Chief Officer in R.B.I office at Bangalore and whose function was to undertake inspection of banks and their subsidiary and financial institution. It may be stated that, he is the officer who had carried out inspections or scrutiny in respect of security transactions of CANFINA in its registered office at Bangalore and has produced the reports being Exhs. A: 1(16), 642, 643 and 644 on record.
283. I would first consider What P.W. No. 8 N.D. Parmeshwaran has to say about the use of BRs and SGLs. This witness was directly concerned officerof the RBI in its department of B.O.D. which used to regulate and supervise the operations of the banks. He is the officer who was closely connected to the issuance of guidelines of the RBI to the various banks in respect of security transactions. His evidence further shows that prudent norms or guidelines were issued from time to time to the banks and financial institutions for the purpose of observance and adherence in their operations in security transactions. It is this officer who was closely involved in issuance of circular on behalf of RBI being dated 26-7-1991 in that behalf and which is produced as Exh. 174.
284. He has spelt out in his evidence criteria and parameters for the issuance of BRs and SGLs by the banks, stating that the banks were not expected to resort to the issuance of BRs/SGLS without actual holding the securities and without having sufficient balance in their SGL Account with RBI. It may be stated that this aspect has been also highlighted in a RBI Circular dated 26th July, 1991.
285. It is also most significant to note that and which would bring to the fore the state of affairs as prevailed at the relevant time when the BRs being the subject matter of this case referred to earlier came to be issued. This witness has stated that, at the relevant time, when the scrutiny of the security transactions of some of the banks were carried out, RBI noticed disturbing feature's and irregularities committed by the banks in their such operation i.e. security transactions by means of BRs and SGLs. He deposes thus: (Refer para 12 on page 297 of his evidence where he enumerate the same as)
'The disturbing features which we noticed were. 1. the banks were short selling securities i.e. they were selling securities which they did not have; 2 in many cases banks were issuing BRs and SGLS on behalf of their brokers which was not a healthy practice; 3, there were large number of returns of SGL forms by the Public Debt Office of the RBI on the ground of insufficiency of securities.'
The said part of the evidence of P.W. No. 8- N.D. Parmeshwaran clearly points out as to when and in what circumstances and conditions banks and financial institutions were expected to and permitted to use the BRs in their security operations. To put it neatly, it clearly points out that possession/existence of the securities was must with the banks at the time of issuance of BRs.
286. This evidence of P.W. No.8-N.D. Parmeshwaran receives corroboration from P.W. No. 23-K.S. Rao As stated earlier, this witness is one who conducted inspection of M.C.B. with the definite focus on the issuance of BRs by it. His evidence (refer pages 599-Z & 599-AA of notes of evidence which is brought out in the cross- examination) clearly goes to show that issuance of BRs is in lieu of physical delivery of the security at the initial stage which has necessarily to be followed by actual physical delivery of the security covered under the particular BR at later stage and there is no exception or other alternate to the same. He has been emphatic when he stated compensation in a monetary form is also no substitute or solution to the actual and physical delivery of the security covered under the BR. This would clearly imply and would indicate imperative requirement that holding and possessing the security at the point of time of issuance of BR by the Bank was a must.
287. Mr. Nanjappa, P.W. No. 65 in his report has made reference to the practice of issuance of BRs and he has by and large stated the same thing and has some perspective about BRs as then indicated by P.W. No. 8-N.D.Parmeshwaran and P.W. No. 23-K.S. Rao, Mr. Nanjappa has also made passing references about the outstanding BRs of CANFINA in his said report. One aspect that has been made out by Mr. Nanjappa would require specific mention. In that, he has pointed out in his report as also stated before the Court that issuance of BR in Government of India securities was not permissible and it could be put through by means of SGL only. Apart from the fact that this part of his evidence has not been contradicted, it requires to be noted that in case of first impugned transaction dated 6th April, 1991, BOK, in the first instance, issued its BR in favour of CANFINA and it is only-on 18th April, 1992, i.e. after a lapse of over an year, that it issued its SGL as a substitute to its said BR and for which evidence is made available. This step on the part of BOK is further corroboration to the evidence of RBI Officers that in GOI security, like in first impugned transaction resort to BR was not permissible and the same has to be put through by means of SGLs only. It may be stated that eventually RBI on 20th June, 1992, issued circular laying down more comprehensive guidelines and virtually it has prohibited resort to the issuance of BRs by the banks in Government securities. The said Circular in Exh. A-(7) on record.
288. From the evidence of the above witnesses, it clearly follows that the financial institutions were allowed to issue BRs in specific type of securities and were not authorized to issue BRs in Government securities in respect of which they could avail of SGL facility and that BR could be issued for transactions only were the scripts were to be issued and concerned Bank held the allotment advice, the Bank physically held the securities in question at its different centres and would be in a position to physically transfer the same within a short period and the case where the formalities in respect of transfer of securities were to be completed but the bank possessed the necessary record of its possession. In any case issuance of BR as substitute to physical delivery was permissible only if Bank concerned held the security as noticed earlier and not otherwise.
289. What therefore follows from the above discussion is that the banks and financial institutions could issue and use BRs in their transactions in Government securities but that should be legitimately and properly resorted to following the prudent norms in that behalf. It did not, as sought to be suggested on behalf of the defence, that any Bank could resort to the issuance of BR even without holding or possessing the security and by use of such BR induce the other party i.e. purchasing Bank to part with the money being the consideration thereof against BR not backed by the requisite security.
290. Issuance of BR was permissible for the legitimate security dealings. It was not a free and unfettered license to anyone to indiscriminately go on issuing the same without holding and possessing the securities in question as is the position in the matter in hand. In such circumstances, the contention raised by and on behalf of the defence of so called market practice in respect of issuance of BRs even without holding securities would require to be rejected outright. There is no substance nor any evidence to show justifying such nefarious practice. On the other hand, the evidence of officials of RBI, as noticed earlier is other wise.
291. As noticed earlier and as has been clearly borne out that BOK when it issued three BRs in three impugned security transactions on account of accused No. 3-A.D. Narottam, it did not possess the security at all. Apart from the fact that accused No. 3-A.D. Narottam in whose account the said transactions were routed through has stated that he did not possess the security in question at all. Even BOK did not hold the said security and yet its officer Accused No. 7-C.S. Raje and Accused No. 8 S.A. Ail issued the said BRs flavouring CANFINA and on the strength thereof made CANFINA to part with the moneys.
I.B.A.'s Officials:-
292. I do not think it necessary to make detail reference to the evidence which prosecution has made available through the office bearers of IBA. (i.e. Indian Bank Association). Passing reference thereto would suffice. The witnesses examined are P.W. No. 9-Natin Shantilal Parekh, an employee of IBA and P.W. No. 10-Beladi Ratnakar Keshav Kamath, Secretary of IBA. The evidence of these two witnesses shows that IBA. is a 'Think tank' of banking industry providing services to its members and is a voluntary body not even registered and does not possess any authority as such for enforcing any rules made by it against its members. The evidence of these two witnesses shows that the said Association undertakes to issue guidance and guidelines to its members on the basis of various directives and guidelines of the RBI. What they have stated about the issuance of and use of BRs by the banks, by and large, is in consonance with what the RBI officer, as noticed, have stated. Therefore there needs no detail reference to this part of the evidence.
293. On the back ground as noticed above it is to be seen whether the three impugned transactions dated 6th April, 1991, 22nd July, 1991 and 31st July, 1991, put through by means of BR even without holding security by BOK were genuine and undertaken in usual course of banking business as sought to be made out.
294. This is what the defence has sought to contend. It is stated by and on behalf of the defence, particularly, on behalf of Accused No. 1-M.K.S. Ashok Kumar, Accused No. 2-H.P. Dalai and Accused No. 12-S. Mohan that the transactions of this case between CANFINA and BOK were put through in the normal course of banking business. The transactions are well documented in all respects and, therefore, there is no question of there being any criminality as such.
295. It is, however, necessary to state that what matters, while considering, analysing and examining the nature of the transactions, is not the formal aspect of the transaction but its substance and in effect what the same were and how and in what circumstances same were put through.
296. As evidence made available which is overwhelming, voluminous and clinching and well documented, at every stage and point, that when the dealers of CANFINA i.e. accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan struck the deals in three impugned transactions, with accused No. 2 H.P. Dalai as a broker, the same were shown to be between CANFIAN and BOK. But the evidence on the record proves convincingly and beyond any shadow of doubt that it was not so. The transactions were routed through the account of Accused No. 3-A.D. Narottam. The moneys were also received and credited into the account of Accused No. 3-A.D. Narottam. Neither the BOK nor even Accused No. 3-A.B. Narottam in his security account with BOK held and possessed the securities in transactions in question. Yet, Accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail issued BRs and other documents and induced CANFINA to part with the moneys. Not only BOK madeCANFINA to part with the moneys in the manner as aforesaid, moneys so received were diverted to the account of Accused No. 3-A.D. Narottam by crediting the proceeds of Pay Orders, in absence of specific instructions of payer Bank and there from the same were further flown out of his accounts to the benefits of others including Accused No, 2-H.P. Dalai who is supposed to be a broker as noticed earlier.
297. Further, it transpired BRs and SGLS which were issued by BOK remained outstanding and CANFINA did not receive he securities. Eventually, in the last week of May, 1992, BOK went into liquidation for the reasons well know, Accused No. 2 H.P. Dalai who is stated to have acted as a broker for CANFINA in the said three transactions, as the evidence discussed herein-above shows is also and beneficiary and recipient of the substantial part of the said amount.
298. The further aspect to be mentioned in this context is the attempt made to camouflage the fraud by involving MCB into the picture and through it undertaking so called Cover Up Operation transactions which were fictitious and bogus unsupported by any security and this was done to fabricate and manipulate the Security Ledger Account of Accused No.3-A.D. Narottam with BOK as has been so clinchingly, convincingly and satisfactory proved by the credible evidence. In fact accused No. 3-A.D. Narottam has admitted that he did not possess the requisite securities to support the said BRs. Further accused Nos. 7 and 8, employees of BOK stated having made entries in security ledger to show existence of security in account of accused No. 3-A.D. Narottam at later stage, when MCB's BRs were received on 16-9-91.
299. If all these facts and circumstances which are cogent and revealing are taken into consideration, the futility in the said plea of the defence becomes clear needing no further comment.
300. It also cannot be said that there is a failure on the part of BOK in not honouring its commitments for the reasons beyond its control. It is indeed preposterous that such a contention has been put into service on the teeth of overwhelming evidence and facts and circumstances as obtained in the case which shows otherwise. It is one thing to say so called failure of a security transaction entered into and or put through with the genuine desire and in a legitimate manner and it is one thing to say that the transactions as in the case herein which were put through with the full knowledge, object and dishonest intention to commit a fraud and induce CANFINA to part with the money. The evidence made available clearly shows how the entire operation was masterminded and executed by the players of it running into hundreds of crores. These clandestine deals were put through to camouflage fraud solely with the object of knocking out and siphoning of the monies of CANFINA for the personal benefit of its players. In such circumstances to say such transaction as genuine, put through in usual course of business, etc. to say the least, is travesty of reality. One cannot lose sight of the fact what it eventually led to BOK going in liquidation and CANFINA loosing its monies.
F.I.R. - CREDENTIAL VALUE
301. On behalf of the defence, in particularly, on behalf of accused No. 2-H.P. Dalai, it is urged that the complaint lodged by CANFINA on 19th June, 1992, with CBI does not disclose any criminal offences andthat investigation agency has falsely cooked up and concocted a story. In as much, it is submitted that the complaint as lodged also does not mention the names of some of the accused.
302. The complaint lodged by CANFINA which is treated as F.I.R. has been produced as Exh. 38.
303. P.W. No 76-Mr. Bhupinder Kumar, who registered a crime has been extensively cross-examined especially on behalf of accused No. 2-H.P. Dalai to the extent that almost each and every line of the contents of the said complaint letter Exh. 38 has been put to him to bring home the point as to what offences the said F.I.R. disclosed. According to the defence, as stated earlier, the said complaint does not disclose any offences against the accused.
