1. Of this batch of appeals, the first four have been preferred by A-1, A-8, A-2 and A-3 respectively and the last one by A-5 to A-7. The persons charged and tried in the Lower Court were eight, of whom the 4th accused was acquitted. The rest are the appellants before us. All these appellants were jointly charged for criminal conspiracy under Section 120-B, Indian Penal Code (charge No. I). The 1st accused was further charged under Section 409, Indian Penal Code, for criminal breach of trust in respect of moneys belonging to the Guntur Cooperative Urban Bank and held by him in trust for the said Bank, aggregating to Rs. 25,340 between 15th February, 1929 and 14th February, 1930. He was charged for a similar offence to the extent of Rs. 24,607-4-9 between 15th February, 1930 and 14th February, 1931 (charges Nos. II-A and II-B). The rest of the appellants were charged individually for abetment of criminal breach of trust committed by the 1st accused in respect of various sums under Section 409, Indian Penal Code, read with Section 109 (charges Nos. III-A to III-D and III-F to III-L). All these offences are said to have been committed in pursuance of the aforesaid criminal conspiracy. Charge No. IV was framed against accused 1 and 2 for an offence under S; 471, Indian Penal Code, read with Section 467, for using certain valuable securities (forged documents) as genuine with fraudulent and dishonest motives. The 1st accused was also charged under Section 467, Indian Penal Code, read with Section 109, for having abetted the commission of the offence of forgery in respect of some documents in pursuance of the aforesaid conspiracy; (charge No. V-A). A-2, A-3 and A-5 to A-7 were charged individually with the offence of forgery under Section 467, Indian Penal Code, in respect of certain documents (charges Nos. V-B, V-C and V-E to V-G). Under Section 477, Indian Penal Code, A-5 and A-8 have been charged for having dishonestly and fraudulently attempted to destroy the Bank accounts and valuable securities and committed mischief in respect of the same by removing them from the Bank office building, treating them with sulphuric acid and throwing them into a well on 14th February, 1931 (charges Nos. VI-A and VI-B). A-1 to A-3 were charged for the abetment of this offence. The 1st accused was sentenced to transportation for life, and he and the other appellants were also sentenced to various terms of imprisonment ranging from five years to ten years. All the sentences were made to run concurrently.
2. This case is a unique one, known as the Guntur Co-operative Urban Bank Fraud Case. Both from the gravity of the offences with which the accused were charged and from the point of view that by these offences a public disaster was caused on account of the financial crash suffered by the Bank-, this case was bound to be one of considerable magnitude. It underwent a very elaborate trial which occupied 75 working days in the Sessions Court, and as many as 188 witnesses have been examined on the side of the prosecution, besides 49 witnesses examined as Court witnesses in the exercise of the discretion of the learned Sessions Judge for meeting the ends of justice. A large mass of documents and accounts have been exhibited. Voluminous is the evidence of Mr. R. Padmanabha Naidu, the Deputy Registrar of Co-operative Societies (P. W. 1). The record of his evidence alone has filled 140 printed pages of foolscap size and his evidence may be said to be a survey of the whole of the prosecution case regarding the various items of misappropriation. His evidence contains the history of this Bank and also the rules and bye-laws governing its administration. P. W. 187 is Mr. C. Venkataramanayya, C.I.D, Inspector of Police, He took up the investigation of this case under the orders of the Deputy Inspector-General of Police. Much interest was evinced by both these witnesses in bringing to light the various, offences committed by the accused in a tangled web of complications. The learned Sessions judge has bestowed on this complicated case a commendable degree of care and attention, and his judgment is so full, so analytical and lucid, that we found it to be of great help in understanding the salient features of this case. With a full mastery of the details, he has taken particular care to group them under appropriate headings for the purpose of clarifying the nature of the evidence bearing on the several charges. We have thought it unnecessary to recapitulate all that the learned Sessions Judge has mentioned in his well-considered judgment. Suffice it to give a brief account of the case and to deal with the questions which the learned Counsel have thought fit to argue before us.
3. This Co-operative Bank was started in or about 1920 and the 1st accused has been its Secretary for nearly ten years from December, 1922 till 23rd February, 1931, on which date he resigned his appointment shortly after the bursting of the bubble. He was also the Treasurer and the Chief Executive Officer of the Bank. He is the brother of Patri Seshagiri Rao (P. W. 127) whose son is the 8th accused. These two brothers live in adjoining houses. The 2nd accused is a cousin of the 1st accused being his paternal aunt's son. These three persons are closely related. The 2nd accused was at first clerk in this Bank and then became the Head Clerk holding that post for several years. The 8th accused has also been a clerk for some time in this Bank. The 3rd accused was the night watchman of this Bank from February, 1929 and has been so for about two years. The 5th accused, who is a retired Reserve Constable, was the bill collector of the Bank in April, 1930 and November to January, 1931 and was ostensibly so for some time both before and after the said period. The 6th accused, who was a bill collector of this Bank from April to June, 1929, is the son-in-law of the 3rd accused. The 7th accused is an ex-Reserve Constable. He is said to have been very intimate with the 1st accused. As observed by the learned Sessions Judge, accused 1, 2 and 8 have been in the inner ring of the conspiracy, while accused 3 and 5 to 7 have been connected with the conspiracy at some stage or other and playing the secondary role.
4. This Co-operative Urban Bank was started in September, 1920, with 22 members having 61 shares. When the 1st accused became the Secretary in December, 1922, the number of members was only 50 and the number of loans 37. In the course of 8 years thereafter, the Bank underwent considerable development, its members numbering 2,255 and the outstanding loans numbering 2,141 (vide the final Audit Report, Ex. JJJ). The amount due to the Bank from borrowers as principal is nearly 3 lakhs, whereas the amount clue by the Bank to depositors and to its principal creditor, the Central Bank, was nearly 3 1/4 lakhs. The share capital was a little over half a lakh. The Bank had a reserve fund of nearly Rs. 5,000 and Rs. 2,000 worth of shares in the Central Bank. On 14th February, 1931, the cash balance was less than Rs. 1,000. For some years before that date the affairs of the Bank were not in a satisfactory condition. There were a series of misappropriations which the 1st accused as the Secretary and Treasurer of the Bank, whom the prosecution would style as the arch culprit, was committing in various ways during the course of three or four years before the eventful Sivarathri day (14th February, 1931), when a large bulk of important documents and valuable securities kept in the Bank premises were attempted to be destroyed by being treated with sulphuric acid and thrown in gunny bags into a well at Gorantla two miles from Guntur. It is rather amazing that such a systematic fraud practised by the 1st accused and his accomplices on such a large scale escaped detection at the earlier stages. It is unfortunate that the Board of Directors and some of the Presidents of the Bank who were functioning during the period in question have exhibited such supineness and lack of effective supervision. This is indeed deplorable.
5. The case for the prosecution is, that while the depletion in the resources of the Bank was taking place on account of the series of misappropriations slyly committed by the 1st accused, the financial equilibrium of the Bank became patently unstable and on account of the large overdues there was pressure from several quarters. In January, 1931, the District Bank threatened this Bank with a suit for the recovery of a large sum of money due to it, unless immediate steps were taken to place this Bank' on a sound footing. The Auditor's certificate gave a warning that the overdues were very heavy and the Directors should take speedy steps for their recovery. Pressure also came from the Guntur Taluk Co-operative Union. Similarly, there was remonstrance by the Vice-President of the Guntur District Board in his capacity as Secretary of the Federation. All this was in January, 1931. Insistence on the preparation of the overdues statement from the accounts with full details was unpalatable to the 1st accused. There was also pressure from some of the depositors whose deposits amounted to nearly half a lakh. Confidence in the Bank was at stake, because repayments were not properly made on the due dates in respect of fixed deposits. When matters were thus coming to a climax, the 1st accused according to the case for the prosecution made arrangements for the destruction of the important Bank records and bonds to escape detection. Having made the necessary arrangements, he left Guntur for Hyderabad on the pretext that his wife was ill. On his recommendation, the Friday (13th February) which is usually the Bank holiday was converted into a working day, so that the 15th might be taken as a holiday in substitution of it along with the 14th which was a public holiday for Sivarathri. The case of the prosecution is that on the night of 14th February the records and bonds of the Bank were packed in four gunny bags and taken in a cart and thereafter they were thrown into a well at Gorantla after being treated with sulphuric acid This was not known to anybody, but the discovery of these records in the well was more or less providential on the 17th February on account of the information given by some cow-herd boys. But for the recovery of these records, the dues of the Bank amounting to some lakhs of rupees could not have been collected from the borrowers. ( Vide the report of the Deputy Registrar, dated 16th March, 