304. It may be stated that section 154 of the Cr.P.C. provides for lodging of the complaint relating to commission of cognizable offence. Thus F.I.R. is a creature of the said section. If it is lodged orally, the said section requires the Police to reduce into writing and obtain a signature of the informal. The substance thereof, then has to be entered into a relevant record kept and maintained at the Police Station. Sub-section (3) of section 154 provides for further investigation in case of their being disclosure of the commission of cognizable offence.
305. The Investigation Officer P.W. No. 76-Mr. Bhupinder Kumar who recorded the F.I.R. in his evidence has stated :--
'On the basis of written complaint of CANFINA vide letter Exh. 38 i recorded F.I.R. in the case on the same day i.e. on 20th June, 1992 at 4.30 hrs. against those accused named in the said F.I.R. under section 120B I.P.C. r/w 409, 420, 467, 468- I.P.C. and section 13(2) r/w 13(1)(d) of the P.C. Act and substantive offences under section 409, 420, 467, 468-I.P.C. and section 13(2) r/w 13(1)(d) of P.C. Act, 1988'.
The accused named in F.I.R. were - (1) Shri M.K. Ashok Kumar, Executive Vice President, CANFINA, Bangalore -accused No. 1, (2) Shri Hiten P. Dalai-accused No. 2. (3) Shri Abhay Narottam Accused No. 3, (4) Shri Bhupen Dalai -accused No. 4, (5) Shri T.B Ruia- accused No. 5. (6) Shri J.P. Gandhi -accused No. 6 and (7) Unknown officers / officials of Bank of Karad Ltd. of Bombay and Karad.
306. It is to be stated that accused Nos. 1 to 6 named in the F.I.R are accused in this case. Accused No. 7-C.S. Raje and accused No. 8-S.A. Ail are the employees of BOK. The names of accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy who are connected with MCB do not figure in the FIR. Accused No. 12-S. Mohan is the dealer of CANFINA. The said complaint letter Exh.38 is running into six full scope papers and sets out about the status of the accused as named in the F.I.R. as also impugned transactions in question and issuance of BRs by BOK as also non-honoring of the same. After stating the details of impugned transactions, the said informal who is P.W. No. 1-K.N. Kamath, the then Managing Director of CANFINA has stated -
'persons mentioned above have therefore committed the offences punishable under section 120B, 409 and 420 of the Indian Penal Code on account of the aforesaid dishonest and /or fraudulent transactions.'
The said letter also in the last, contains a request to the CBI that-
'a criminal case may please be registered and investigation taken up.'
307. Thus, reading the evidence of the CBI officer who recorded the F.I.R., it becomes clear that such registration was done on the strength of the said written complaint of CANFINA being Exh.38. P.W. No. 1-Mr. K.N.Kamath has already proved the contents of the said letter. The said letter mentions the offences under section 120B, 409 and 420 of I.P.C. Further the request is made to investigate into the matter.
308. On consideration of the contents of the letter Exh.38 and evidence of P.W.No. 1-K.N. Kamath the informal and P.W. No. 76-Bhupinder Kumar, I do not find any substance in the contentions raised by the defence. As is clear that letter Exh.38 contents the graphic details of the impugned transactions and the fate thereof and CANFINA sustaining losses. It is not expected as also not required that such information should contain each and every aspect of the evidence in minute details that may be available or that may be produced during the trial. The purpose of lodging information is to facilitate investigation in the offences and if one reads the said letter, it becomes clear that necessary ingredients for inquiry and investigation have been made out. The names of accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy do not figure in the said complaint letter as also in the F.I.R and the reason is obvious, since, as on that date when the complaint was lodged and F.I.R was registered, the involvement of M.C.B. was not known to the informant. In the circumstances, the contention raised by and on behalf of the defence that F.I.R does not indicate any criminal offences, etc. requires to be rejected.
309. It is also submitted that the offence of charge of criminal conspiracy has not at all been established by the prosecution against the accused in this case. It is submitted that there is no evidence direct or circumstantial against the accused to prove the said charge to suggest there being conspiracy to commit various offences of this case. There is no evidence for establishing link and connection and agreement between the accused. It is asserted that an agreement amongst the conspirators is the gist of this offence, which is wanting.
310. Ld. P.P. Submitted that there is voluminous evidence both oral and documentary which has been made available on record. The witnesses have deposed about the respective roles, acts or omission of the accused is series of steps in course of events. The witnesses are associated in one capacity or the other with the concerned institutions and thus they have first hand knowledge as to how things happened. The documentary evidence which is voluminous is clear testimony of the contents there of and the same are contemporaneous written record evidencing the specific course of events, roles played by the various parties including the accused herein and which were kept and maintained in usual course of businesses of each of concerned institutions. He submits that most of the witnesses are the employees of concerned banks and of CANFINA and documents which have been produced and proved have been kept and maintained by such institutions in the course of their normal banking business activities. He further submits that the evidence adduced has to be considered appreciated by applying rules of evidence as provided under section 10 of Indian Evidence Act. Offence being of criminal conspiracy.
311. On careful consideration of all the submissions advanced for and against as also critical analysis and scrutiny of the evidence made available in this case it has to be held that the prosecution has succeeded in establish the charge of conspiracy against accused Nos. 1,2,3 and 7 to 12.
312. The offence of conspiracy consists in the combination of agreement between two or more persons to do unlawful act or to do a lawful act by unlawful means. This is the gist of offence of criminal conspiracy. Section 10 of the Evidence Act which is special provision in the context of offence of criminal conspiracy, provides that there has to be prima facie evidence in support of the existence of criminal conspiracy between two or more conspirators and it is then only that anything said, done or written by any one of them can be used against the other. The said section envisages that there should be reasonable ground to believe that two or more persons conspired together to commit an offence or an actionable wrong.
313. Section 120A of I.P.C defines criminal conspiracy, the main ingredientof this offence is the engagement and the association of more than one person to break the law. There has to be an agreement between the conspiratorsand the evidence to prove the same.
314. Conspiracy is hatched in utmost secrecy and it would not be that easy to prove the same by direct evidence. In such circumstances, the same has to be inferred from facts, statements and conduct of the parties to the conspiracy. Section 10 of the Evidence Act renders assistance in such situation. It is further to be noted that the onus lays on the prosecution to prove the charge of conspiracy by cogent evidence which may be direct or circumstantial.
315. The application of Rule of law embodied in section 10 is strictly conditional upon there being reasonable ground to believe that two or more persons have engaged themselves in any joint enterprise i.e. criminal conspiracy. Agency is a predominant factor of the provision of section 10. On this branch of law, the Apex Court has in its numerous decisions crystallized the principles bearing in mind that the conspiracy is hatched in secrecy and possibility of having direct evidence to prove the same becomes difficult. Often such matters are required to be considered on circumstantial evidence. Criteria and guidelines are laid down as to how circumstantial evidence should be sifted, examined and appreciated. The main thread is that circumstances relied upon must be clinching and cogent pointing to the culpability of the accused of conspiracy and have to be totally incompatible to his innocence. It has also been posited that doubt howsoever grave will never be a substitute to the proof.
316. I propose to consider the various circumstances and facts which have been clearly born out in this case on the basis of evidence.
317. On careful examination and critical analysis of the evidence, facts and circumstances of the evidence adduced in this case it clearly stands proved and which is summed up in brief as hereinbelow to have clear appraisal about the links, amongst accused inter se, their roles in various deals and steps, over acts, clandestine devices, circumstances attendant to their every action vis-a-vis each institutions involved to highlight as to how a cleverly engineered fraudulent plans were perpetrated, at all stages.
(A) CANFINA:
i) CANFINA is wholly owned subsidiary of Canara Bank being under the category of Government Company and was authorized to undertake transactions in Government Security.
ii) At the relevant time Company had registered office at Bangalore and office at Bombay.
CANFINA's Security Transactions were originated from its registered office at Bangalore by its Dealers only.
iii) At the relevant time its dealers accused No. 1-M.K.S. Ashok Kumar and 12-S. Mohan being the employee of CANFINA, respectively Chief Dealer and Dealer were authorized to strike and finalize deals in Government security of CANFINA of its all centres including its Bombay office. After striking and finalized deals, accused No. 1-M.K.S. Ashok Kumar and 12-3. Mohan used to make entries in the dealers pad and such entries in dealer's pad have been proved relating to impugned transactions.
iv) Monies required for purchase of securities in Bombay were remitted from Bangalore office to Bombay, for which purpose CANFINA at Bangalore issued and drew its cheques for the amounts required upon Canara Bank and by means of I.B.A same were remitted to Bombay office of CANARA Bank.
v) After striking and finalizing the deals of impugned transactions accused No. 1-M.K.S Ashok Kumar and 12-S. Mohan conveyed the same to Bombay office for further process and for implementation and execution.
vi) After execution of the deals, Bombay office reverted back to the registered office at Bangalore and reported about the same to the dealers and particulars conveyed in reporting were the payments to counter party, the position/mode of delivery, i.e. to say whether physical or through BR or SGL.
vii) At the relevant time P.W. 2-Mr- Vernekar and P.W. 3-Mr. Kukian and some other officers of CANARA BANK were concerned in execution of the security transactions at Bombay who on the basis of instructions of the dealers i.e accused Nos. 1 and 12 took further steps in execution of transactions, strictly in accordance with the instructions of the dealers received over telephone.
viii) P.W. 2-Mr. Vernekar received such telephonic instructions in respect of the security transactions from the dealers from Bangalore and then made entries in the Rough Transaction Sheets which have been produced and proved.
B. PROCESS OF EXECUTION.
i) In telephonic instructions accused Nos. 1- M.K.S,. Ashok Kumar and 12-S. Mohan the dealers used to convey particulars, such as, name of Counter party and broker involved, descriptions of the security, quantity, rate and mode of delivery etc..
ii) In the said impugned purchase transactions, the representative of broker i.e accused No. 2-H.P. Dalai came with the Cost Memos and BRs of Counter Party Bank i.e. BOK to Canara Bank's Bombay office on the respective dates of the transactions.
iii) P.W. 2-Mr. Vernekar after checking the particulars of the security and its particulars etc. with the instructions received over telephone from the dealer as recorded by him in Rough Transactions Sheet, issued Pay Orders on behalf of CANFINA favouring BOK in its account with Canara Bank for which he was delegated with powers and then handed over the same to the messenger of the broker coming with the BRs and Cost Memos.
iv) The required record in respect of the security transaction as also the payments made was made in the relevant registers etc. as required in Bombay office.
v) Bombay Office of CANFINA had sent periodical statements of the security transactions by Courier Services to the registered office of CANFINA at Bangalore mentioning all the requisite particulars.