1931, Ex. RRR-2.) Accused 5 and 8 have been charged directly for this offence, while accused 1 to 3 were charged for the abetment thereof. Curiously enough, on the early morning of 16th February, 1931, Patri Seshagiri Rao (P. W. 127) who is no other than the brother of the 1st accused thought fit to send a report to the Police (Ex. RRR-3), in which he stated that his younger brother's house wherein the Guntur Urban Bank Was located was broken open and ledgers and other books were removed from the office and were strewn in the yard. After mentioning some features indicating the commission of burglary, he stated that the 1st accused had taken his wife to Hyderabad for treatment, and also referred to the receipt of some anonymous letters by the Secretary threatening him for having instituted suits for the realisation of the amounts due to the Bank. He further said that the handle of the safe was kept loose in its place evidently showing that the safe was interfered with. The 2nd accused after making the necessary arrangements for the destruction of the records made himself scarce by going away to Samalkot. On the receipt of such a report, the Sub-Inspector (P. W. 173) went to the Bank office at about 7 a.m. and examined the scene of the alleged offence closely. After a careful enquiry he could not make out how the offenders could enter the Bank office except through the adjoining house, and Seshagiri Rao was unable to suggest how the offenders could have entered the house. It is significant that in the report no mention was made of the loss of records. The Sub-Inspector found to his surprise that almost all the records had disappeared. He thereupon suspected that the records were removed not by any outsider but by those connected with the Bank. He was of opinion that the report suggesting the commission of burglary was false. Investigation was started in due course and a provisional charge sheet was filed on 9th April, 1931. In the course of the investigation, the confession of the 5th accused was recorded by the Magistrate on 15th April, 1931 (Ex. JJJJ-1). This confession led to the discovery of the details of the process employed for the attempted destruction of the records. The names of P. Ws. 81, 83 and 84 were disclosed in the confession and then they were examined by the Police. A second charge sheet was filed on 29th April, 1931, including A-7. A fifth gunny bag was recovered from the well on 30th April, 1931 (vide the V. M.'s report, Ex. KKK-6). On 19th May, 1931, the final charge sheet was filed against all the eight accused. The preliminary enquiry before the Magistrate was begun on 17th June, 1931.
6. In the elaborate enquiry made in this case, the 1st accused came to be charged with a series of misappropriations of 92 items of moneys, 45 of which were between 15th February, 1929 and 14th February, 1930 and 47 between 15th February, 1930 and. 14th February, 1931 (charges Nos. II-A and II-B). These items have been dealt with in ten groups. They show the various methods employed for misappropriating the moneys of the Bank. Group 1 consists of 29 items of fictitious loans. These are treated as loans given by the Bank and debited in the Bank accounts but the moneys lent thereunder were misappropriated by the 1st accused as the so-called borrowers were only fictitious persons. Group 2 consists of seven items of forged bonds by means of which moneys were misappropriated. Group 3 consists of eight blank bonds besides one blank bond included among the forged bonds. Group 4 consists of three items of bonds executed by members. Group 5 consists of six items of bonds of non-members, besides three such bonds included among the blank bonds. Group 6 consists of bonds taken on the pretext that the originals were missing. Group 7 consists of bonds taken on the pretext of adjusting old loans. Group 8 consists of bonds taken to accommodate the 1st accused. These are benami transactions. Group 9 consists of items of re-payments misappropriated and also the misappropriation of the cash balance. Group 10 consists of bonds for which no consideration was paid. In such manifold ways, the 1st accused is said to have managed to misappropriate nearly half a lakh of rupees. After a full consideration of the evidence, the learned Sessions Judge finds with respect to charges II-A and II-B that all the items of misappropriation therein mentioned are proved except to the extent of Rs. 2,539 (vide paragraph 152 of his judgment). The charges of abetment of misappropriation committed by the 1st accused framed against accused, 2, 3 and 5 to 8 are found by the learned Sessions Judge to have been proved. Such misappropriations are shown to have been made by the violation of several of the bye-laws extracted in paragraph 11 of the judgment of the Lower Court. The learned Counsel for the appellants tried to point out some instances of breaches of some rules and bye-laws, even in respect of loans granted to persons of position about which there can hardly be any suspicion of dishonesty on the part of the Secretary. All that we could say is that, in respect of the items of misappropriation with which the accused have been charged, the defence of an accidental omission or mistake by oversight showing an innocent condition of mind seems to be out of question. On the other hand, the violation of rules and bye-laws in so many ways shows a systematic course of conduct adopted by the 1st accused with his accomplices for the perpetration of this huge fraud, and the cumulative effect of all the ways and means adopted, as shown by the nature of the bonds referred to in Groups 1 to 10, is so forceful as to indicate the dishonest intention which is no other than the intention to cause wrongful gain to the 1st accused and wrongful loss to the Bank.