C. SOME MORE PARTICULARS, AS EMERGED FROM THE EVIDENCE DISCUSSED EARLIER AS TO HOW THE IMPUGNED THREE TRANSACTIONS WERE PUT THROUGH:
i) Procedure followed and steps taken were the same as mentioned herein-above. The Deals were struck by the Dealers i.e. accused No. 1-M.K.S. Ashok Kumar and/or accused No. 12-S. Mohan at Bangalore and conveyed over telephone to P.W. 2-Mr. Vernekar.
ii) Dealers made entries in the dealers pad at Bangalore and P.W. 2-Mr. Vernekar made entry in a Rough Transaction Sheets at Mumbai noting down the particulars of instructions received from the dealers from Bangalore over telephone. BOK Bombay was the counter party. Entries in Dealers Pads in respect of 1st and 2nd of 15th October, 1991 are in the handwriting of accused No. 1-M.K.S. Ashok Kumar, Accused No. 2-H.P. Dalal was the broker.
iii) The representatives of the broker in all ..... handedover the same to P.W. No. 2-Mr. Vernekar.
iv) Mr. Vernekar P.W. 2 on verifying and checking with the entries in the Rough Transaction Sheets issued Pay Orders on Canara Bank favouring BOK and handed over the same to representative of the broker.
v) BOK received the credit of the proceeds of the said Pay Orders on the very day. Same were issued by Canara Bank favouring BOK. P.W. 2-Mr. Vernekar received BRs which he kept treating same as a valuable securities on the basis of recitals thereof whereby BOK undertook to deliver the securities to CANFINA later on. P.W. No. 2-D.G. Vernekar made the payment on the basis of recitals in the BRs.
vi) In respect of first transaction of 6-4-91. On 18-4-92 BOK substituted its BR with SGL which when P.W. No. 2-Mr. Vernekar lodged with Reserve Bank, was bounced on the ground of insufficiency of balance.
vii) On 15-10-91 and 18-10-91 CANFINA received..... procedure followed was the same as mentioned earlier.
viii) As a result of repurchase of said security as mentioned in (vii) above, BOK reduced its liability under the BR dated 22-7-1991 issued in second transaction by making endorsement on the reverse of the relevant BR to that effect. Endorsement has been made and signed by accused No. 7-C.S. Raje as an officer of BOK.
D. BOK BOMBAY
i) At the relevant time accused No. 7-C.S. Raje and Accused No. 8-S.A. Ail were the concerned employees working in the security department and used to attend the work of security transactions of BOK.
ii) Accused No. 7-C.S. Raje was an Officer and was authorized to sign cheques and BRs as also Cost Memos for and on behalf of BOK. Accused No. 8 was working under accused No. 7-C.S. Raje and who used to prepare Cost Memos, BRs, etc. and used to keep and maintain the record with regard to the security transactions by making entries in the security ledger, etc.
iii) Accused No. 3-A.D. Narottam was at the relevant time Director of BOK.
iv) Accused No. 4-B.C. Dalal was also at the relevant time Director of BOK.
v) Accused No. 3-A.D. Narottam had his accounts with BOK, both Over Draft Account and Savings Account. Accused No. 3-A.D. Narottam used to operate the O.D. Account for his security transactions.
E. LINKS CONNECTION BETWEEN ACCUSED INTER-SE.
i) Accused No. 1-M.K.S. Ashok Kumar & 12-S. Mohan as noticed earlier were respectively the Chief Dealer and Dealer and employees of CANFINA and such public servants.
ii) Accused No. 2-H.P. Dalal, 3-A.D. Narottam, 4-B.C. Dalal and 6-J.P. Gandhi were the Share Brokers.
iii) Accused No. 2-H.P. Dalal and 4-B.C. Dalal are related as Nephew and uncle.
iv) Accused No. 6-J.P. Gandhi also a Share Broker related to accused No. 2-H.P. Dalal and 4-B.C. Dalal.
v) Accused No. 3-A.D. Narottam also Share Broker and Director of BOK was having account with BOK as stated earlier. He was associated with accused No. 4-B.C. Dalal being the employee of his firm known as Champaklal Devidas which was started by father of accused No. 4-B.C. Dalal, since deceased.
vi) Accused No. 4-B.C. Dalal and his son were also the Directors of BOK.
vii) Accused No. 6-J.P. Gandhi also was associated and worked with the said Company of accused No. 4-B.C. Dalal.
viii) Accused No. 5-T.B. Ruia was a Director of Dhanraj Mills Pvt. Ltd. and had account with BOK and MCB had association with Accused Nos. 2-H.P. Dalal, 4-B.C. Dalal, 6-J.P. Gandhi and 9-K.K. Kapadia.
ix) Evidence shows, which has been made available by Accused No. 3-A.D. Narottam that some where in the year 1990, there was huge liability upon the accused No. 5-T.B. Ruia in respect of L.I.C. Mutual Funds and it is further case of accused No. 3-A.D. Narottam that, accused No. 4-B.C. Dalal and 6-J.P. Gandhi as also accused No. 2-H.P. Dalal, with a view to role over the said liability, started putting through fictitious and bogus security transactions of routing the same into his account with BOK and he being ex-employee of accused No. 4-B.C. Dalal allowed to do so as he was promised that every thing would be done allright.
x) Accused No. 3-A.D. Narottam has made reference to another case lodged by CBI Case No. 23 of 1993 being No. RC. 7(S)/93-Bom. on the file of this Special Court in respect of liability of LIC Mutual Fund in which he as also Accused Nos. 2-H.P. Dalal, 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi and other are accused.
F. ROLL OVER IN THE ACCOUNT OF ACCUSED NO. 3-A.D. NAROTTAM:
i) Accused No. 3-A.D. Narottam, allowed to operate such Role Over Security Transactions with CANFINA in his account with BOK under the instructions of accused No. 2-H.P. Dalal, 4-B.C. Dalal and 6-J.P. Gandhi. He admits the issuance of deliver orders as also receipts and credits of Pay Orders issued by CANFINA in three impugned transactions into his O/D account with BOK.
ii) According to accused No. 3-A.D. Narottam when the three impugned transactions were put through nor he or BOK held or possessed the security in question and BRs issued by BOK favouring CANFINA were not supported or backed by the requisite security thus evidence of accused No. 3-A.D. Narottam lends corroboration to prosecution evidence in this respect.
G. DIVERSION/SIPHONING OFF.
i) The monies of the three transactions received from CANFINA and which were credited into account of accused No. 3-A.D. Narottam on the respective dates in BOK, to the last rupee, were transferred to various Banks, like Andhra Bank, Citi Bank, Grindlays Bank, Bank of America etc. which was done under instructions of accused No. 2-H.P. Dalal.
ii) Evidence shows that major part of funds had gone into the account of accused No. 2-H.P. Dalal.
iii) As far as accused Nos. 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi are concerned, there is no clear cut evidence to show and prove passage of monies into their accounts. There is also no evidence against accused No. 4-8.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi of their involvement in putting through impugned transactions and or two sub transactions or with regard to the diversion or being beneficiaries of the funds.
H. ROLES OF ACCUSED NO. 7-C.S. Raje AMP 8-S.A. All.
i) At the relevant time they were admittedly the employees of BOK working in the Security Transactions.
ii) Cost Memos and BRs having issued by them and as also prepared and signed by them.
iii) The Pay Orders issued by CANFJNA on Canara Bank favouring BRs were received by them and who after crediting the proceeds thereof into the account of BOK transferred the same into the Over Draft Account of accused No. 3-A.D. Narottam in absence of any instructions from the payer Bank i.e. Canara Bank or from CANFINA.
iv) They admit that BRs were issued in three impugned transactions which were not backed up by the requisite securities.
v) They admit having issued Pay Orders on the instructions of accused No. 3-A.D. Narottam favouring various Banks and debiting the amount thereof into Over Draft account of accused No. 3. They also admit the payees of the said Pay Orders having received the credits of the proceeds of the said Pay Orders.
vi) They admit the receipt of MCB's BRs and Cost Memos on 16-9-1991.
vii) They admit the receipt on Receiving Orders for receiving securities from MCB. They also admit the receipt of letters of accused No. 3 and issuance of Pay Orders on 16-9-1991 favouring MCB.
viii) They also admit the receipt of Pay Order from MCB on 16-9-91 for sum of Rs. 534, 59, 87, 471.88 and having credited amount thereof into the Over Draft account of accused No. 3-A.D. Narottam on the same day i.e. on 16-9-91.
ix) They admit that on 16-9-91 entries were made in the security ledger account of Accused No. 3-A.D. Narottam, Ex. 309 in respect of three impugned transactions of 6-4-91, and 22-7-91 and 31-7-91, breaking the chronological sequence so as to show balance at the securities of three impugned transactions on their respective dates in the account of accused No. 3-A.D. Narottam.
x) They admit that such entries were made breaking and disturbing chronological sequence, since on the respective dates when three impugned transactions were put through, into the security account of accused No. 3-A.D. Narottam, there existed no securities to meet the commitments to CANFINA.
I. MCB-COVER UP OPERATIONS.
i) Accused No. 9-K.K. Kapadia was Vice Chairman and accused No. 10 was its employee.
ii) Accused No. 11-S.N. Ramaswamy, the proprietor of M/s. Excel and Co. and share broker was having an account with MCB.
iii) The evidence shows that accused No. 9-K.K. Kapadia and Mr. V.C. Desai, the then employee of MCB used to attend security transactions of MCB.
iv) MCB used to issue BRs and Cost Memos which used to be handled exclusively by Accused No. 9-K.K. Kapadia.
v) Accused No. 11 had issued its Delivery Orders upon MCB for delivering securities in three Cover Up Transactions of 16-9-91 to BOK.
vi) MCB had issued Cost Memos and BRs, both prepared and signed by Accused No. 10-M.S. Kushte favouring BOK in respect of three cover up transactions, which are matching the securities of three impugned transactions in all respect.
vii) Proceeds of Pay Orders received from BOK favouring MCB on 16-9-91 were credited into the current account of Accused No. 11-S.N. Ramaswamy with MCB.
viii) There is a evidence of transfer of Rupees 15 lakhs into the current account of Accused No. 11-S.N. Ramaswamy for investment into FOR on 16-9-91 itself.
ix) There is a letter also of accused No. 11-S.N. Ramaswamy to MCB for issuance of Pay Orders favouring BOK for sum of Rs. 534,59,87,471/ 88 on 16-9-91 and Pay Orders were issued by MCB on the same day.
x) A documentary evidence in respect of various transactions with MCB has been made available.
xi) There is a evidence that accused No. 11 did not hold or possess the securities of three Cover Up transactions. MCB also did not possess and hold the said securities on the day in question.
xii) On the same day i.e. 16-9-91 whatever amount received from the account of Accused No. 3-A.D. Narottam from BOK vide Pay Orders, was repaid to BOK by MCB on the same day, minus sum of Rs. 15,00,5324/ -, 15 lakhs credited/invested in FOR into the account of Accused No. 11 and balance of Rs. 5324/- was charged by MCB as its commission for issuance of Pay Order.
J. INSPECTION OF MCB BY RBI.
i) Evidence of P.W. 23-Mr. K.S. Rao and his inspection report Ex. 386 and 386-A.
ii) Joint statement of accused No. 9-K.K. Kapadia, 10-M.S. Kushte and P.W. 20-Mr. D.P. Gandhi dated 22-5-92 being Ex. 352 admitting the security transactions and issuance of BRs etc. and meetings in the offices of BOK and Accused No. 2-H.P. Dalal.
K. OUTSTANDING BRs AND SOL OF BOK ISSUED TO CANFINA.
i) The BRs/SGL issued by BOK to CANFINA in three impugned transactions remained outstanding.
ii) R.B.I. Inspection of CANFINA.
iii) P.W. I-Kamath, the then M.D. of CANFINA came to know about the outstanding of BRs from Inspector of R.B.I. in the last week of April, 1992.
iv) He contacted Accused No. 1-M.K.S. Ashok Kumar to Bangalore and arrival of Accused No. 1-M.K.S. Ashok Kumar at Bombay had discussions and meeting with accused No. 2-H.P.Dalal.
v) Meetings in Taj Mahal Hotel.
vi) Meetings were held in Taj Mahal Hotel which were attended by officials of CANFINA and Canara Bank. Meetings were also attended by Accused Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalal, 3-A.D. Narottam, 4-B.C. Dalal and 5-T.B. Ruia.
vii) The admission by accused Nos. 2-H.P. Dalal, 3-A.D. Narottam and 5-T.B. Ruia of receipt of amounts.
viii) In the meeting efforts were made to persuade the brokers to bring back the monies received by them and as admitted by them.
ix) Lodging of complaint by CANFINA on 20-6-1992 by letter Ex. 38 with CBI.
x) Security by P.W. 65-R.I. Nanjappa in respect of security transactions of CANFINA at Bangalore Office and report Ex. 342,343 and 344 and A-160.