7. Mr. Vepa admits that in so far as the present accused are concerned, the sum and substance of all his arguments about irregularities simply comes to this, that it cannot be said that the 1st accused devised these irregularities for the purpose of effecting his fraud. All these really make little or no difference on the question of his guilt. In most cases of this sort it is the existence of irregularities which give a loophole for committing criminal misappropriation of moneys and we cannot see that it makes any material difference whether the accused devised these irregularities to cover the fraud or merely took advantage of existing irregularities for committing them. Nor has it been shown that the grant of loans of large amounts by the Secretary in anticipation of the sanction of the Board of Directors has ever been a recognised practice. The rule with regard to this matter is given in Bye-law 38, second part, to the effect: 'Loans not exceeding Rs. 100 may in emergent cases be sanctioned by the President on the recommendation of the Secretary.' As pointed out in para. 8 of the judgment, Bye-law 23(a), as it originally stood, made the President the ex-officio Treasurer, while 23(b) made the Secretary responsible for the executive administration of the Society subject to the control of the President; but, by virtue of the resolution Ex. A-12, dated 20th January, 1925, Clause (a) of Bye-law 23 was amended making the Secretary the ex-officio Treasurer and custodian of the properties of the Society. Even so, it does not give him the power of the President within the meaning of Bye-law 38 so as to sanction any loan in anticipation of the sanction of the Board of Directors. Even for the President to sanction it such a loan should not exceed Rs. 100. In fact Rule 38 is clear that the Secretary has got to recommend to the President, so that two people must concur. It is impossible therefore to contend, and it has not been contended, that the disbursement of these large loans by the 1st accused as Treasurer in anticipation of sanction of the Directors was an irregularity authorised either by the bye-laws or by the practice of the Bank.
8. We must at the same time express our opinion that, whether it be within the letter of the law or not, that a person having no shares in the Bank should be able to apply for a loan making his share part of the loan itself and that two other persons similarly situated should be regarded as share members of the Bank capable of standing as sureties to third persons for their loans. When the rules of the Society clearly contemplate that any applicant for a loan has first to be recognised as a member by the Board of Directors, that on recognition as such member his loan has further to be sanctioned guaranteed by two members, to allow persons not members to borrow up to the maximum amount making their shares part of their loans and to permit others in just the same position to stand surety for them, is to, set at nought the whole idea on which these Cooperative Banks are founded, to deprive the depositor of his security and to leave him without any real security whatsoever with his money in a Bank which need have no paid-up capital. If such a practice is really frequent in any Co-operative Bank we consider that bye-laws should be framed to prevent it. However, that is not any part of the fraud with which the accused in this case are charged, and we merely make these remarks in passing on the facts which have been brought to our notice in this case.
9. We may now consider certain objections raised by the learned Counsel for the appellants with respect to the first charge, which, if sound and tenable, would affect the jurisdiction of the Court to take cognizance of the offence of criminal conspiracy punishable under Section 120-B, Indian Penal Code. Charge No. 1 runs as follows:
That between 155-2--1929 and 14--2--1931 both days inclusive at Guntur, you the accused 1 to 8 were parties to a criminal conspiracy, the object of which was to commit criminal breach of trust in respect of moneys belonging to the Guntur Co-operative Urban Bank and held by the 1st accused as Secretary and Agent of the said Bank in trust for the said Bank, which is an offence punishable under Section 409, Indian Penal Code, with transportation for life, and to do any act which may serve to conceal the said offence and prevent its detection and have thereby committed an offence punishable under Section 120-B, Indian Penal Code.