L. EVIDENCE OF R.B.I. OFFICIALS AND OFFICE BEARERS OF THE IBA ABOUT THE USE OF BRs etc.
M. EVIDENCE OF ACCUSED NO. 3-A.D. Narottam ORAL AS ALSO DOCUMENTARY - HIS WRITTEN STATEMENT IN CIVIL SUITS FILED BY CANFINA IN THIS SPECIAL COURT:
i) Accused No. 3 admits rolling over of funds into and through his O/D account at the instance of Accused No. 2-H.P. Dalal and putting through bogus impugned security transactions, issue of delivery orders, cost memos,BRs, receipt of credits From CANFINA, diversion from his account to various Banks, including direct transfer of substantial amount into the account of Accused No. 2-H.P. Dalal in Andhra Bank, issuance of pay orders favouring various banks under instructions of accused No. 2 cover up operations of 16-9-91 without backed by securities, etc. Says he being used by accused No. 2 as conduit etc.
N. i) Evidence discussed earlier and as summarized hereinabove clearly speaks out that it was accused No. 2 and Accused No. 3 (and other stock brokers who are named as accused in this case but prosecution has not been able to get concrete evidence against them) who were running and managing treasury desks of BOK and BOK's management completely humbled down to their wishes. BOK went on readily and willingly funding accused Nos. 2 and 3 lending its name to put through their transaction in security. At the relevant time accused No. 3 and accused No. 4 as also son of accused No. 4 happened to be on the Board of Directors of BOK. Other important players, i.e. Accused No. 2 and accused No. 6 were well connected to them. As far as accused Nos. 2 and 6, as noticed, they were related to Accused No. 4 by blood. Accused No. 6 was managing broking business of Accused No.4. These show link and nexus among the said accused.
ii) The impugned transaction as noticed were put through by means of BRs and which BRs were not supported by security. Stakes involved were of hundred of crores.
iii) R.B.I. which is supposed to be regulatory watchdog and Central Bank merely blinked of its eyes to the exploitation of the system and criminal intend of the said accused to defraud CANFINA by resorting to such murky security deals by means of issuance of BRs/SGLs without support of requisite security.
iv) The stakes involved in second and third impugned transaction of 22-7-91 and 31-7-1991 respectively being 212.80 lakhs and 255 crores (approximately) which were beyond capacity of the Bank like BOK considering its financial position and status. Yet accused No. 1 and or accused No. 12 put through deals for such huge amounts.
v) Entry in the dealers pad of CANFINA's office which is the first record in time and earliest record in respect of first and second impugned transaction are in the handwriting of accused No. 12 and that of third transaction of 31-7-1991 is in the hand writing of accused No. 1.
vi) Transaction of 15-10-91 and 18-10-91, when BOK alleged to have purchased the security from CANFINA were also put through by Accused No. 1 and Accused No. 12 and what was done was that the liability under the BRs issued in second transaction of BOK came to be reduced which clearly manifests that Accused No. 1 and Accused No. 12 were aware about the outstanding BRs. It is relevant to note that sub-transaction dated 18-10-91, as evidence shows was struck by Accused No. 1 and by Accused No. 12 from Bangalore from their residence when there was a Public Holiday for the Bank at Bangalore.
vii) Accused No. 1 and 12 were very much aware of the mode of delivery in all the impugned transactions as the same has been reflected in the entries in the dealers pad made by themselves and these lends corroborationto the evidence of P.W. 2-Mr. Vernekar who has testified that he reported the said fact to the dealers at Bangalore on the same day.
viii) Pay Orders in three impugned transaction issued by Canara Bank on behalf of CANFINA favouring BOK were credited into the account of accused No. 3. BOK on the same day, without there being any instructions either from CANFINA or Canara Bank, on the very days. The said amounts were diverted to other accounts. There is a evidence made available about the said diversion into the account of accused No. 2.
ix) Evidence shows continuation of conspiracy from April, 1991 till end of May 1992 by the following overt acts.
a) On 15-9-91 Cover Up operation through MCB.
b) On 15th and 10th October, 1991 two sub-transactions.
c) On 18-4-1992 BOK issued its SQL as substitute to its BR issued by it to CANFINA in first security transaction dated 6-4-91 which was dishonored by R.B.I, when presented by CANFINA on the ground of not sufficiency of balance.
d) On April, 1992 accused No. 1-M.K.S. Ashok Kumar in the company of accused No. 2-H.P. Dalal met P.W. 25-P.R. Appana Rao in the office of Canbank Mutual Fund in connection with BOK's outstanding BRs and the assurances of accused No. 2.
e) In the third week of the May 1992 meetings in the Taj Mahal Hotel were held and admissions by accused Nos. 2, 3 and other accused of the receipt of proceeds of CANFINA's money.
f) All these would show that conspiracy continued and links and connections between the accused.
g) Most importantly, accused No. 2-H.P. Dalal figures as broker in all the transactions three impugned transactions and two sub-transactions as also in other various transactions with different parties put through on the payment flown from account of accused No. 3 from CANFINA's payments.
318. The chain and course of events in the back-ground of impugned security transactions which are back bones of this case, as enumerated herein-above, stand established and proved by the prosecution beyond shadow of doubt. While discussing and considering the evidence of the prosecution and facts as gathered in the context of each of the points mentioned hereinabove, Court has already considered the same and held prosecution having established the conspiracy between accused Nos. 1, 2, 3 and 7 to 12.
319. Agreement, as stated, amongst the conspirators is main ingredient of conspiracy. The parties to such agreement may execute certain acts collectively together or by few of them or even by one of them with the object of achievement and fulfillment of the object.
320. The evidence discussed and the points enumerated hereinabove establish the nexus and links between the accused herein as part of conspiracy. To summarise it:
a) In striking deals of the impugned transactions accused No. 1 and 2 being the dealers of CANFINA were involved and the evidence shows that accused No. 2 was the common broker in all the impugned transactions. This shows association and link of accused Nos. 1, 2 and 3.
b) The said impugned deals were routed into the account of the account of accused No. 3 Mr. A.D. Narottam with BOK. Accused Nos. 7 and 8 were the concerned employees of the said Bank and who have, as noticed earlier taken necessary steps for the execution of the said deals. Asnoticed earlier, Cost Memos and BRs were issued by accused Nos. 7 and 8 on the strength of Delivery Order of accused No. 3 favouring CANPINA although there existed no security in the account of accused No. 3 with BOK or with BOK itself. It is to be noted that the said security transactions were shown to be between CANFINA and BOK although it was not so. Thus accused Nos. 1, 2 8s 3 and 7, 8 and 12 come into picture in chain of events.
c) In the Cover Up Operations put through MCB, on 16-9-1991 accused Nos. 9, 10 and 11 appeared on the scene. The said Cover Up operation as noticed earlier by cogent and clinching evidence, were undertaken for manipulating the security ledger account of accused No. 3 with the object of preparing record in the security ledger that there existed the securities in the account of accused No. 3 covered under three impugned transactions. The entries eventually were made in the security ledger account of accused No. 3 with BOK breaking chronological order and sequence and it has been proved that the sole object of such cover up operation was to fabricate the record of BOK. Thus link between accused Nos. 9, 10 and 11 with accused Nos. 2, 3, 7 & 8 also stands established. Documentary evidence, namely joint statement of accused Nos. 9. 10 and one Mr. Gandhi (P.W. 20) of MCB, which has been produced and proved as Ex. 352 and to which accused Nos. 9 & 10 are the signatories, which statement is proved shows links between accused Nos. 9, 10 and 11 and MCB on one part and that of accused Nos. 2, 3, 7 & 8 on the other. In fact the Cover Up Operation was result of outcome of such meetings. These thus establish as links between accused Nos. 2, 3, 7, 8, 9, 10 and 11.
d) As noticed earlier accused Nos. 1 & 12 being the dealers have struck the deals with accused No. 2 the broker and accused No. 2 as noticed earlier is a common connecting link between other conspirators i.e. accused Nos. 1, 3, 7 to 12. It is in the evidence, clearly proved that BOK's, BRs and Cost Memos used to be collected by the messenger of accused No. 2 from CANFINA and used to collect CAN FIN A's pay orders favouring BOK, against delivery of cost memos and BRs etc.
e) Evidence further shows direct involvement of accused No. 2-H.P. Dalal in the process of documentations in impugned transactions as already noticed above. In as much as, some documents such as D/Os and R/ Os of accused No. 3-A.D. Narottam are in his hand writing.
f) It is also proved that substantial part of amounts passed into his (i.e. accused No. 2-H.P. Dalal) account.
g) CANFINA is a victim as a result of what was done.
h) The other causalities are BOK and MCB which went into liquidation.
321. The evidence discussed hereinabove and what emerged therefrom enumerated hereinabove is squarely borne out from the evidence that has been adduced by the prosecution in this case. Major portion of the evidence consist of documentations. Such documentations is of contemporaneous record which speaks volume on the aspect sought to be bring forth therefrom by the prosecution. Such documentation itself is the process in consequence and thus circumstances in the background of various acts of commission and omission that occurred in the whole operation of the transactions in securities. The Court has relied upon such circumstances as the same stood proved and clinchingly established with reference to the various acts to which concerned accused were direct parties.
322. As stated earlier while accepting the circumstantial evidence the Court had to exercise utmost precaution and prudent rules of evidence required tobe judicially applied while considering circumstantial evidence. This what the Apex Court has posited in the case of S.P. Bhatnagar v. State of Maharashtra & another, reported in : 1979CriLJ566 :
'The circumstances from which the conclusion of guilt is to be drawn should in the first instance be fully established, and all the facts so established should be consistent only with the hypothesis of the guilt of the accused. Again, the circumstances should be of a conclusive nature and tendency and they should be such as to exclude every hypothesis but the one proposed to be proved. In other words, there must be a chain of evidence so far complete as not to leave any reasonable ground for a conclusion, consistent with the innocence of other accused and it must be not to leave any reasonable ground for a conclusion consistent with the innocence of the accused and it must be such as to show that within all human probability the act must have been done by the accused. : 1953CriLJ129 Foll.'
323. Bearing these principles in mind this Court as discussed hereinabove has assessed and weighed each of the circumstances while assessing the complicity and involvement of the concerned accused in various acts. The circumstances as made out which have been sufficiently supported by contemporaneous documents are of conclusive nature and tendency and point out to the guilt of the concerned accused.
OFFENCE UNDER SEC. 4O9 OF I.P.C.
ENTRUSTMENT / DOMINION.
324. The criminal breach of trust by public servant of property in his capacity of a public servant is a main offence of this case is directed against the accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan, the dealers at the relevant time of CANFINA who struck and finalized the deals in security transactions being the subject matter of this prosecution. It is noticed from the evidence discussed earlier, the entire scenario upon which the prosecution case has been set up is based on what consequences that ensued as a result of the said security transactions of CANFINA being not fructified. It stands amply proved that, as a result of the said security deals, CANFINA parted with the moneys which was its property as envisaged under the provisions of the said section and ultimately suffered losses.
325. As held earlier, accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan have already been held to be public servants. The question whether it can be said that there was an entrustment over CANFINA's property to the accused Nos. 1 & 12. It is not in dispute that moneys which CANFINA parted were as considerations of the securities in respect of the deals struck and finalized by accused Nos. 1 and/or 12 as its dealers. The transactions in securities were for and on behalf of CANFINA. It, therefore implies that CANFINA was the owner of the property and accused Nos. 1 & 12 being its employees and dealers, were entrusted with the property and said to have dominion over its property. Said entrustment flew from the delegation of powers conferred upon accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan by CANFINA under its Board Resolution dated 10th August, 1989 being Exh. A-1(11) on record which is already considered hereinabove in the context of authority and power of accused No. 1 and/or accused No. 12 to strike and finalize deals. By the said resolution, (CANFINA, a corporate body, has delegated powers and authorized accused No. 1 M.K.S.Ashok Kumar and accused No. 12-S. Mohan to strike and finalize deals in security transactions on its behalf without there being limits.
326. It is noticed earlier that although at the relevant time, there were no comprehensive guidelines as such framed by CANFINA, nevertheless, such transactions were to be undertaken by following and observing prudential banking norms and policy and guidelines as laid down by R.B.I. Such delegation of powers by CANFINA to accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan made it imperative to the said accused to handle the property of CANFINA in a particular manner and not in violation of any prudential banking norms, banking policy and guidelines of R.B.I, in best interest and profitable to CANFINA. It must be also noted that with such type of power/delegation there is implicit and inherent obligation cast upon the dealers to use and exercise the powers with regard to the security transactions by acting honestly and in any event to ensure not to dispose of the same dishonestly in violation of the authority. What is criminal breach of trust has been defined under section 405 of I.P.C.
327. Entrustment as such is not necessarily a term of law. It may have different implications in different contexts when a body like CANFINA which; is a corporate body possesses the property and authorizes by delegating powers to its employees like, accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan to handle the same in a particular manner. The ownership of benefits and interest in the property remains with it. It has been held by the Apex Court in the case of Rashmi Kumar (Smt) v. Mahesh Kumar Bhada. reported in 1997(4) Bom.C.R. 145 (S.C.) that in order to establish entrustment of dominion over the property to an accused person, mere existence of that person dominion over the property is not enough and it must be further shown that the dominion was the result of the entrustment. It follows that there has to be evidence of entrustment. In my view the Resolution of Board of Directors of CANFINA dated 10th August, 1989 Exh.A-l (11) is the document whereby accused Nos. 1-M.K.S. Ashok Kumar & 12-S. Mohan have been delegated powers to deal with CANFINA's property, namely, securities including Government securities. The said document Exh. A-1(11) is a proof of entrustment of dominion of the property of the CANFINA-security upon accused Nos. 1 & 12.
328. As already discussed earlier and it has been proved beyond any shadow of doubt that in respect of transactions being the subject matter of this prosecution, it is Accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S Mohan as the dealers who struck and finalized the deals and thus they handled the property of CANFINA.
329. As noticed earlier, there is in the evidence and it has been proved be yond doubt that ail the transactions of this prosecution were finalized by accused No. 1-M.K.S. Ashok Kumar and Accused No. 12-S. Mohan and all the necessary further steps in respect of implementation/execution thereof were taken strictly in accordance with the instructions/directions of the said accused. It is only after the deals were struck and finalized at Bangalore that the payments came to be remitted from Bangalore to Bombay and which thereafter was paid over to BOK. But for striking and finalizing the deals in the transactions of this case by dealers i.e. Accused Nos. 1 & 12, CANFINA could not have parted with the moneys. Therefore, considering the evidence discussed hereinabove and the manner and the circumstances in which the money came to be parted it clearly shows that whatever Accused No. 1M.K.S. Ashok Kumar and Accused No. 12-S. Mohan did, was in pursuant to the trust reposed upon them by CANFINA by delegating the powers.
330. As the evidence shows and which has been proved that the said deals in question were shown to be although between CANFINA and BOK, in reality, it was not so. The moneys of CANFINA travelled into the account of accused No. 3-A.D. Narottam and therefrom to other sources. The role played by Accused No. 2-H.P. Dalal has already been discussed above. It is accused No. 2-H.P. Dalal who acted as a broker and Accused No. 1-M.K.S. Ashok Kumar and/or Accused No. 12-S. Mohan who struck the deals. It is, therefore, legitimate to infer that they did so, in consultation and in close association with Accused No. 2-H.P. Dalal, a broker. As it happened and already proved by evidence that eventually CANFINA suffered losses. The manner in which the course of events took place respecting all the transactions of this case, is clear manifestation of a dishonest intention on the part of accused No. 1-M.K.S. Ashok Kumar and accused No. 12-S. Mohan which is the gist of this offence.
SECTION 467 OF I.P.C.
FORGING OF VALUABLE SECURITIES-
BRs & COST MEMOS, ETC.
331. As noticed earlier, there are six BRs and six cost memos which figured in this case being issued by BOK favouring CANFINA on 6th April, 1991, 22nd July, 1991 and 31st July, 1991 in the respective impugned transactions between CANFINA and BOK of the respective securities mentioned therein. Three BRs and cost memos have been issued by MCB favouring BOK on 16th September, 1991 in respect of respective securities as mentioned therein. It stands already proved that BRs were the documents to be reckoned as 'Valuable securities'. It is to be noted that, on the strength and basis of BRs, CANFINA paid the moneys to BOK accepting the said BRs of BOK as valuable securities. There are many witnesses who have stated as discussed hereinabove that BRs were in par with a document of valuable securities. The said BRs also contain recitals of the receipt of considerations. The same also contain the recitals that till discharge thereof the CANFINA was to hold the same on account of BOK. All this would show that BR is a document of valuable security.
332. It is already held and proved that when BOK issued these three BRs, there existed no securities under the respective BRs with it at all and BOK was not in a position at the dates when it issued the said BRs or even thereafter and thus was not in position to deliver the securities under the BRs to CANFINA. It is, therefore, evident that the documents, namely, the said BRs were prepared purporting to be a valuable security, without there being any securities to back up the same.
Section 467 of I.P.C. which is relevant is reproduced below :--
'467. Whoever forges a document which purports to be a valuable security, or a Will, or an authority to adopt a son, or which purports to give authority to any person to make or transfer any valuable security, or to receive the principal, interest, or dividends thereof, or to receive or deliver any money, moveable property, or valuable security, or any document purporting to be an acquittance or receipt acknowledging the payment of money, or an acquittance or receipt for the delivery of any moveable property or valuable security, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.'
The plain reading of the said section 467 I.P.C. makes it clear that any document, which is meant to be a valuable security prepared and/or executed with the object as appearing in the said section would; constitute an offence of forgery. In the instant case, it is already proved that there existed no security at all to back up the issuance of BRs with BOK or MCB. Yet, Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje and 8-S.A. Ail, as far as BOK is concerned got the said BRs forged for using the same as valuable securities and on the strength of which made/induced CANFINA to part with the moneys. As far as MCB is concerned, the position is the same that BRs were issued by Accused No. 9-K.K. Kapadia and accused No. 10-M.S. Kushte in active connivance with accused No. 2-H.P. Dalal, accused No. 3-A.D. Narottam, Accused No. 7-C.S. Raje, Accused No. 8-S.A. Ail and Accused No. 11-S.N. Ramaswamy without there being requisite securities. Delivery orders or receiving orders were issued and exchanged by BOK and MCB in respect of security transactions which securities did not exist at all. On the strength of said BRs issued by MCB favouring BOK, BOK paid the moneys to MCB. Although the said BR.s of MCB were brought into picture in a Cover Up operations, the fact remains that the same were issued with the definite object and intention for being used as a valuable securities to facilitate receipt of the money from BOK, when issuance of the same was not backed up by requisite securities.
333. Considering the evidence discussed hereinabove as also earlier in the relevant context, it has to be held that concerned accused, namely accused No. 2-H.P. Dalal, accused No. 3-A.D. Narottam, accused No. 7-C.S. Raje and accused No. 8-S.A. Ail as far as BRs of BOK is concerned and accused No. 9-K.K. Kapadia, accused No. 10-M.S. Kushte and accused No. 11-S.N. Ramaswamy, as far as BRs of MCB is concerned, were responsible for forgery of said BRs which were the valuable securities and which each one of them know that the same was to be used as such. Thus, ingredients of section 467 of I.P.C. squarely apply to the said accused and hence held guilty for the said offences.
CERTAIN ASPECTS CONCERNING
INVESTIGATING AGENCY- C.B.I.
CONDUCT OF PROSECUTION BEFORE THE COURT :--
334. It is the C.B.I. who carried out investigation in this case as also many other cases relating to tainted security deals. It collected voluminous evidence, interrogated several witnesses. It must be said that in the cases of such types, criminal elements involved therein, do not fall in the category of traditional crimes i.e. crimes under I.P.C. like murders, gangwars, etc. Same involve consummate and ingenious skills of perpetrators, who possess proficiency not easily comprehensible. Such criminals are not traditional and conventional which professional agency must bear in mind while conducting investigation.
335. These are so to say new types of crimes, with change of pattern. A murder may be committed in the heat of moment upon passion being aroused. However, offence of the types as in this case are committed with cool calculations and deliberate design with an eye on personal profit regardless of the consequences as is manifested in this case. As noticed, both the banks-BOK and MCB had tragic end going into liquidation.
336. Although CBI was very much aware that all the financial institutions involved in such fraudulent deals were subjected to inquiry, inspection andscrutiny by RBI, which is a Central Statutory Authority under RBI and Banking Regulations Acts, whose reports of such findings were and could be available, no efforts to co-ordinate with the RBI appears to have been made as ought to have been done. It is something strange and intriguing that when prosecution, during the course of conduct of trial realized the importance, relevancy and utility of such RBI findings and when attempts were made by issuance of Court processes requiring RBI to produce such findings concerning CANFINA, RBI through its Counsel vehemently opposed such production by use of shield of claim of privilege. This is indeed ironical and unfathomable. RBI there by only exhibited its ignorance about the nature of its such Reports and their statutory character and evidentiary relevance in the trial of offences of the type herein before the Court of law. Indeed, Court was required to, after examining the statutory aspects, to rule that such Reports were Statutory Re-ports and in public interest their disclosure was necessary. For that matter, making available before the Court, was RBI's prime duty. This clearly illustrates lack of co-ordination between the investigating agency and supervising and controlling agency i.e. RBI as also ignorance of statutory provisions.
337. Further, just as investigation and collection of material and evidence was vital, it was equally crucial to present the same before the Court in definite orderly and coherent and systematic manner during the conduct of trial. As it transpired, this did not happen. In this case, in the midst of trial, prosecutors were changed and replaced. All these resulted in wasting precious judicial time of the Court and same caused inconvenience to all. It is necessary that investigation agency would ensure to involve with it those well experienced and proficient in Banking operational systems. It is to be noted that the Reports of Auditors statutory as also internal of the concerned institutions, were not collected and made available before the Court being contemporaneous record having corroborative value. It was also observed that, even some senior officials of CBI were unaware of the existence of statute, namely, Bankers Book Evidence Act and which Act permits and allows for the tender of certified copy of any entry in the Banker Book in all legal proceedings as a prima facie evidence and that the certified copy of extracts in respect of any relevant entry has to be duly certified and authenticated by an authorized officer of a Bank, in a manner as provided in the said Act. The investigating agency being unaware of this important provision, seized such record which was very bulky, like, Security Ledger, Account Ledger containing record of the Bank, etc. Said ledgers contain record required in many other cases before various courts. The record was, apart from its bulkiness, in keeping and preserving it, there used to be repeated demands from other courts for the same record in some other cases and applications after applications for such movement were required to be entertained wasting time of the Court as also causing inconvenience. There is also damage caused in the process of such handling. Even in this case, several of such ledgers have been produced containing record pertaining to various other cases pending in different courts. It is expected that investigating agency shall take notice of this important statutory provision and shall follow it in future. It is to be noted that recently Central Vigilance Commission (CVC) has added Special Chapter in its Manual concerning matters/cases of Banks put through irregularly, Bank frauds, etc. laying down guidelines to tackle the cronic problems. It is hoped that con-cerned agencies, like CVC, CBI and RBI would ensure meaningful and purposeful co-ordination in handling cases of the types, including investigations.
338. However, in the given circumstances, Court expresses its sincere appreciation over the valuable assistance rendered by the Prosecutor as well by the defence. The trial of the case has dragged on for quite a long time. That is because of voluminous evidence that has been made available before the Court as also unconventional and untraditional nature of facts, somewhat intricate and of complicated nature as obtained herein. Some accused, namely, Accused No. 3-A.D. Narottam and Accused No. 11-S.N. Ramaswamy appeared in person all throughout and conducted their defences. As far as Accused No. 12-S. Mohan is concerned, he also appeared in person except that at the last stage, for the argument, he engaged his Advocate. Accused No. 3-A.D. Narottam, as stated earlier, also adduced evidence by examining himself on oath. He also examined certain witnesses. All these contributed to the consumption of good deal of time of the Court. But by and large the conduct of the trial was smooth and the credit of it goes to every one concerned in this case.