10. The offence of criminal conspiracy was made a substantive offence by the introduction of Section 120-A in the Indian Penal Code by the Criminal Law Amendment Act (VIII of 1913). Before that amendment, conspiracy was treated only as one of the means for the abetment of a crime and it was made punishable as a substantive offence only in the case of an offence falling under Section 121 (waging war against the Queen). As to the taking cognizance of the offence of criminal conspiracy punishable under Section 120-B, a restriction is placed by Section 196-A, Criminal Procedure Code. In a case where the object of the conspiracy is to commit any non-cognizable offence, or a cognizable offence not punishable with death, transportation or rigorous imprisonment for a term of two years or upwards, no Court can take cognizance of that offence without the sanction of the Local Government, or a Chief Presidency Magistrate or District Magistrate empowered in this behalf by the Local Government. In the present case, the question for consideration is whether charge No. 1 has specified as the object of the conspiracy any non-cognizable offences. We find that the dominant motive or object of the criminal conspiracy is the commission of criminal breach of trust in respect of moneys belonging to the Bank which is also expressly mentioned as an office punishable under Section 409, Indian Penal Code. This is certainly a cognizable offence, and if the commission of this offence is stated to be the real object of the conspiracy no sanction is necessary under Section 196-A, Sub-clause (2) of the Criminal Procedure Code. But Mr. Vepa, the learned Counsel for the appellants, would lay stress on the latter part of this charge and argue that it indicates as the object of the conspiracy the commission of the offences of forgery and destruction of records with which the accused have also been charged under separate heads. The offences falling under Sections 467 and 477 are no doubt non-cognizable offences. According to his contention, the charge must be understood as expressing the commission of these three kinds of offences as the, objects of the conspiracy. If this contention is correct, i.e., if the commission of these three specific offences is meant to be stated as the object of the conspiracy, nothing would be easier than to mention all of them with the appropriate sections of the Penal Code in the charge. But we find specific mention of the offence of criminal breach of trust under Section 409, Indian Penal Code, as the object of the conspiracy without any mention of any other specific offences. Sections 467 and 477 are nowhere mentioned in this charge. The wording in the latter part of the charge is very general, inasmuch as it simply states that the object of the conspiracy was to do any subsidiary act which may enable them to conceal the offence of criminal breach of trust and thus prevent its detection. Unless the particular kind of act resorted to for the concealment of the offence is specified, we cannot say whether such an act would be a non-cognizable offence. Many and various could be the means for that purpose. That purpose could be achieved by doing an act which may not amount to an offence known to the Indian Penal Law. Any of such acts may also amount to a cognizable offence. If such acts be the object of the conspiracy no sanction is necessary. Unless it can be predicated that the latter part of the charge necessarily and expressly refers to the commission of non-cognizable offences, the restriction imposed by Section 196-A cannot be invoked for the aid of the defence in this case. At the time of the criminal conspiracy for the object of committing criminal misappropriations of the Bank's money, the conspirators could not have designed the particular act or acts which may become necessary in the course of time for the concealment of that offence. As it has now turned out that for such a purpose they have committed the offences of forgery and attempted destruction of records, it does not follow that these specific offences were within the contemplation of the conspirators when they entered into the conspiracy for committing criminal breach of trust. The charge simply indicates that their subsidiary object was also to employ all the necessary machinery for the concealment of the offence of criminal breach of trust which is the dominant motive for the conspiracy. We are not therefore justified in importing into charge No. 1 the commission of the specific offences under Sections 467 and 477 as the object of the criminal conspiracy. This would be a very narrow and strained interpretation of the latter part of the charged The learned Sessions Judge has rightly remarked in paragraph 3 of his judgment, that the prosecution does not suggest that the specific mode of preventing detection was in contemplation at the outset, but only that the prevention of detection was also one of the original objects of the conspiracy. The mere fact that additional charges were framed under Sections 467 and 477, as the general object had taken such a specific turn later on, does not warrant the contention now put forward by the appellants. We are therefore clearly of opinion that both in the spirit and letter of charge No. 1, there is nothing to necessitate the sanction required by Section 196-A of the Criminal Procedure Code. There is therefore no legal bar to the cognizance of this case by the Court. We were referred by the learned Advocate-General to a decision in Bishambharnath Tondon v. Emperor (1925) 90 I.C. 706 (Oudh Judicial Commissioner's Court) in which there are observations pertinent to the present case. In that case, the object of the conspiracy was mainly cheating. It is stated that when the main object of the conspiracy is to cheat, even if the charge says that the cheating was to be carried out by means of forgery, the charge should be deemed to be one of conspiracy for the purpose of cheating, whatever means may have been employed to effect that cheating. If cheating is carried out by means of forgery, it does not follow that the provisions of Section 196-A would apply. (Vide p. 711.) In the present case, the charge does not even specify that the offence of criminal breach of trust was to be carried out and its detection prevented by means of specific offences.