DEFENCE PLEAS-UNDER GENERAL EXCEPTIONS:
339. One aspect would need consideration in the background of the stand taken by some of the accused in their defence claiming exceptions under the provisions of Chapter 4 of the I.P.C. This is particularly done by Accused No. 3, 7, 8 and 10. It is necessary to note that accused in any case when he claims exceptions, burden lies of proving the existence of such circumstances upon him. Section 105 of the Evidence Act specially provides for the same.
i) Accused No. 3:--Accused No. 3 has pleaded that he was compelled to allow him to use his account in BOK by Accused Nos. 2, 4, 5 and 6. His defence indicates that there was huge liability upon accused No. 5 in respect of LIC Mutual Fund and for rolling over the same, accused Nos. 2, 4, 5 and 6 evolved a scheme by undertaking fictitious security deals. He was employee of accused No. 4 for considerable period. Accused No. 6 had worked with his firm. Accused No. 6 was also associated to Accused No. 4. The Accused Nos. 2, 4 and 6 prevailed upon him to allow such role over operation in his account with BOK. He therefore pleads that he was used as conduit in such role over security transaction operation and was forced to issue Delivery Orders or Receiving Orders etc., in support of security transactions although he did not possess the same. He claims that he was assured by the said accused in particular, by accused No. 4 that everything would be properly done.
ii) Accused Nos. 7 & 8:---As far as accused Nos. 7-C.S. Raje and 8-S.A. Ail are concerned, they are the employees of BOK and they have pleaded that they did whatever required in execution of security transactions with CANFINA into the account of accused No. 3, they did it under instructions of accused No. 3 who was its Director.
iii) Accused No. 10:---He was an employee of M.C.B. and admits having singed Cost Memos and BRs of M.C.B. in Cover Up Operations as also Pay Orders. He has stated that he did so under the instructions of then Chairman of M.C.B. Mr. Desai.
340. Considering the pleas of the above accused, it will be necessary to advert to the relevant provisions as contained in Chapter 4 of I.P.C. under title 'General Exceptions'. Sections 76,79 and 94 will be the relevant sections in the background of pleas as raised by the above accused, mentioned earlier.
341. Section 76 provides excuse to a person who had done what by law is an offence under a misconception of facts leading him to believe in good faith that he was bound by law to do it. Whilst section 79, which provides some what similar to section 76 does, as noticed earlier, only requires one more fact that talks of justification for doing particular act.
342. Section 94 provides for justification when any person is compelled to do some thing by administering threats.
343. On careful consideration of the statutory provisions noticed herein-above and the pleas that aforesaid accused have put forth as justification claiming exceptions, stated above, it need to be stated that taking into account the standings and status of the accused and nature of work they were doing and their duties and functions, etc. the same does not hold water good.
344. As far as Accused No. 3 is concerned, the evidence shows that he had worked and had long and sufficient experience in share broking and security transactions. As a matter of fact and as evidence shows he was also engaged in such operations since long. It therefore clearly follows that he had sufficient knowledge and also understanding of nature of transactions being the subject matter of this case and inevitable consequences that would ensue by putting through the transactions in securities in the manner the same were done as in the case herein. His evidence clearly shows that he was all along aware and conscious of the fact as to what was being done. In fact, he himself was an active participant in the operations. Transactions worth hundred of crores were routed into his Bank account without there being any security. As experienced Share Broker he knew what such transactions meant. It is difficult to believe and accept his plea that he readily and willingly acceded to the suggestion of Accused Nos. 2,3,4,5 and 6 as sought to be made out. There is no question of mistaken fact of law or fact that can be inferred in his case. Further the transactions were spread over for long period of time and he did not do anything despite being aware of the nature of the transactions and the consequences if he was so innocent as claimed now.
345. As far as acceded Nos. 7 & 8 are concerned, they were the employees of BOK working in the security department and they knew and were very much aware of the nature of their work, duties and responsibilities attached thereto. Accused No. 7 was an officer authorized and empowered by BOK to sign cheques, BRs etc. He as also Accused No. 8 had experience of work relating to the security transactions and operations of accounts. For that matter, they were aware of the significance and importance as also purpose of BRs in the security transactions. In such circumstances there mere plea of they having acted upon the instructions of the Accused No. 3 who at the relevant time was a Director of BOK does not appeal to the reason. If indeed it was so then there were other superior officers and the Managing Directors and Chairman etc. of the said Bank and it is not explained as to why they did not take up the matters to them. This conduct of their rules cut the merits of their defence plea.
346. Now coming to the plea of Accused No. 10 it may be stated that two officers of the M.C.B. P.W. 20 D.R. Gandhi and P.W. 22-O.K.M. Nambiar in their defence stated that the security transactions used to be attended by accused No. 9. They have proved and identified the various documents relating to such cover up operation transactions of M.C.B. dated 16-9-1991. It is most pertinent to note that in the cross examination Accused No. 10 has notmade any suggestion or elicited anything which would make the said plea even reasonably probable.
347. Therefore, taking into consideration all these facts, I do not find any substance in the pleas whereby Accused Nos. 3,7,8, and 10 have claimed exceptions and the same stands rejected
348. Before parting, this Court thinks it expedient to put it on record, certain most disturbing features concerning working of the banks involved in this case, viz. Canara Bank and its subsidiary CANFINA, BOK, M.C.B. and A.N.Z. Grindlays Bank, with regard to their so called transactions in Government securities being subject matter of this case. This is being done from and on the basis of evidence that has been made available before this Court by the prosecution as also by the defence which Court has critically and most carefully sifted and examined while considering various points to which this a Court addressed itself.
349. Vis-a-vis, security transactions impugned in this prosecution, viz. three main impugned transactions and two sub-transactions with CANFINA and BOK and three Cover Up transactions between BOK & M.C.B. were undertaken by means of BRs although there existed no securities with the concerned Banks to support issuance of BRs. SGL issued by BOK as substitute to its earlier BR was also without sufficient balance in its PDO with RBI. culminating to its dishonour on the ground of insufficiency of securities. Evidence shows that, in case of one security transaction stated to be between ANZ Grindlays Bank and NOCIL, in fact had not taken place at all. NOCIL purported to be purchasing party has testified to that effect. Still Grindlays Bank had issued its BR for the said security. CANFINA's dealers went on in putting through successive transactions of hundreds of crores stake with BOK when its earlier transactions by means of BRs were outstanding. M.C.B. which was very small Bank, with four crores deposit capacity, issued BRs to the extent of four hundred crores, that too without holding and possessing the requisite securities. This was done, as is evident, to manipulate security account of Accused No. 3 A.D. Narottam with BOK which had earlier issued its BRs to CANFINA without holding requisite securities and on strength of which CANFINA paid the moneys to BOK.
350. It stands clearly borne out from, the evidence discussed that resort to the issuance of BRs in the transactions of this case, is a key factor behind entire mischief and malpractice resorted to by its perpetrators with sole aim of facilitating the brokers, in particular Accused No. 2 H.P. Dalal , Accused No,. 3-A.D. Narottam and Accused No. 11-S.N. Ramaswamy of illegally siphoning of moneys of CANFINA for their speculative returns and benefits which is blatant criminal misuse of Bank money, a public fund. BRs were issued by brazenly flouting the healthy banking system, guidelines of RBI and prudential norms of banking. This is amply demonstrated from further fact that BOK could not honour its commitments under its BRs issued to CANFINA and eventually went into liquidation. M.C.B. also met with the same fate.
351. Those who actually participated in perpetrating frauds have been held guilty. They happen to be employees of the concerned institutions and the brokers involved in the fraudulent security transactions. The question of considerable importance as also of great concern that comes to the front as to how the administrative apparatus of the concerned institutions in particular of Canara Bank and CANFINA, in particular, their Higher Ups allowed such thumbs to happen and what did they do to avert the scenario. Were there or not existed system of internal checks and balances with the said institutions? Did they not so also RBI , which is a Central Bank, controlling and guiding the banking operations of all the Banks in this country, realize or had no means to know that small Banks like BOK and M.C.B. were being used as conduits by the brokers, some of whom were on their Boards of Directors. Especially so when atleast in one instance, SGL issued by BOK in April, 1992, as substitute to its earlier BR was dishonoured by RBI (P.D.O) on the ground of insufficiency of balance.
352. This Court is constrained to note and with grave concern, considering the way the top bosses of these institutions, viz., Canara Bank and CANFINA, who were examined as witnesses, acted and reacted while holding responsible positions in such prime financial institutions, dealing with public funds. This Court, with full sense of its responsibility but with great reluctance is constrained to observe that the conduct of such higher ups amply demonstrated complete lack of accountability on their part in monitoring and overseeing the dealings in the public funds holding responsible positions in the said institutions. The state of affairs which existed with regard to the security transactions of CANFINA for the year 1990 i.e. prior to the period of impugned transactions was graphically highlighted and exposed in the Inspection Report (Ex. a-l(16)) rendered by Mr. Nanjappa (P.W. No. 65) RBI Inspector, submitted to RBI. The picture which existed in CANFINA was grim and disturbing. Despite this, it is shocking and strange that neither RBI nor Higher Ups of CANFINA or Canara Bank thought it prudent to act timely and swiftly to retrieve and or to improve the situation and functioning and avert such nefarious malpractices until the scam in security transactions of Banks surfaced in April 1992, by the time, CANFINA was deprived of hundreds of crores of rupees by such fraudulent deals by clandestine manner. Although scam was revealed in last week of April, 1992 it took RBI to awake from slumber three months to issue circular in July, 1992 laying down guidelines. Had it been done promptly, perhaps position would have been different. This did not happen. No convincing explanation is offered for such criminal apathy by the higher ups of Canara Bank and CANFINA. Their lackadaisical, indifferent and complacent attitude is baffling. This Court thinks it necessary to highlight this state of affairs to emphasize that the manner in which transactions of this cases in securities were put through, it clearly manifests that the issuance of guidelines remained in papers and followed in breaches only. Committees after committees are appointed, headed by competent and proficient men, who make recommendations suggesting means to improve the system. But what is of most and crucial importance is the personnel engaged and concerned in the day-to-day banking operations that matters most. Working of all system will depend upon the personnel who operate it. These fraudulent security transactions of this case clearly reveals that system failure is occurred due to failure of the persons, operating it and their fraudulent deeds': What is most deplorable and regrettable aspect noticed by this Court is the casual and mechanical way the top officials of Canara Bank and CANFINA testified before this Court without there being any indications of remorseness. In an important aspect of banking business, some of the senior officials ex-hibited their ignorance of the existence of important statute like Bankers Book Evidence Act and how certification of authentication was to be done thereunder in respect of extracts of ledgers. No point in multiplying but these are few as illustrative. However, all said and done as far as findings of this Court in respect of culpability and involvement of the accused in this case, as held herein the same will not get detracted as the evidence clearly shows their complicities in the various offences of which they are held guilty. One cannot say or justify one's criminal Act or omission with a plea that he committed crime because there was no policeman to prevent him from doing so. Crime if so committed and proved, its perpetrator cannot escape its inevitable consequences.
353. Taking over all appraisal of the evidence, totality of a the facts andcircumstances, the entire evidence made available and discussed, the rolesplayed by concerned accused the legal position, the Court comes to the conclusion and holds, that: -
i) Accused Nos. 1-M.K.S. Ashok Kumar, 2 H.P. Dalal, 3-A.D. Narottam, 7, C,S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte, 11-S.N. Ramaswamy and 12-S. Mohan are held to be guilty being parties to a continuing criminal conspiracy between April, 1991 and May, 1992 at Bangalore and Bombay, 'the object whereof was to 'commit criminal breach of trust in respect of the property of CANFINA viz. an amount of Rs. 374,35,18,345.78' punishable under section 120B read with section 409 of I.P.C.
ii) Accused Nos. 1-M.K.S. Ashok Kumar and 12-S. Mohan are held guilty of offences under section 409 read with 109 of I.P.C. for the offence of committing breach of trust in respect of the property of CANFINA viz. Rs. 374,35,18,354.78.
iii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy are held guilty under section 409 read with section 109 of I.P.C. for abetting Accused Nos. 1 and 12 in commission of offence of criminal breach of trust in respect of property of CANFINA with the sum of Rs. 374,35.18.353.78.
iv) Accused Nos. 1-M.K.S. Ashok Kumar, 12-S. Mohan are held guilty for the commission of offences under section 13(1)(d) read with section 13(2) of the Prevention of Corruption Act, 1988 being public servants for abusing their positions as such public servants and by corrupt and illegal means obtained for Bank of Karad A/c. Accused No. 3-A.D. Narottam, accused No.2-H.P. Dalal, Accused No. 11 -S.N. Ramaswamy pecuniary advantage of Rs. 374,35,18,354.78 and caused wrongful loss to CANFINA to the extent of the said amount.
v) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-SN. Ramaswamy are held guilty under section 13(l)(d) read with section 13(2) of the Prevention of Corruption Act, read with section 109 of I.P.C for abetting Accused Nos. 1 and 12 in the offence of criminal misconduct and corrupt practice being public servants.
vi) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail each one of them held to be guilty under section 467 read with section 120B of I.P.C. for the offence of forgoing documents viz. cost memo dated 6-4-91 Ex. 188, BR dated 6-4-91 Ex. 189, cost memo dated 22-7-91 Ex. 195, BR dated 22-7-91 Ex. 196, cost memo dated 31-7-91 Ex. 229 and BR dated 31-7-91 EX. 229 of BOK and S.G.L. form dated 18-4-92 Ex. 190 purported to be valuable security with the common object of receiving property viz. sum of Rs. 374,35,l8', 354/78 from CANFINA
vii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8-S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte and 11-S.N. Ramaswamy each one of them held to be guilty under section 467 read with section 120B of I.P.C. for the offence and forging documents viz. cost memo dated 16-9-91 Ex. 667., BR dated 16-9-91 Ex. 344, cost memo dated 16-9-91 Ex. 668, BR dated 16-9-91 Ex. 343, cost memo dated 16-9-91 Ex.669, BR dated 16-9-91 Ex. 345 of M.C.B, purported to be valuable security with the object of receiving property viz. the sum of Rs. 374,35,18,354.78 from BOK A/c. CANFINA.
viii) Accused Nos. 2-H.P. Dalal, 3-A.D. Narottam and 11-S.N. Ramaswamy each one individually are held guilty under section 411 of I.P.C. for dishonestly receiving and retaining the property out of Rs. 374.35,18,354.78 received from CANFINA knowing and believing the same to be stolen property, as under:
i) Accused No. 1-M.K.S. Ashok Kumar Rs. 78,91,27,715.15; ii) Accused No. 3-A.D. Narottam Rs. 295,28,90,639.63. iii) Accused No. 11-S.N. Ramaswamy Rs. 15,00,000/-.ix) As far as Accused Nos. 4-B.C. Dalal, 5-T.B. Ruia and 6-J.P. Gandhi are concerned, it is held that charges leveled against them have not been proved by adequate evidence,
All accused present.
354. On 11th March, 1999 this Court pronounced its findings holding Accused Nos. 1-M.K.S. Ashok Kumar, 2-H.P. Dalal, 3-A.D. Narottam, 7-C.S. Raje, 8 S.A. Ail, 9-K.K. Kapadia, 10-M.S. Kushte, 11-S.N. Ramaswamy and 12--S. Mohan guilty of offences as already indicated hereinabove. On that day applications were made by and on behalf of the defence for adjournment for making submissions on the quantum of sentences and the matter was adjourned today.
355. Today this Court heard the Counsel for the respective accused viz. Accused Nos. 1,2, 3 and 7 to 12. Court also heard the learned Public Prosecutor in the matter. The said accused have also submitted their written says.
356. I would briefly summarize the gist of submissions made by and on behalf of the defence through Counsel as also stated in their written says on the quantum of sentences.
357. Accused No. 1 M.K.S. Ashok Kumar: Mr. Thacker, learned Counsel for Accused No. 1 submitted that since the entire judgment has not been made available to Accused No. 1 he is handicapped on making comprehensive submissions on the quantum of sentence. He further submitted that the evidence as made available does not disclose any overt act attributing accused No. 1 of his involvement in the various offences . In as much as the learned Counsel submitted that there is no evidence to show that accused No. 1 had played any active role in the commission of various offences with which he has been convicted vis-a-vis impugned transactions in securities put through by and on behalf of CANFINA. He further submitted that accused No. 1 had played a very important role as an employee of CANFINA and was responsible for giving good returns to his employer i.e. CANFINA in various security deals and testimony of the same is that he came to be praised and complimented by Board of Director of CANFINA. It may be stated that learned Counsel also made submission concerning merits of the matter in respect of which the Court has already rendered its findings in the judgment.
358. Accused No. 2-H.P. Dalal : ---As far as accused No. 2 is concerned, by and large the submissions made were also in the terms as have been done by and on behalf of accused No. 1. Similar grievance is also voiced by accused No. 2 of being handicapped for want of entire judgment for facilitating submissions on quantum of sentence.
359. Mr. Ovalekar, Ld. Counsel made reference to the provisions of I.P.C. under which accused No. 2 has been held guilty and submitted that there is nothing made available in the evidence by the prosecution attributing precise and distinct role to accused No. 2. At the outset it may be stated that this aspect touches the merits of the findings of this Court in respect of complicity and involvement of accused No. 2 in this case.
360. Mr. Ovalekar tried to make a point that since the prosecution has not made available evidence about the precise and distinct role of the accused No. 2 in the commission of various offences while awarding sentences, the Court must take into consideration the said fact.
361. Accused No. 3-A.D. Narottam :---As far as accused No. 3 is concerned he is appearing in person. Reading his written submissions of accused No. 3 at the outset the same contains what he has already testified before the Court when he examined himself on oath as provided in section 315 of Cr.P.C. The Court has already discussed in its judgment that part of evidence of accused No. 3. Accused No. 3 again reiterates that he has been made scapegoat. His account was used as conduit by other accused. He has not receive any benefit etc.
362. He has further stated that he is 67 years old person and therefore prayed that the Court must show leniency to him.
363. Accused Nos. 7-C.S, Raje & 8-S.A. Ail: -As far as Accused Nos. 7 and 8 are concerned reading the written submissions and what is submitted across, it is gathered that what is sought to be highlighted is that the said Accused Nos. 7 and 8 state that they being the employees of BOK had to carry out instructions of their superiors. They had no intention to commit any offences. It is also stated that the said accused are bread earners for their respective families and therefore the Court should be merciful to them while awarding sentences.
364. Accused No. 9-K.K. Kapadia:---As far as Accused No. 9 is concerned, referring to the oral submissions by his Counsel and by reading the written submission what is sought to be put forth is that the said Accused No. 9 is responsible businessman and in his capacity as Vice Chairman of M.C.B. he was rendering honorary services to the said Bank. It is also submitted that there is no evidence made available by the prosecution indicating his positive roles in the operations.
365. Accused No. 10-M.S. Kushte:---Accused No. 10 in his written submissions and oral submissions by his Counsel has highlighted his family background, it is pointed out that responsibility of his family is on his head he being only earning member in the family. It is submitted that he was an ordinary employee of MCB and whatever he did was under the instructions of his superiors.
366. Accused Ho. 11-S.N. Ramaswamy:---As far as accused No. 11 is concerned he appeared in person. The sum and substance of oral as also written submissions is that according to him he had not committed any crime. He also did not receive any benefits. He has also stated about his family back-ground and his responsibility to his family. He has also prayed for leniency in the matter of awarding sentence.
367. Accused No. 12-S. Mohan---As far as Accused No. 12 is concerned his submissions in his written say as also advanced across can broadly be divided into two parts. Firstly, it is sought to put forth that Accused No. 12 at the relevant time was working under Accused No. 1 and that whatever he did was under instructions of Accused No. 1 who was his superior. The second point that is made out is about his family background he being young, his poor financial condition and being without job etc. He prayed for leniency in award of sentence.
368. Having considered the submissions on the point of sentences it is thought necessary to advert to what the learned Public Prosecutor has submitted.
369. Learned Public Prosecutor, Mr. Pradhan as far as quantum of sentences is concerned submitted that the offences involved in this case with which the accused have been held guilty are of serious nature. He submits that in cases of economic offences tike these Court has to be very firm and exemplary sentences will required to be awarded to the perpetrators of the crime. He submits that these are not ordinary offences against any individual but same are offences against the society and public at large and therefore stringent view is called for.
370. It may be stated that reference was made by and on behalf of defence as also by prosecution to certain decisions of the Apex Court as also of this Court to highlight the principles the Court should follow in awarding sentences crux of which is that the approach of the Court should be corrective and reformative and should not be vindictive. It may be stated that various decisions which were referred to related to those where the offences involved were of traditional types like murders, dacoities etc. Whereas the offences in this case are of different type-economic offences.
371. Mr. Pradhan, Ld.P.P has made reference to certain decisions of the Apex Court which have highlighted that the Court should be very strict in the matter of dealing with culprits in economic offences, as in the case herein, as the same relate to the swindling of public funds on large scales for their selfish gain and as such offences against the society having deadly repercussions at the economic structure of the nation. He has urged for exemplary sentences.
372. As held earlier the offences in this case are not of conventional or traditional types. The huge funds running into hundreds of crores of the Banks, which are public money, have been diverted and siphoned by perpetration of fraud by undertaking fraudulent security transactions which were ostensibly shown as genuine. The evidence clearly establishes that there was a well planned strategy and everything that was done was done with cool head knowing fully well the consequences thereof.
373. It is relevant to note that transactions in question and various steps taken by its players/ perpetrators at various and different stages have spread over a period of 13 months. As held earlier it would be crystal clear that each and every action that was taken, right from the first transaction in April, 1991 till end of May, 1992 by the convicted accused will indicate what was actually sought to be achieved and how in cleverly planned strategy, clandestine operations were carried out. Each player had played his crucial and vital role at every stage.
374. The fact that the transactions in security being the subject matter of this case were not legitimate and everything was amiss is amply demonstrated from the fact that both the banks involved viz. BOK and M.C.B met with deadly end. Both the institutions have gone into liquidation. The evidence has already established how the accused in this case were operating in these banks as if their private property. CANFINA is not the only victim but thousands of depositors of both the banks.
375. The Court is of view that in ultimate analysis such types of crimes and its perpetrators cannot be equated and compared with ordinary criminals like thieves or robbers. Such crimes have very serious repercussions and impact upon the economic structure of the country. There is more damage caused to the society and to the nation. That being so there is no question of being lenient as has been sought to be made out in the matter of awarding sentences. In the submissions made by and on behalf of convicted accused, I do not find any mitigating circumstances to justify to be lenient.