11. It is also argued that there is a misjoinder of charges, offending against the provisions of the Criminal Procedure Code. Section 233 is overridden by Sections 234, 235, 236 and 239. In view of the comprehensive nature of the first charge relating to criminal conspiracy, the subsequent series of acts of misappropriation forming the subject of separate charges are so connected together as to form the same transaction within the meaning of Section 235. The real test is whether they are so related to one another in point of purpose or as cause and effect as to constitute one continuous action. The main object of the conspiracy having been stated in the first charge, all the subsequent acts are only done in pursuance of that conspiracy which is the main link which connects all these acts and makes them part of one transaction. The facts of this case have a close resemblance to the facts of the case repotted in Abdul Salim v. Emperor I.L.R. (1921) Cal. 573. It has been held that a* charge of criminal conspiracy under Section 120-B for the purpose of committing the offence of cheating (Section 420, Indian Penal Code) between certain dates may be legally joined with individual charges of every distinct offence committed in pursuance of the conspiracy by different members of it on different intermediate dates. This view has the support of earlier decisions reported in Amrita Lal Hasra v. Emperor I.L.R. (1915) Cal. 957 and Harsha Nath Chatterjee v. Emperor I.L.R. (1914) Cal. 1153. The offence of conspiracy and the offences committed in pursuance of it could be jointly tried, as they must be deemed to form one and the same transaction. There is, in our opinion, no substance in the objection raised on the ground of misjoinder. It is, however, contended that on account of the numerous charges there was embarrassment to the accused in defending themselves. The learned Sessions Judge was fully alive to this contention, but thought that he was exercising his discretion rightly in framing the charges for the several items of misappropriation etc. in the manner he did. Having regard to all the facilities given to the accused for meeting these charges, we are not disposed to think that there was any real embarrassment or hardship to them by the manner of the trial. The legal objections raised on behalf of the appellants are not, in our opinion, sound, and they must therefore be overruled.
12. [Their Lordships then discussed the evidence and concluded as follows:--]
In the result, we confirm the convictions under all the sections of the 1st accused. As regards the sentences, we see no adequate grounds for reducing them, so far as the charge of conspiracy under Section 120-B read with Section 409 (which is the chief charge) is concerned, the alternative to transportation is 10 years' rigorous imprisonment, which we consider to be insufficient. We accordingly confirm the sentences.
13. As regards accused 2, we confirm the convictions, but taking into consideration he was largely a tool of accused 1, we reduce the sentences under Sections 120-B and 409 and 477 read with Section 109 to 7 years' rigorous imprisonment. The other sentences are confirmed. v
14. The convictions and sentences of accused 3 under Section 477 read with Section 109 are set aside. We confirm the other convictions, but reduce the sentence under Sections 120-B and 409 read with Section 109 to 5 years' rigorous imprisonment. The other sentences will stand.
15. We confirm the convictions and sentences of the 5th accused and the 6th accused.
16. As regards the 7th accused, we confirm the conviction, but reduce the sentence under Sections 120-B and 409 read with Section 109 to 7 years' rigorous imprisonment. The other sentences, will stand.
17. In respect of the 8th accused, we confirm the convictions. We note that the sentence of 10 years under Section 477 is in excess of what is prescribed in that section as the alternative for transportation. We reduce the sentence under this section, and under Section 120-B to 6 years' rigorous imprisonment. The other sentence will stand. The sentences to run concurrently in the case of all the accused.