376. Of late, there is phenomenal rise in magnitude of such type of white collar crimes which has posed a grave threat to the economic structure of the country. Scams after scams, in the financial sphere are surfacing involving huge amounts. Process is unabated. In fact, if judicial notice is to be taken, what is happening around in this country, there is increase in such scams involving crores and crores. It has shocked the conscience of the people and there is growing feelings amongst them that regulatory watchdog agencies are incapable to prevent and check such evils or deliberate corroborators to the same. Such belief is strengthened from the fact as to how and in what manner the R.B.I., which is central body having enormous powers under statutes, to decide and lay down policy and guidelines for observance of banks and financial institutions in this country, and whose power and authority have been given approval by the highest Court of this country in its numerous pronouncements, responded or failed to rise to the occasion by its prompt action or inaction when security scam in bank securities broke out in 1992, which this Court has already dealt with earlier. This Court has also highlighted how higher-ups in the management of the Canara Bank conducted themselves. It has become common phenomena these days that Controllers, Regulators and Managers of the statutory Agencies awake after escape of horse from stable. Judicial process is also slow as is evident that this Court could reach the final stage in this case after 8 years of commission of offences although Special Act has been brought into force to ensure 'speedy . trials' in these type of offences. Existing legal system, as is, may appear paradoxical that it has to apply penal statute enacted in the year 1861 i.e. 139 years ago, Rules of Evidence embodied in Indian Evidence Act, 1872, 125 years old statute when such type of offences in particular economic offences, bank frauds, etc. committed with ingenuity and consummate skills and by deploying very sophisticated new technique, as in this case, were not even comprehended thereunder. A poor hungry person stealing bread, Government servant in grade III defrauding 500 rupees and those looting and plundering huge public funds of Rs. 500 crores are considered as same crimes and dealt with on one legal platform and similar type of punishments are prescribed for the criminal in the Penal Code. It is necessary that such white collar crimes involving high stake which are committed which cool calcula-tions and deliberate design with an eye on personal profit regardless of the consequences to the community devoid of any scruples are dealt with iron hand.
377. I would like to refer to a decision of the Apex Court which is directly on the point and outlines the approach of the Court in awarding sentences in economic offences and what should be borne in mind. The decision in question is reported in the case of State of Gujarat v. Mohanlal Gitamalji Porwal & another : 1987CriLJ1061 . This is what the Apex Court has posited:-
'The cause of the community deserves equal treatment at the hands of the Court in the discharge, of its judicial functions. The community or the State is not a persona nongrata whose cause may be treated with disdain. The entire community is aggrieved if the economic offenders who ruin the economy of the state are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless, of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage: done to the National Economy and National Interest.'
378. In my view the above observation of the Supreme Court in all force and in all respect would require to be applied to the offenders of this case.
379. Accused Nos. 1 and 12:---In the case in hand, it is very important to note that all the accused, who have been held guilty, were fully aware and conscious as to what they were doing and consequences thereof. Coming to accused Nos. 1 and 12 who were the dealers of CANFINA, they knew how and with whom they were dealing with. All the three impugned transactions and two sub-transactions have been put through in successive order. The first transaction of 6-4-91 was around Rs. 25,00,00,000/-, while the second transaction was to the extent of Rs. 212,80,00,000/- which was put through on 22-7-91 while third transaction was still of a larger stake to the extent of about Rs. 255,00,00,000/-. They knew that instead of physical delivery of the security BOK had issued its BRs to CANFINA without holding securities. The transactions in all the deals were between CANFINA and BOK. We have already noticed earlier the standing and status of BOK as such. Although it was a scheduled Bank the evidence made available shows its standing capacity and financial status having deposit etc. to the extent of about 78 crores. Still the transactions in securities one after the other notwithstanding the fact that earlier transactions were not cleared the said Dealers went on putting successive deals.
380. Accused No. 2:---As far as Accused No. 2 is concerned he is common player in every field. He has acted as broker on papers but evidence as clearly discussed earlier shows how he was managing curtain from behind. In as much as in three impugned transactions and two sub-transactions, as noticed earlier there are atleast four documents to which Accused No. 2 is a party being author and/or signatory thereof and to which there is absolutely no explanation offered by said accused. In one instance, although he purported to act as a broker, he issued his own Delivery Order. He knew that the Deals were not between CANFINA and BOK, but put through the account of accused-No. 3 and of one such D/O of accused No. 3 he himself is an author. Evidence clearly shows that he is an all-round player, striking shots, withwell calculated and consummate skill, in every part of the filed. He figures as a common broker in all the tainted security transactions being the subject matter of this case, i.e. three impugned transactions, two sub-transactions, in cover up operation, all the transactions except one put through but of funds diverted from the account of accused No. 3 from BOK and what is more direct recipient of the substantial part of the funds. Therefore accused No. 2 being stock broker knew what he was doing and the consequences of its deals. As noticed earlier substantial amount of the transaction on the very days were routed has travelled into own account from BOK.
381. Accused No. 3: ---As far as Accused No. 3 is concerned he has tried to take stand being innocent and being victim of circumstances. However it needs to be stated that he has been in the security market working as stockbroker for last so many years. He himself was operating as broker in his own transactions. He knew how and what were being done to which he was a direct parry. In as much as noticed earlier there are various documents in the form of D/Os, R/Os, Advices to the Bank for issuing P/Os. etc. of him he himself is the author. He knew what he was doing and the consequences thereof.
382. It is true that he has admitted everything before the Court although at such belated stage faced with the evidence that the prosecution has gathered. As a matter of fact, the entire operation could be possible being the subject matter of this case as he readily and willingly allowed the transactions to be routed through his account. It is true that he is an aged person but considering the role which he has played in the entire operation and the consequences thereof the Court cannot consider his prayer for mercy. It is further to be noted that at the relevant time he has also on the Board of Director of BOK. Director of corporate body is like a trustee of its property and has been so held by the Apex Court in the case of R.K. Dalmia & others v. Delhi Administrations, reported in : [1963]1SCR253 .
383. Now coming to Accused Nos. 7 and 8, admittedly they were employees working in the Bank viz. BOK. -They were working in security department and therefore they knew what was the work they were doing and the consequences thereof. It is in the evidence that there was no balance at all of the securities involved in impugned three transactions either in the account of accused No. 3 or with BOK. Yet they issued BRs and Cost Memos and what is more relevant, Pay Orders from CANFINA on the strength thereof. Further on the very day without any instructions from CANFINA, they credited proceeds of all the pay orders into the account of accused No. 3 and passed on the amounts to various sources. This was not permissible at all and accused Nos. 7 and 8 should have known the same. They ought to have realised that-being employees of Bank, they were custodian of public funds.
384. Accused Nos. 9. 10 and 11---Coming to accused Nos. 9, 10 and 11 as stated they were concerned with MCB. The evidence shows and it has been sufficiently and adequately documented, that MGB was a Bank of small standing with hardly capital of Rs. 4 crores and on 16-9-91 when so called cover up operations in security transactions at the behest of Accused No. 11 were put through, there existed no security at all either in the account of Accused No. 11 or with MCB. Still BRs and Cost Memos were issued on the same day i.e. 16-9-91 for the amounts over 400 crores and on the strength thereof received Pay Orders from BOK. There is cogent evidence made available by the prosecution in this respect.
385. Accused Nos. 9. 10 and 11:---Accused Nos. 9 and 10 were the employees of the MCB and they knew what they were doing and the consequences that would ensue of their actions. So is the position as far as accused No. 11 is concerned. He was share and stock broker and has readily and willingly come forth to issue D. O.s etc. on the single day i.e. 16-9-91 for a huge amount of over 400 crores. Accused No. 9 was at the relevant time Vice Chairman of M.C.B. and was like a trustee as per ratio of Apex Court in Dalmia's case (supra).
386. Therefore taking into consideration all these facts, in my view, this is not the case where accused would deserve any leniency. As a matter of fact as indicated by the Apex Court in the case mentioned hereinabove such offences have to be dealt with firm hand.
387. In the circumstances the sentences are being awarded as would be indicated in the operative part of the judgment.
388. Before parting with the judgment, this Court is constrained to make some observations about the conduct of one of the witnesses in this case who happened to be a member of the Bar and has also been appointed as a Notary under the Notaries Act, 1952. Section 8 of the said Act lays down functions of Notaries which includes as per Clause l(e) thereof 'administer oath to, or take affidavit from, any person'. Court is required, with great reluctance 'to make certain observations and recommend some action in the circumstances explained hereinbelow against the said witness.
389. It is noticed that somewhere in May, 1992 Accused No. 2 made an affidavit before the Notary Mr. Niranjan Raosahib Jagtap, examined as P.W. 59 in this case. It is noticed that the said witness was also interrogated by Investigating Agency and his statement under section 161 of Cr.P.C. was also recorded. Although he was cited as one of the witnesses in this case yet he accepted the brief in this case for and on behalf of one of the accused i.e. Accused No. 11. He also has filed his appearance on his behalf and at some stages appeared and represented said accused before this Court. Court hastens to clarify that just as a litigant has a right to choose his Advocate of his choice same principle could be extended to the Advocate. However some sense of discipline and purity requires that when P.W. No. 59 being a Notary, entrusted with important duty in his capacity as Notary and who was very much aware that he was one of the witnesses and recording of his statement under section 161 of Cr.P.C. in this case, chose to accept the brief from one of the accused in this case as stated earlier.
390. The matter does not end there. When he was called as witness by the prosecution, he deviated from his version as reflected in the statement recorded under section 161 of Cr.P.C. The Court again hastens to clarify that it is not the aspect with which this Court is concerned. Ultimately the statement recorded by the police under section 161 of Cr.P.C. has no credential value as such before the Court.
391. What is most disturbing feature and fact that this Court is required to make observation is that his evidence shows that he was appointed as Notary by Maharashtra Government under the Notary Act in the year 1983 and has been continuously acting Notary as such since then. Affidavit in question was made somewhere in May, 1992. His evidence shows and which he has clearly admitted that when accused No. 2-H.P. Dalal declared the said affidavit before him, he did not ensure that accused No. 2 read and under-stood the contents thereof. His evidence suggests and clearly indicates that it was not part of his duty as Notary to ensure that the declarant of the affidavit has to understand the contents of the affidavit as also truthfulness and correctness thereof. It is necessary to note that Notary Act (the relevant provision referred to earlier) talks of 'oath' and 'Affidavit'. P.W. 59 himself being a lawyer, he would understand the efficacy of oath and the affidavits which are to be made before him in his capacity as the Notary. Needless to add that statement contained in such affidavits have to be truthful and accurate and maker of it before he affirms must know that the same are true and correct. This is basic requirement of the statement on 'oath'. Thus it was a basic requirement that P.W. 59 acting as Notary under the statute to ensure that the declarant of the affidavit has understood the contents of the affidavit. However as stated, Jus evidence shows that he did not bother to ensure that accused No. 2-H.P. Dalal while declaring the said affidavit, had understood the contents thereof. On the contrary the evidence of this witness shows that he only mechanically saw to it that accused No. 2 signed before him without knowing the contents thereof. It is to be stated that the said affidavit of accused No. 2-H.P. Dalal could not be received in evidence as proved document.
392. There are provisions in the said Notary Act as also Rules made thereunder which oblige a Notary and makes it imperative that such affidavits be declared in a particular manner. For that matter it is necessary for a Notary to ensure that the declarant of it has understood the contents thereof. As noticed earlier evidence of this witness before this Court same shows that he has not done so. Notwithstanding that since 1983 he has been acting as Notary.
393. The institution of Notary has been brought into picture by the statute to facilitate the needy people to make affidavits to avoid ordeals of going to the Court etc. Such affidavits are made with the specific object of recording something in black and white at particular point of time. Such affidavits are required to be made on oath. It is indeed strange and regrettable that the said Notary P.W. 59 who has been acting Notary as such since 1983 did not know this basic requirement that he was to follow.
394. The Court wishes to add that the said conduct of the Notary is not at all satisfactory and convincing and reflects on his conduct and Court expresses its disapproval for the same.
395. The office of this Court is directed to forward the relevant paragraphs of this judgment to the Chief Secretary, Maharashtra State for necessary action. The office of this Court shall also forward the copy of his testimony as appearing on pages 1326 to 1333 of the Notes of Evidence to the Chief Secretary for his perusal. Court is not suggesting any course of action as such and leaves it to the Chief Secretary and the Government to take appropriate action it may deem fit and proper.
396. As held earlier the sentences passed upon accused are as follows: