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IN

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 5 OF 2010

N. Raghavender … Appellant

VERSUS

State of Andhra Pradesh, CBI … Respondent

JUDGMENT

Surya Kant, J.

Appellant is aggrieved by the judgment dated 18th June, 2009

passed by Andhra Pradesh High Court, dismissing his criminal appeal

against the judgment and order dated 28th March, 2002 of the Special

Judge, CBI Cases, Hyderabad whereby he was held guilty of the offences

under Sections 409, 420, and 477A of the Indian Penal Code (for short,

“IPC”) and Section 13(2) read with Section 13(1)(d) of the Prevention of

Corruption Act, 1988 (for short, “PC Act”) and sentenced to a total of five

years of rigorous imprisonment with various fines for each offence.

Accused Nos. 2 and 3 who were also tried along with the appellant, were,
Signature Not Verified

however, acquitted of all the charges.

Digitally signed by
Vishal Anand
Date: 2021.12.13
17:51:13 IST
Reason:

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FACTS:

2. The brief facts germane to the appeal are as follows:

The Appellant- N. Raghavender worked as a Branch Manager in

Sri Rama Grameena Bank, Nizamabad Branch from May, 1990 to

September, 1995. A. Sandhya Rani, Accused No. 2 worked as a Clerk-

cum-Cashier in the same Bank from 1991-1996 and she also attended

day-to-day transactions in current and savings accounts relating to

preparation of credit and debit vouchers. C. Vinay Kumar, Accused No.

3 was the Treasurer of the Nishita Educational Academy (for short, “the

Academy”) and is the brother-in-law of Appellant (Accused no. 1).

Accused No. 3 opened Current Account No. 282 in the afore-said Bank

in his capacity as an authorized signatory of the Academy. The account

was opened with an initial deposit of Rs. 5,00,000/-. The prosecution

case is that the Appellant and Accused No. 2 abused their respective

position in the Bank and conspired with Accused no. 3 by allowing

withdrawal of amounts up to Rs. 10,00,000/- from the account of the

Academy, notwithstanding the fact that the account did not have the

requisite funds for such withdrawal.

3. The alleged modus operandi of the accused persons was that the

Appellant, in his capacity as a Branch Manager, issued loose-leaf

cheques on 23.04.1994 and thereafter, for a sum of Rs. 2,50,000/-, and

despite withdrawal of the said amount, the debit was deliberately not

entered into the ledger book. After that, another such transaction took

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place on 30.06.1994 for a sum of Rs. 4,00,000/-, and once again, the

debit was not entered into the ledger sheet of the Bank. This was

followed by the Appellant issuing another cheque on 30.07.1994, of a

closed account for withdrawal of Rs. 3,50,000/-. The endorsement on

the third cheque issued by the Appellant showed the payment in favour

of Accused No.3; however, the signature on the cheque did not tally with

that of Accused No.3. The Appellant was further accused of pre-

maturely closing two FDRs on 24.02.1995 and 25.02.1995, which were

for a sum of Rs. 10,00,000/- and 4,00,000/- respectively, and stood in

the name of one B. Satyajit Reddy. As per the vouchers issued by the

Bank, a total of Rs. 14,00,000/- were credited to account No. 282 but

only Rs. 4,00,000/- were shown in the ledger. The remaining Rs.

10,00,000/- were allegedly adjusted towards the secret withdrawal from

account No. 282 during the year 1994. It is the prosecution’s case that

the Appellant, Accused No.2 and Accused No.3, worked in tandem to

engineer these transactions, which resulted in a wrongful loss to the

Bank and its Depositors.

4. Eventually, the Auditor (PW-2) began to notice the irregularities.

The Appellant was thereafter shifted from the above-stated Branch to

the Head Office, and an internal inquiry was ordered. The said inquiry

prompted the Chairman of the Bank (PW-1) to make a written complaint

dated 27.11.1995 (Ex P1) to the Superintendent of Police, Central

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Bureau of Investigation at Hyderabad (for short, “CBI”), the relevant

extracts whereof being highly relevant, reads as under:

“Our Grameena Bank is established in February 1985 under the

Regional Rural Bank Act of Parliament, and sponsored by State
Bank of Hyderabad. The Bank is a scheduled bank and its area
of operation is restricted to the district of Nizamabad with its
headquarters at Nizamabad town. We have, as of now, 26
branches operating in the district. The branch at Nizamabad is
one of the 26 branches.
2. The branch during the period 1990 to 1995 was headed by one
Shri N. Raghavender as the Branch Manager.
3. During the course of audit of the branch certain transactions of
seriously irregular in nature, put through by the Branch Manager
with the connivance and co-operation of certain members of staff
and customers have come to surface. Some of the transactions
are considered to be very serious and were put through by the
Branch Manager, bypassing the laid down instructions and
norms for conducting such transactions, with an intent to pass on
undue monitory benefit to certain customers who are his near
relatives including his wife. The transactions of the above nature
are large in number. However, one such transaction is detailed
hereunder for your considering an investigation.

UNAUTHORISED ENCASHMENT OF TERM DEPOSITS NO.

0257120 AND 0257121 FOR RS.10.00 LACS AND RS.400 LACS
RESPECTIVELY.

The laid down procedure for such transactions warrant that if

and when the depositor desires premature withdrawal he should
present to the branch, the term deposit in question duly
discharged along with written request for premature withdrawal
of deposits. Thereupon, the Branch Manager, after duly verifying
the genuineness of the signature of the depositor and the deposit
receipts may permit premature payment. In respect of fixed
deposits where interest is paid periodically will be worked out
and adjusted from the interest payable on such deposits and net
amount of interest payable and the principle will be released to
the depositor. As per the Income Tax rules any such amount
exceeding Rs.20,000/- is to be paid either by crediting to the
depositor’s account with the branch or paid by way of Banker’s
Cheque in the name of depositor “crossed account payee”.

xxx xxx xxx

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Unauthorised payment of deposit came to light on 12.9.1995

when the depositor called on the branch for drawing interest.
From the scrutiny of records it is found that even though the
deposits are terminated in February 1995, periodical interest
continued to be credited to the depositor’s Savings Bank A/c
No.5520 by remitting cash and also transfer from the joint
account of Branch Manager and his wife bearing SB A/c
No.5555, apparently to make the depositor believe that the
deposit is intact.
After unearthing of these transactions Shri Raghavender, who
was relieved of the branch charge, managed with the depositor
and produced predated letter and relative deposit receipts with
the apparent intent to regularize the transaction. The relative
term deposit receipts are clean and without any endorsements or
stamps on the face of the receipts. Thereby even though the Bank
did not incur any minority loss under this transaction, the Branch
Manager misusing his official position and passing on benefit to
the tune of Rs.14.00 lacs to the firms having substantial interest
of his near relatives is considered an act calling for investigation.
Further investigation into the transactions at the branch is in
progress and report when received will indicate further the
fraudulent transactions if any put through by the then Branch
Manager Shri N. Raghavender.
The Branch Manager wields considerable influence with local
leaders, officials and other VIPs. The departmental enquiry by
the Bank may not be very effective in safeguarding the interests
of the Bank in its totality, since investigation into the transactions
warrants contacting various outside parties to whom access of
the Bank is not likely to be possible.
xxx xxx xxx”

5. CBI registered case No. RC7(A)/96-CBI/Hyderabad under

Sections 409, 477(A), and 120B IPC, and Section 13(2) read with 13(1)(c)

& (d) of the PC Act. Investigation was held; charge-sheet was filed and

the learned Special Judge, CBI, framed the following charges against the

Appellant and his co-accused:

“CHARGE NO.1:
That, all of you i.e., A.1 to A.3 during the years 1994-95, while
A.1 and A.2 were under employment of M/s. Sri Rama Grameena

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Bank, Nizamabad, and A3 as Treasurer, Nishita Educational

Academy, agreed to do or caused to be done an illegal act to wit
to cheat Sri Rama Grameena Bank, Nizamabad in the matter of
allowing withdrawals of amounts to the tune of Rs.10.00 lakhs
in current A/c No.282 of Nishita Educational Academy,
Nizamabad without having sufficient funds, in pursuance of the
agreement and thereby committed an offence punishable U/Sec.
120-B I.P.C. and within my cognizance.

CHARGE NO.2:
That all of you i.e., A.1 to A.3 as stated above, cheated by
dishonestly and fraudulently inducing the said bank to deliver
Rs.10 lakhs to you and which was the property of the said Bank
and that you thereby committed an offence punishable
U/Sec.420 IPC and within my cognizance.

CHARGE NO.3:
That all of you as stated above (Charge No.1) and being in such
capacity entrusted with certain property committed criminal
breach of trust in respect of that property, and thereby you
committed an offence punishable U/Sec.409 IPC and within my
cognizance.

CHARGE NO.4:
That all of you during the same course of transaction as stated in
Charge No.1 being in such capacity wilfully and with intent to
defraud, fabricated certain papers, writings and accounts of
Srirama Grameena Bank, Nizamabad and Nishitha Educational
Academy, and you thereby committed an offence punishable
U/Sec.477-A IPC and within my cognizance.

CHARGE NO.5:
That A.1 and A.2 of you being public servants employed as
formerly Manager, Sri Rama Grameena Bank, Nizamabad (A.1)
and formerly Clerk-cum-Cashier, Sri Rama Grameena Bank,
Nizamabad (A2) respectively during the year 1994-95 by corrupt
or illegal means or by otherwise obtained for yourself a pecuniary
advantage of Rs.10 lakhs from Sri Rama Grameena Bank,
Nizamabad and thereby committed an offence punishable
U/Sec.13(2) r/w 13(1)(c) & (d) of P.C. Act, 1988 and within my
cognizance.”

6. In the aftermath trial, a total of eleven witnesses, PW-1 to PW-11,

were examined by the Prosecution and documentary evidence

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comprising Exhibits P-1 to P-68 were also put forth. The Accused on

their part, were examined under Section 313 of Code of Criminal

Procedure (in short, ‘Cr.P.C’), but no other defence witness was brought

forward. The Accused did produce documentary evidence Exhibits D-1

to D-6 in their defense.

7. To substantiate the charges against the present Appellant, the

case of the prosecution rested heavily upon circumstantial and

documentary evidence. Bhaskar Reddy (PW-1), Chairman of the Bank,

deposed that in November, 1994, Badam Swamy (PW-2) conducted an

audit of the Nizamabad Branch and some irregularities were found to

have been committed by the Branch Manager N. Raghavender.

Thereafter, he ordered a detailed audit. During the course of the audit,

PW-1 called upon the Appellant and questioned him about the said

irregularities. PW-1 further deposed that when he asked the Appellant

as to how he had allowed the premature closing of the two FDRs

bypassing the prescribed procedure, the Appellant produced two letters

(marked as Ex P6 & Ex P7), purportedly written by B. Satyajit Reddy to

the Bank Manager. Vide the aforesaid letters, B. Satyajit Reddy had

authorized premature withdrawal of FDRs with a request to the Bank

Manager to transfer the amounts into the account of Nishita

Educational Academy. PW-1 stated that the standard procedure for

prematurely closing an FDR required the FDR holder/depositor to

present the receipt of the FDR along with a written request seeking

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premature payment. He explained that in the present case, the FDRs

remained with the depositor and no specific request was received. He

further explained that the alleged premature payment was permitted by

the Branch Manager by using general debit vouchers instead of term

deposit receipts. PW-1 in his cross-examination, while admitting that he

never received any complaint from Mr. Reddy regarding the premature

closure, disputed the genuineness of Ex P6 & P7. So far as the allegation

regarding the unlawful withdrawal of Rs. 10 Lakhs from account No.

282 is concerned, PW-1 deposed, “The account holder is required to

utilize the cheques issued to him only. In cases of certain

contingencies he may request the Branch in writing to issue a

loose cheque leaf for operating the account. Such a request in

writing is to be approved by the Branch Manager when he may

issue a loose leaf making appropriate endorsement on the cheque

form itself and on application”. PW-1 additionally clarified that,

“There is no prohibition for re-using cheque books of loan A/cs if

they are sufficient in number to be used as loose leaves provided

they are recorded as such in the cheque book issue register.” Lastly,

PW-1 acknowledged that during the period the Appellant was the

Branch Manager, the business of the Bank had grown and the Bank

was recategorized from Scale-I to Scale-II.

8. The deposition of Badam Swamy (PW-2), Auditor, is crucial to the

Prosecution’s case. He deposed that under instructions of PW-1, he had

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conducted a special audit of the Nizamabad branch in the year 1995.

PW-2 in his deposition explained that he scrutinized two sets of

transactions, the first being the premature closing of the two FDRs in

the name of B. Satyajit Reddy, and the second being the transactions

relating to withdrawal of Rs. 10 Lakh from account No. 282. So far as

the first set of transaction is concerned, PW-2 deposed that B. Satyajit

Reddy had purchased two FDRs for 4 Lakhs (Ex P4) and Rs. 10 lakhs

(Ex P5) respectively, and in addition to these, Mr. Reddy had also opened

S.B. Account No. 5520 (marked as Ex P11). The FDRs, Ex. P4 and Ex.

P5, were purchased in January, 1995 for a period of 12 months. PW-2

explained that in the present transaction, the Branch, as per the

instructions of the party/depositor, had to credit a monthly interest in

S.B. Account No. 5520. PW-2 alleged that the Appellant, without the

knowledge of the party and without any authorization, withdrew the

FDR amounts from the Bank by raising two debit vouchers (marked Ex

P29 and Ex P30). These vouchers were prepared by Accused No.2 and

were passed by the Appellant. The withdrawn amount was thereafter

credited to a third-party account, i.e., account no. 282 of the Nishitha

Educational Academy. PW-2 alleged that there was nothing in the

records to show that either Mr. Reddy had surrendered the FDRs or that

he had moved any application for payment of the FDRs. PW-2 further

deposed that even after the FDRs were withdrawn, the monthly interest

of Rs. 11,570/- payable to Mr. Reddy continued to be credited into his

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S.B. Account No. 5520. It was alleged that in order to transfer Rs.

11,570/-, debit vouchers bearing S.B. Account No. 5555 were raised.

The said S.B. Account No. 5555 stood in the name of the Appellant and

his wife.

9. With respect to the second set of transactions, PW-2 deposed that

in the year 1994, an amount of Rs. 10,00,000/- was ‘fraudulently’

withdrawn from account No. 282 by passing three cheques (Ex P25, Ex

P26 & Ex P27) which were signed by Accused No.3. However, neither did

the signature on the three cheques tally with that of Accused No.3 nor

were these transactions reflected in the concerned ledger sheet (Ex P23).

PW-2 alleged that the ledger sheet- Ex P23 was intentionally ill-

maintained to suppress these transactions. PW-2 further alleged that

while there was balance in account no. 282 when Ex P25 was presented,

there were insufficient funds when the other two cheques were passed.

Thus, according to PW-2, the Appellant had allowed withdrawal of Rs.

10,00,000/- from account No. 282, even though there were insufficient

funds in the said account. It was also pointed out that the Appellant had

also permitted overdrawing of another Rs. 4 lakhs from account No. 282.

PW-2 alleged that in order to cover up these withdrawals and to adjust

the amounts, the Appellant withdrew the amount of Rs. 14 Lakhs

pertaining to the FDRs of B. Satyajit Reddy.

10. During his cross-examination, PW-2 deposed that he had never

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personally enquired from B. Satyajit Reddy about the premature closure

of his FDRs, instead, he claimed that PW-1 had spoken to Mr. Reddy.

PW-2 further admitted that despite knowing that the signature on the

three cheques did not match with that of Accused No.3, he never

enquired about the transactions from Accused No.3 directly. PW-2 shed

light on the fact that beyond the account ledger sheet (Ex P23), the Bank

also maintained three other ledgers, i.e., the Officer’s Cash Scroll,

Transit Voucher Register and the Cashier Payment Register. PW-2

deposed that he had examined these three ledgers, but these were not

filed before the Court. PW-2, however, admitted that the three cheques

in question were reflected in the Officer’s Cash Scroll. He further

admitted that entries relating to cheques Ex P25 and Ex P26 were duly

mentioned in the Bank Payment Register maintained for the period from

23.04.1994 to 21.07.1994.

11. The Manager of the Bank, Mr. D. Ram Mohan Rao, appeared as

PW-3. While he mainly deposed about the various standard operating

procedures at the Bank, it is relevant to note that he too testified about

the uncommon but acceptable practice of issuing loose cheque leaves

upon the request of a customer. He further deposed that “Sometimes

the important customers sit in the cabin of the manager and their

cheques are sent to the counter for encashment, and at times cash

is delivered to the customer in the manager cabin.”

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12. B. Chandrasekhar (PW-4), Cashier, deposed that Accused No.3

was an important customer of the Bank. He stated that the three

cheques in question were taken by the Appellant personally and handed

over to Accused No. 3, and then the Appellant had passed those

cheques. He further stated that the amounts relating to the cheques, Ex

P25 to P27 were handed over by him to the appellant, and then the

appellant handed it over to Accused No.3. He too deposed that entries

relating to Ex P26 and Ex P27 were not found in the concerned ledger

sheet- Ex P23. In his cross-examination, he stated, “It is true that Ex

P25 contains the signature of N. Lalitha on its reverse side. The

signature of the person who receive the amount will be obtained

on the reverse of cheque in token of receipt of the said amount.

The signature on the reverse of Ex P-26 is not that of A1. It is also

true that the signature of A1 is also not there on the reverse of Ex.

P27”.

13. The evidence of Mallikarjun Sanne, PW-5, is of no consequence as

he was not personally aware of any of the facts relating to the case. Next

comes the deposition of B. Ganagaram (PW-6), who worked as an

Accountant at the Nizamabad Branch. He testified that loose cheque

leaves could be issued by the Bank, provided that the record of the same

was maintained. He went on to depose that, “It is true that there was

sufficient amount in a/c No. 282 to meet the cheque amount of Rs.

2.50 Lakhs. There was a balance of Rs. 4,78,480/- was the balance

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in the A/c of 282 as on 30.06.1994 and I have authenticated the

said balance on the same day. It is true that there was sufficient

amount to meet the cheque of Rs. 4 lakhs on 30.06.1994. The

balance amount available in the said A/c No. 282 on 28.07.1994

was Rs. 12,12,830/-. It is true that an entry with pencil was made

between the lines debiting a sum of Rs. 3.50 Lakhs to A/c No. 282.

The said entry is now marked as Ex D3” (sic). He lastly stated, “There

is a possibility of missing certain entries in posting the same in

the ledger entry due to rush of work. But they will be rectified at

the time of balancing the amount. See Ex P8, it is balancing

register. It was maintained by A2.”

14. J. Madhusudhan (PW-7), Second Officer of the Nizamabad Branch,

deposed that B. Satyajit Reddy had approached him in the first week of

September 1995 with a request to credit the interest accrued in the two

FDRs into his S.B. A/c 5520. He stated that when he inspected the FDR

register, he found that the two FDRs had been prematurely closed. He

then brought this to the notice of Mr. G. Nagesh Reddy, the then

Manager. He testified that the Appellant had signed the entries relating

to those closures as is evident from the Term Deposit Register (Ex P9).

He further stated that he had not seen any letters written by B. Satyajit

Reddy for closing of the FDRs or for transferring the said amount to

account no. 282. He, however, could not testify as to at whose instance

the two FDRs were prematurely closed. G. Nagesh Reddy (PW-8), was

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appointed the Branch Manager after the Appellant was shifted to the

Head Office. PW-8 also deposed that he did not find any letter by B.

Satyajit Reddy requesting the Branch to transfer the amounts from his

FDR into account No. 282. PW-8 further stated that, “Our bank has

not suffered any loss due to the transaction involved in the present

case”. B. Satyanarayana, PW-9, was a formal witness who accorded the

sanction for prosecution of the Appellant and Accused No. 2.

15. Amar Singh (PW-10), was the handwriting expert who examined

the various cheques, vouchers and other relevant documents in the

present case. According to PW-10, the questioned signatures were freely

written in normal hand. He stated that one of the signatures on Ex P27

matched the specimen signature of the Appellant, but the purported

signatures of Accused No.3 on the three cheques did not tally with his

specimen signature. He further opined that the disputed signatures on

the two letters (Ex P6 and Ex P7) were tallying with the specimen

signatures of B. Satyajit Reddy. S. Vadyanathan (PW-11), is the

Investigating Officer in the present case. PW-11 collected various

documents from the Bank and Nishita Educational Academy. He also

collected the sanction order from PW-9 for prosecution of the Appellant

and Accused No.2. We may also note that PW-11 stated that the

specimen signature of the Appellant was not taken before any Judicial

Authority though it was obtained before independent witnesses.

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16. The Appellant, in his statement recorded under Section 313

Cr.P.C., denied the prosecution case. When confronted with the

allegations levelled by PW-1 regarding the unauthorized premature

closure of the two FDRs, the Appellant stated that he had done so, “With

the request in writing, of depositor only premature payment was

permitted. As depositor requested that he had misplaced FDRs

and could not trace them out. As he is V.I.P. customer, I obliged.”

The Appellant (Accused No.1) categorically denied the allegation that

premature withdrawal had been done without the consent or knowledge

of B. Satyajit Reddy. He further stated that it was on the request of B.

Satyajit Reddy that Rs. 4 Lakhs were transferred to the account of the

Academy, i.e., account No. 282. When asked about the withdrawal of

Rs. 10,00,000/- from account No. 282 in the year 1994, he disputed the

version put forth by the prosecution, and stated, “As there was

balance, I passed the cheque and paid the amount to A3.” Lastly,

the Appellant claimed that he had been falsely implicated due to the

rivalries between the two Bank Unions.

17. We may, at the outset, clarify that the learned Special Judge in

paragraph 50 of his judgment dated 28.03.2020 has unequivocally

acquitted all the accused of offences under Section 120B IPC and under

Section 13(2) read with Section 13(1)(c) of the PC Act. Accused No.2 and

Accused No. 3 were further acquitted of all the other charges as well.

The Appellant, however, was held guilty of offences punishable under

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Sections 420, 409 and 477A IPC as also under Section 13(2) read with

Section 13(1)(d) of the PC Act. It is useful to reproduce paragraph 50 of

the judgment of the Special Judge which reads as follows:

“50. The same thing can also be stated about A.3. Though A.3
credited amount to A/c No. 342 of Nishita Builders instead of A/c
No. 282 of Nishita Educational Academy but it has by no way
resulted in having benefit to A.3 either directly or indirectly. It is
A.1 who has deposited interest in his account though the F.D.Rs.
were prematuredly encashed that too without proper authority of
Satyajit Reddy. As started earlier Satyajit Reddy has not given
evidence in favour of A.1 as he was not aware about premature
payment of F.D.Rs. by A.1.

There are no specific overact of A.3 to say that he conspired

with A.1 to cheat the bank or caused wrongful loss to bank and
corresponding wrongful gain to himself. A.3 has acted in normal
course of his duties. No intention can be attributed to A.3. on the
basis of available evidence it also does not suggest that A.3 has
done any specific crime....” (sic)

18. As for the Appellant, the Trial Court held that the prosecution had

adequately proved its case against him. Despite taking note of some of

the discrepancies in the prosecution case, and the ineffective cross-

examination concerning the allegations of passing of the three cheques

(Ex. P25 to P27) and the illegal withdrawal of Rs. 10 lakhs from account

No. 282, the Court opined that, “However, the subject matter of

enquiry is the premature withdrawal of the two FDRs in February

1995 without any authority or with knowledge to FDR holder…”

(sic).

19. With respect to the premature encashment of the two FDRs which

stood in the name of B. Satyajit Reddy, the Trial Court was not

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convinced with the explanation of the Appellant. The two letters (Ex P6

and Ex P7) given by the Appellant to PW-1 were disbelieved and instead,

the Court laid emphasis on the fact that despite premature closure of

the two FDRs, the Appellant continued to deposit the monthly interest

in the account of B. Satyajit Reddy. The Court also noted that the

subsequent interest payments were not made by the Bank, but the

amount was instead transferred from account No. 5555, which stood in

the name of the Appellant and his wife. Since no explanation was given

in regard to these interest payments made to B. Satyajit Reddy, the

Court drew an adverse inference, and propounded that the interests

were credited to create the illusion that the FDRs were still alive. The

Court, therefore, summarily concluded that these circumstances clearly

revealed that the Appellant had, without any authorization or consent,

encashed the two FDRs. Thus, the Trial Court found the Appellant

guilty, and consequently convicted and sentenced him to five years

imprisonment along with various fines.

20. The Appellant challenged his conviction and sentence before the

High Court of Judicature, Andhra Pradesh at Hyderabad. Much like the

Trial Court, the High Court did not accord any weight to the allegations

or the defence raised by the Appellant pertaining to the withdrawal of

Rs. 10 lakhs from account No. 282. Upon appraising itself of the

evidence on record, the learned Single Judge noted that no financial loss

was caused to the Bank. The High Court, however, held that a loss had

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been incurred by B. Satyajit Reddy, because without his consent and

knowledge, his deposits in the two FDRs were transferred to another

account. Whilst observing that B. Satyajit Reddy was the best person to

testify about the pre-mature withdrawal of the FDRs, the Court opined

that in the light of the overall circumstances of the case, the non-

examination of B. Satyajit Reddy could not lead to an adverse inference

against the prosecution’s case. Thus, the High Court held that the

Appellant had misused his official position as the Bank Manager to

prematurely encash the two FDRs, and thereafter transfer the amount

into the account of the Academy. The High Court also held that in order

to extend an undue advantage to his brother-in-law, i.e., Accused No.3,

the Appellant had intentionally indulged in the falsification of records

pertaining to the three cheques passed by him in the year 1994.

Accordingly, the High Court concurred with the findings of the Trial

Court and dismissed the appeal preferred by the Appellant.

21. The aggrieved appellant is now before this Court.

CONTENTIONS:

22. Shri Sidharth Luthra, learned Senior Counsel on behalf of the

Appellant vehemently argued that the prosecution case is based upon

surmises and conjectures, and the best neutral evidence has been

withheld without any explanation. He contended that the most serious

accusation attributed to the Appellant is that he had unauthorizedly

closed two FDRs of B. Satyajit Reddy pre-maturely and transferred the

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sum of Rs. 10,00,000/- and 4,00,000/- respectively to the account of

his brother-in-law, i.e., account No. 282 which stood in the name of the

Academy. Learned Senior Counsel urged that neither had B. Satyajit

Reddy been examined by the CBI as a witness nor was his statement

recorded during the course of internal auditing. He canvassed that there

is nothing on record to doubt the two letters dated 22.02.1995 (Ex P6)

and 24.02.1995 (Ex P7), whereby, B. Satyajit Reddy authorized the

Appellant to pre-maturely withdraw the FDRs and requested him to

transfer the said amount to the account of Nishita Educational

Academy. He further contended that no effort was made to investigate

as to whether or not the Appellant had the authorisation for pre-mature

withdrawal of the FDRs. Learned Senior Counsel drew our attention to

the evidence of the handwriting expert (PW-10), to highlight that

signature on the letters dated 22.02.1995 and 24.02.1995, matched

with the signature of the B. Satyajit Reddy. Thus, by relying upon the

principles enunciated in Prabhat & Ors v. State of Maharashtra1 and

Mahak Chand & Ors v. State of U.P.2, it was contended that the non-

examination of B. Satyajit Reddy was fatal to the case of the Prosecution.

It was passionately urged that the statement of the Appellant made

under Section 313 Cr.P.C., has in this regard been completely

overlooked.

1 (2013) 10 SCC 391, ¶ 11

2 (2019) SCC OnLine All 4044, ¶ 63 to 65

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23. Shri Sidharth Luthra then pointed out paragraph 23 of the High

Court judgment, wherein, it was acknowledged that no loss to the Bank

was caused as a result of the alleged misdemeanours of the Appellant.

He relied upon the statements of Chairman (PW-1) and Branch Manager

(PW-8) of the Bank, who have admitted that no loss was caused to the

Bank and no complaint from B. Satyajit Reddy was ever received against

the Appellant. Learned Senior Counsel also pressed the decisions of this

Court in Hari Sao & Anr v. State of Bihar3 and Mohd. Ibrahim &

Ors v. State of Bihar & Anr4, in aid to urge that in such

circumstances, no offence can be said to have been made out against

the appellant.

24. Adverting to another incriminating circumstance, namely, the

deposit of interest accrued on the two disputed FDRs in the account of

B. Satyajit Reddy even after closure of the FDRs from the personal

account of the appellant and his wife, learned Senior Counsel argued

that this allegation was raised for the first time in the deposition of PW-

2, and no charge was framed against the Appellant generally or

specifically in relation thereto. In this regard, he took the plea that the

credit vouchers Exhibits P-37 to P-42 and the ledger Exhibit P-11 were

not put to the Appellant while his statement was recorded under Section

313 Cr.P.C. Drawing force from the decision of this Court in Samsul

3 (1969) 3 SCC 107

4 (2009) 8 SCC 751

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Haque v. State of Assam5, it was argued that if circumstances are not

put to the accused in his examination under Section 313 Cr.P.C., they

must be excluded from consideration because the accused did not have

any chance to explain them. Alternatively, learned Senior Counsel

submitted that since the charge-sheet accuses the Appellant of

transferring interest from his account to account no. 5520 of B. Satyajit

Reddy, it is not a case where bank funds were utilized for depositing the

interest in the account of B. Satyajit Reddy. The Bank, thus, has

suffered no loss.

25. With respect to the second set of transactions, learned Senior

Counsel for the Appellant highlighted that there is no finding of the Trial

Court or the High Court, regarding insufficiency of funds in account No.

282 of the Academy when the Appellant allowed withdrawals of the

amount to the tune of Rs. 10,00,000/- under the three cheques

(Exhibits P-25 to P-27). It is asserted that the evidence of PW-2 and PW-

6, in this regard, is inconsistent. While PW-2 admitted that there was

balance in the account of the Academy by the date Ex P-25 was passed

but there was inadequate balance at the time of two other transactions

(cheques marked as ExP-26 and ExP-27). Rather, PW-6 in his cross-

examination has candidly admitted that there were sufficient funds

available in the afore-stated account on the dates when the amounts

5 (2019) 18 SCC 161, ¶ 13, 22, 32

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were withdrawn. Learned Senior Counsel argued that the aforesaid

inconsistency has been duly noticed in the impugned judgment yet the

High Court proceeded on a wrong premise that the onus was on Accused

No. 3 to prove the availability of funds in the account.

26. It was further claimed that there is total absence of mens rea as

no benefit was drawn by the Appellant even if the cash was handed over

to Accused no. 3, who has since been acquitted. The statement of B.

Chandrasekhar (PW-4) is said to have been misconstrued by the Trial

Court and the High Court, as he had clearly admitted that not only was

the amount pertaining to the three cheques- Ex P25 to P27, handed over

to Accused No.3 but also that the signature of the Appellant was not

found on the three cheques. It was advanced that the findings of the

High Court were also self-contradictory in as much as the Court held

that the Appellant’s acts were meant for the benefit of Accused No. 3,

and yet the acquittal of Accused No. 3 was sustained.

27. With regard to the use of loose cheques and the alleged omission

to record relevant entries in the ledger of current account no. 282, it is

claimed that the same cannot be a ground to convict the Appellant for

offences under Sections 420, 409 and 477A IPC or under the provisions

of PC Act. Learned Senior Counsel maintained that, at worst, it was a

case of gross administrative misconduct for which the Appellant has

already been dismissed from service and denied his pensionary benefits.

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This allegation, according to him, should be mirrored in the light of the

fact that the Bank has not suffered any losses. Reliance was also placed

on the statements of PW-1 and PW-2 to contend that (i) Officers Cash

Scroll; (ii) Transit Voucher Register; & (iii) Cashier Payment Register

have not been produced by the prosecution as the production of that

record would have proved that though the total amount pertaining to

the three cheques was not reflected in the account ledger, yet it finds

mention in other ledgers and was duly accounted for.

28. Learned Senior Counsel further urged that once the Appellant’s

signatures on Exhibit P-25, P-26 and P-27 have not been proved, the

very foundation of use of loose cheques by the Appellant stands

demolished. This fact is further fortified as the specimen signatures of

the Appellant were never taken before a Judicial Officer.

29. It was also contended on behalf of the Appellant that charges

under Sections 409 and 420 IPC cannot go together. Shri Siddharth

Luthra canvassed that the Appellant is a victim of rivalry between two

factions of the Bank. It was highlighted that the overall deposit in the

Bank had enormously increased during the appellant’s tenure as its

Branch Manager which became a cause of eyesore amongst his rivals.

30. Lastly and alternatively, learned Senior Counsel for the Appellant

persuaded this Court to take a compassionate view. Banking upon the

successful performance of the Appellant that he increased the total

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deposit from 40,00,000/- to 7,00,00,000/- and resultant increase in the

status of the Bank as Scale-II, coupled with the fact that the Appellant

has no criminal antecedents, it was prayed that it is a fit case for

reduction of sentence to the extent already undergone.

31. Shri Jayant K. Sud, learned Additional Solicitor General,

appearing for the prosecution—CBI, on the other hand, rigorously

defended the judgments of the Trial Court and High Court. He reminded

us of the well-known limitations in exercise of powers under Article 136

in a concurrent finding of facts. Learned ASG urged that there is no

question of law involved in this appeal and all that has been determined,

are essentially mixed questions of law and facts for which the Courts

below have appraised and re-appraised the entire evidence.

32. Learned ASG reiterated that to establish mens rea or criminality

under Sections 420, 409 and 477A IPC, it was not necessary to prove

that the Appellant had derived benefit or caused any loss to the Bank.

The fact remains that the action of the Appellant involved unauthorized

conversion of public funds of an individual. He pointed out that the

issuance of bank receipts for withdrawal of funds without existence of

securities could not be justified except for illegal benefit to a private

individual, namely, brother-in-law of the Appellant (Accused No. 3).

Such illegalities cannot be defended on the pretext of practice or internal

procedure being followed by the Bank.

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33. Learned ASG argued that the Appellant was the custodian of the

Branch and had to take the entire responsibility for the duties he had

failed to discharge. According to him, the onus stood shifted on the

Appellant to show that he had complied with all transactions genuinely

and all the requirements or conditions were adhered to (see: N.V.

Subbarao Vs. State6). He explained that there is no error of facts or in

law when the Court relies on factual presumptions to convict or

exonerate the accused like the Appellant.

34. In all fairness, we may point out that learned ASG also relied upon

two more decisions of this Court in Vinayak Narayan Deosthali v.

Central Bureau of Investigation7 and Neera Yadav v. Central

Bureau of Investigation8 .

ANALYSIS:

35. Having heard learned Counsel for the parties at considerable

length, we find that two questions fall for our consideration in the

present appeal. First, whether a case is made out for interference by this

Court in the concurrent findings of the Courts below? If yes, then

whether conviction of the present Appellant for offences under Sections

409, 420 and 477-A of the IPC as well as under Section 13(2) read with

Section 13(1)(d) of the PC Act is sustainable?

6 (2013) 2 SCC 162

7 (2015) 2 SCC 553
8 (2017) 8 SCC 757

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36. We may at the outset concur in principle with the contention of

the learned ASG that the scope of interference by this Court in a

question of fact or even in a mixed question of fact and law, is narrow.

Unless there are exceptional circumstances where this Court finds that

material evidence has been misread or misconstrued or has been

completely overlooked resulting in a perverse finding, this Court will be

extremely reluctant to scrutinize or reappraise the evidence, more so

when the concurrent view taken by the courts below, is one of the

plausible or possible views.

37. These self-evolved principles on the Court’s limitation to interfere

with a synchronal finding of conviction are, however, always subject to

caveats and lawful exceptions. The very ethos of our criminal justice

system lies in the understanding that better it is to acquit n number of

suspicious persons, rather than convicting one innocent. Nevertheless,

no crime should go unpunished.

38. We may point out that in the case before us, neither the Trial Court

or the High Court has discussed the ingredients of Sections 409, 420,

or 477-A IPC, nor have they made any effort to refer to the specific

evidence which may satisfy such ingredients. There is no gainsaying

that the role of the Trial Court and the High Court is not just to decipher

and bring to light the relevant evidence, but also to apply the relevant

laws to the factual matrix before it. It further appears that the Courts

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below have inter-changed and mixed up the allegations against the

Appellant. While the charges were framed primarily with respect to the

issuance of the three loose cheques and the alleged unlawful withdrawal

of Rs. 10 Lakhs from account no. 282, the Courts below have proceeded

to convict the Appellant on the ground that he prematurely and

fraudulently enchased the two FDRs, which stood in the name of B.

Satyajit Reddy. Further, the High Court, while acknowledging that no

loss was caused to the Bank, held that a loss had been incurred by B.

Satyajit Reddy. But the charges against the Appellant, as can be seen in

Paragraph No. 5 above, were that the three accused, by their fraudulent

and illegal actions, caused a loss to the Bank. Even further, as pointed

out by the learned Senior Counsel for the Appellant, the High Court held

that the actions of the Appellant were not to his benefit, but to the

advantage of his brother-in-law, i.e., Accused No. 3. The Brother-in-law

of the Appellant was, however, acquitted by the Trial Court and no

appeal was preferred by the State against his acquittal. Keeping these

contradictions in mind, we are of the opinion that the boundaries of

judicial temperance would not be disturbed if the present matter is

looked at more closely.

39. Within these broader contours, the litmus test is whether a case

under Sections 409, 420 and 477A IPC, and under Section 13(2) read

with Section 13(1)(d) of the PC Act is made out against the Appellant?

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40. Before we advert to the relevant evidence on record, we deem it

appropriate to brace ourselves with the relevant statutory ingredients

necessary to bring home the guilt of an accused when charged under

Sections 409, 420 and 477A IPC.

Ingredients necessary to prove a charge under Section 409 IPC:

41. Section 409 IPC pertains to criminal breach of trust by a public

servant or a banker, in respect of the property entrusted to him. The

onus is on the prosecution to prove that the accused, a public servant

or a banker was entrusted with the property which he is duly bound to

account for and that he has committed criminal breach of trust. (See:

Sadupati Nageswara Rao v. State of Andhra Pradesh9).

42. The entrustment of public property and dishonest

misappropriation or use thereof in the manner illustrated under Section

405 are a sine qua non for making an offence punishable under Section

409 IPC. The expression ‘criminal breach of trust’ is defined under

Section 405 IPC which provides, inter alia, that whoever being in any

manner entrusted with property or with any dominion over a property,

dishonestly misappropriates or converts to his own use that property,

or dishonestly uses or disposes of that property contrary to law, or in

violation of any law prescribing the mode in which such trust is to be

discharged, or contravenes any legal contract, express or implied, etc.

9 (2012) 8 SCC 547

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shall be held to have committed criminal breach of trust. Hence, to

attract Section 405 IPC, the following ingredients must be satisfied:

(i) Entrusting any person with property or with any dominion over

property;

(ii) That person has dishonestly mis-appropriated or converted that

property to his own use;

(iii) Or that person dishonestly using or disposing of that property or

wilfully suffering any other person so to do in violation of any

direction of law or a legal contract.

43. It ought to be noted that the crucial word used in Section 405 IPC

is ‘dishonestly’ and therefore, it pre-supposes the existence of mens rea.

In other words, mere retention of property entrusted to a person without

any misappropriation cannot fall within the ambit of criminal breach of

trust. Unless there is some actual use by the accused in violation of law

or contract, coupled with dishonest intention, there is no criminal

breach of trust. The second significant expression is ‘mis-appropriates’

which means improperly setting apart for ones use and to the exclusion

of the owner.

44. No sooner are the two fundamental ingredients of ‘criminal breach

of trust’ within the meaning of Section 405 IPC proved, and if such

criminal breach is caused by a public servant or a banker, merchant or

agent, the said offence of criminal breach of trust is punishable under

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Section 409 IPC, for which it is essential to prove that:

(i) The accused must be a public servant or a banker, merchant or

agent;

(ii) He/She must have been entrusted, in such capacity, with

property; and

(iii) He/She must have committed breach of trust in respect of such

property.

45. Accordingly, unless it is proved that the accused, a public servant

or a banker etc. was ‘entrusted’ with the property which he is duty

bound to account for and that such a person has committed criminal

breach of trust, Section 409 IPC may not be attracted. ‘Entrustment of

property’ is a wide and generic expression. While the initial onus lies on

the prosecution to show that the property in question was ‘entrusted’ to

the accused, it is not necessary to prove further, the actual mode of

entrustment of the property or misappropriation thereof. Where the

‘entrustment’ is admitted by the accused or has been established by the

prosecution, the burden then shifts on the accused to prove that the

obligation vis-à-vis the entrusted property was carried out in a legally

and contractually acceptable manner.

Ingredients necessary to prove a charge under Section 420 IPC:

46. Section 420 IPC, provides that whoever cheats and thereby

dishonestly induces a person deceived to deliver any property to any

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person, or to make, alter or destroy, the whole or any part of valuable

security, or anything, which is signed or sealed, and which is capable of

being converted into a valuable security, shall be liable to be punished

for a term which may extend to seven years and shall also be liable to

fine.

47. It is paramount that in order to attract the provisions of Section

420 IPC, the prosecution has to not only prove that the accused has

cheated someone but also that by doing so, he has dishonestly induced

the person who is cheated to deliver property. There are, thus, three

components of this offence, i.e., (i) deception of any person, (ii)

fraudulently or dishonestly inducing that person to deliver any property

to any person, and (iii) mens rea of the accused at the time of making

the inducement. It goes without saying that for the offence of cheating,

fraudulent and dishonest intention must exist from the inception when

the promise or representation was made.

48. It is equally well-settled that the phrase ‘dishonestly’ emphasizes

a deliberate intention to cause wrongful gain or wrongful loss, and when

this is coupled with cheating and delivery of property, the offence

becomes punishable under Section 420 IPC. Contrarily, the mere

breach of contract cannot give rise to criminal prosecution under

Section 420 unless fraudulent or dishonest intention is shown right at

the beginning of the transaction. It is equally important that for the

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purpose of holding a person guilty under Section 420, the evidence

adduced must establish beyond reasonable doubt, mens rea on his part.

Unless the complaint showed that the accused had dishonest or

fraudulent intention ‘at the time the complainant parted with the

monies’, it would not amount to an offence under Section 420 IPC and

it may only amount to breach of contract.

Ingredients necessary to prove a charge under Section 477-A IPC:

49. The last provision of IPC with which we are concerned in this

appeal, is Section 477A, which defines and punishes the offence of

‘falsification of accounts’. According to the provision, whoever, being a

clerk, officer or servant, or employed or acting in that capacity, wilfully

and with intent to defraud, destroys, alters, mutilates or falsifies any

book, electronic record, paper, writing, valuable security or account

which belongs to or is in possession of his employer, or has been

received by him for or on behalf of his employer, or wilfully and with

intent to defraud, or if he abets to do so, shall be liable to be punished

with imprisonment which may extend to seven years. This Section

through its marginal note indicates the legislative intention that it only

applies where there is falsification of accounts, namely, book keeping or

written accounts.

50. In an accusation under Section 477A IPC, the prosecution must,

therefore, prove—(a) that the accused destroyed, altered, mutilated or

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falsified the books, electronic records, papers, writing, valuable security

or account in question; (b) the accused did so in his capacity as a clerk,

officer or servant of the employer; (c) the books, papers, etc. belong to or

are in possession of his employer or had been received by him for or on

behalf of his employer; (d) the accused did it wilfully and with intent to

defraud.

51. Let us now test the evidence to determine whether or not an ex

facie case under the above-stated three provisions of the IPC is made

out against the Appellant?

52. We may at this stage, recapitulate the two sets of allegations

against the Appellant. First, is that the Appellant misused his official

position at the Bank and passed three loose cheques in 1994, to

withdraw funds from account No.282, despite there being insufficient

funds in the said account, and thereby extended an undue advantage

to his brother-in-law, Accused No. 3. It is alleged that these actions of

the Appellant caused a wrongful loss to the Bank. It is further alleged

that this transaction was deliberately not recorded in the current

account ledger sheet of account no. 282 (Ex P23) so as to screen the

offence from the Head Office. The second allegation, which according to

the two courts below was the gravamen of the accusation, is that two

FDRs of Rs. 10,00,000/- and Rs. 4,00,000/-, respectively belonging to

B. Satyajit Reddy were prematurely encashed by the Appellant in

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February 1995, and the said amount was thereafter transferred to

account no. 282. It has been further held that even though the two

FDRs were for a combined amount of Rs. 14 Lakhs, only Rs. 4 lakhs

were shown to be credited into the Account of the Academy. The rest of

the amount was adjusted towards the concealed withdrawals that took

place in the year 1994.

53. Even though the two sets of allegations are continuous parts of

one single transaction, for the sake of brevity and clarity, we propose

that the two allegations may first be examined independently.

(A) Fraudulent and unlawful withdrawal of Rs. 10 Lakhs from

Account No. 282 in the year 1994.

54. We may outrightly note that so far as this allegation is concerned,

there is no dispute as to the factum of ‘entrustment’. The Appellant

being the Branch Manager was in-charge and responsible for the

deposits made by the Bank customers. The prosecution in regard to this

set of transaction, has put forth a five-pronged claim. First, the

Appellant along with co-accused conspired to cause wrongful loss to the

Bank. Second, the Appellant permitted the use of three loose cheques.

Third, the cheques were passed by the Appellant even though there were

insufficient funds in account No. 282. Fourth that the relevant entries

regarding this transaction were intentionally not recorded in the ledger

book- Ex P23, and fifth, that the amount pertaining to these cheques

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was collected by the Appellant. This according to the Prosecution, and

as held by the High Court, was done to extend an undue benefit to the

brother-in-law of the Appellant, i.e., Accused No.3.

55. It may first be noted that the Trial Court has unequivocally held

that neither was there a conspiracy between the three accused persons,

nor did the withdrawal result in any direct or indirect advantage to

Accused No.3. In fact, the learned Special Judge went to the extent of

holding that Accused No.3 merely acted in the normal course of his

duties as a Treasurer/authorized signatory of the Academy. Since the

prosecution has not assailed the acquittal of Accused No. 3, the findings

in respect to his innocence have attained finality. In any case, the

prosecution has adduced no other evidence that would indicate a prior

meeting of minds between the Appellant and his co-accused.

56. There is no doubt that amongst the three accused persons, the

Appellant being the Branch Manager, had the sole authority to issue

and pass the three loose cheques. The record though clearly reveals

that issuance of a loose cheque was a departure from the standard

operating procedure followed at the Bank, but no evidence has been led

that it was an ‘illegal practice’. The deposition of PW-1 and PW-3 is clear

on this point. Both have deposed that in the ordinary course of business,

the cheque holder ought to only utilize the cheques that are issued to

him, but in certain contingencies or exceptional situations, the Bank

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could issue loose cheques also. Since no explicit prohibition on issuing

of loose cheques has been proved, the mere fact that the Appellant

issued those loose cheques, is not sufficient to conclude that he acted

unlawfully or committed a ‘criminal misconduct’.

57. The case of the Prosecution rested heavily on the premise that the

three cheques in question, i.e., Ex. P25 to P27, were passed even though

there weren’t adequate funds in account No. 282. The first cheque (Ex

P25) was for an amount of Rs. 2.5 Lakhs and was passed on 23.04.1994;

the second cheque (Ex P26) which was for an amount of Rs. 4 Lakhs

was passed on 30.06.1994; and the third cheque (Ex P27) was passed

on 30.07.1994 for an amount of Rs. 3.5 Lakhs. While PW-2 deposed that

there were sufficient funds at the time of passing of Ex P25, he claimed

insufficiency of funds when Ex P26 and Ex P27 were passed. On the

other hand, the Appellant in his statement under Section 313 CrPC

contradicted the stand of PW-2 and has testified about there being

sufficient funds in account No. 282 throughout. The stand of the

Appellant also finds corroboration in the testimony of PW-6, Accountant

of the Branch. We have perused the Current Account Ledger for account

No. 282 (Ex P23) and it appears that there were sufficient funds in

account No. 282 for passing all the three cheques in question. Thus, the

contention that the three cheques were passed despite insufficient funds

in account No. 282, cannot be sustained. This being the case, we have

no difficulty holding that so far as this part of the transaction is

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concerned, the Bank did not suffer any loss.

58. In order to substantiate the charge under Section 477-A IPC, the

primary contention of the Prosecution is that despite passing the three

cheques (Ex P25 to Ex P27), the Appellant did not make the relevant

entries into the Current Account Ledger (Ex P23) of account No. 282.

This was allegedly done to conceal the withdrawals as there were

insufficient funds in the account of the Academy. We may note that the

expression ‘intent to defraud’ as given under Section of 477-A, contains

two elements, deceit and injury. So far as the second element is

concerned, it has already been noted that no financial injury was caused

to the Bank.

59. With respect to the question of ‘deceit’, the depositions of PW-2

and PW-6 unveil that though the relevant entries were missing in the

Current Account Ledger, they do find a mention in the other ledger

sheets maintained by the Bank, namely, the Officer’s Cash Scroll and

the Cashier Payment Register. PW-6 has further deposed that the entry

relating to Ex P25, has been mentioned in the Current Account Ledger.

The ledger- Ex P23 does reveal that there is some truth in the deposition

of PW-6. It can be seen that there is an entry made with a pencil for an

amount of Rs. 2.5 lakhs and the relevant cheque number of Ex P25 has

also been recorded. We have further noted that two other entries marked

as Ex D3 and Ex D4, pertaining to the other amounts of Rs. 4 Lakhs

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and Rs. 3.5 Lakhs have also been inserted, but here the relevant cheque

numbers have not been recorded. When this is viewed in the light of the

deposition of PW-2, non-production of the other relevant ledgers cannot

be overlooked. Had the prosecution produced the other ledgers with

some discrepancies therein, we would have been inclined to take an

alternative view. But since the direct and relevant evidence has been

withheld, the benefit of doubt for such failure ought to be accorded to

the Appellant.

60. It is also alleged that the afore-said amount of Rs. 10 lakh was

collected by the Appellant. The prosecution witnesses have deposed that

the operating procedure at the Bank entailed that the signature of the

person who received the cheque would be recorded on the back side of

the cheque. Two incriminating circumstances have come on record in so

far as this allegation is concerned. First, as deposed by PW-2, and

corroborated by PW-10, the signature on the back of the cheque did not

tally with that of Accused No.3. Second, the signature of the wife of the

Appellant- N. Lalitha, appears on the back of Ex. P25. Undoubtedly, this

raises a suspicion. But as can also be seen from the record, there are

contradictions on this point as well. PW-4 has acknowledged that the

payment for the three cheques was received by the Appellant and he

subsequently handed over the same to Accused No.3, who at the

relevant time, was waiting in the office room of the Appellant. Further,

neither of the courts below have recorded a finding that the Appellant

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gained any pecuniary benefit nor is there any other adverse

circumstance which may lead us to reach such a conclusion. Therefore,

in view of such slippery evidence, we are not inclined to accord much

weight to this allegation.

(B) Unauthorised premature encashment of the two FDRs

belonging to B. Satyajit Reddy

61. We may now consider the second set of allegations pertaining to

the alleged premature withdrawal of two FDRs and the subsequent

unauthorised transfer of Rs. 14 Lakhs to account No. 282. It may be

noted that the allegation of premature withdrawal is also accompanied

by the averment that despite the premature withdrawal, the interests

relating to the two FDRs continued to be deposited into savings account

No. 5520 of B. Satyajit Reddy. The interest amount, however, was

transferred from account No. 5555, which stood in the name of the

Appellant and his wife. It is alleged that the subsequent interest

payments were made to ‘deceive’ the FDR holder into believing that the

FDRs were still alive.

62. As already clarified by us, to prove the charge under Section 409

IPC, the prosecution need not prove the exact manner of

misappropriation. Once the ‘entrustment’ is admitted or proved, as has

been done in the present case, the onus lies on the Accused to prove

that the entrusted property was dealt by him in an acceptable manner.

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Thus, misappropriation with this dishonest intention is one of the most

important ingredients of proof of ‘criminal breach of trust’. The offence

under Section 409 IPC can be committed in varied manners, and as we

are concerned with its applicability in the case of a bank officer, it is

fruitful to point out that the banker is one who receives money to be

drawn out again when the owner has occasion for it. Since the present

case involves a conventional bank transaction, it may be further noted

that in such situations, the customer is the lender and the bank is the

borrower, the latter being under a super added obligation of honouring

the customer’s cheques up to the amount of the money received and still

in the banker’s hands. The money that a customer deposits in a bank

is not held by the latter on trust for him. It becomes a part of the

banker’s funds who is under a contractual obligation to pay the sum

deposited by a customer to him on demand with the agreed rate of

interest. Such a relationship between the customer and the Bank is one

of a creditor and a debtor. The Bank is liable to pay money back to the

customers when called upon, but until it’s called upon to pay it, the

Bank is entitled to utilize the money in any manner for earning profit.

63. In the case in hand, the Appellant in his examination under

Section 313 Cr.P.C. has neither disputed the factum of the premature

withdrawal, nor of the subsequent transfer of the amount to account

No. 282. On the contrary, he has specifically claimed that he only acted

on the written request made by the customer. The Appellant has

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fortified his assertion by producing two letters (Ex P6 and Ex P7) statedly

written by B. Satyajit Reddy and addressed to the Branch Manager. The

deposition of the handwriting expert (PW-10) has given some credence

to the Appellant’s version as according to his opinion, both the letters

bear the signature(s) of B. Satyajit Reddy.

64. On the other hand, the Prosecution disputed the genuineness of

these two letters and has accused the Appellant of securing these letters

antedated. The subsequent conduct of the Appellant i.e., the deposit of

interest from his own account to that of B. Satyajit Reddy has been

strongly highlighted to emphasize that the Appellant had made the

withdrawal without the knowledge or consent of the FDR holder and in

contravention of the law. The latter fact weighed heavily on the minds of

the Courts below as both have proceeded to convict the Appellant on the

assumption that he did not receive any authorization for the premature

encashment and transfer. There is thus a serious dispute on the factum

of whether or not B. Satyajit Reddy had sought the premature

withdrawal and the subsequent transfer of the proceeds of FDRs to the

account of Academy. The best person to clear the air and enlighten us

would have been B. Satyajit Reddy himself, but neither was he

associated during the course of inquiry/audit or the investigation nor

was he examined as a prosecution witness in the trial.

65. The investigating agency did not care to record the statement of B.

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Satyajit Reddy either under Section 161 Cr.P.C. or as a court witness.

There is not even a whisper that B. Satyajit Reddy was won over by the

appellant from the very inception and/or his examination at any stage

would have been an exercise in futility. Further, there is also no written

or oral complaint made by B. Satyajit Reddy against the Appellant or

other officials of the Bank accusing them of misusing his FDRs or

causing any financial loss to him. On the contrary, the Appellant has

produced on record two letters dated 22.02.1995 and 24.02.1995 (Ex

P6 and Ex P7) purportedly written by B. Satyajit Reddy for premature

encashment of his FDRs and to deposit the amount in the account of

the Academy. These two letters (which the Appellant is accused to have

obtained antedated) suggest that copies thereof were physically

received/handed over to the Chairman and other officials of the Bank.

There was, thus, sufficient time to contact a valuable customer like B.

Satyajit Reddy and enquire about the genuineness of those letters. The

Chairman of the Bank (PW-1) in his complaint to CBI dated 27.11.1995

(Ex P1) did not make even a bald allegation about genuineness of these

two letters which were already in his possession. Unfortunately, CBI too

made no effort to contact B. Satyajit Reddy and ascertain the correct

facts. There is indeed no quarrel that no financial loss was caused to B.

Satyajit Reddy. It, thus, emerges indisputably that:

(i) B. Satyajit Reddy had made no complaint alleging any loss to him;

(ii) His written requests dated 22.02.1995 and 24.2.1995 (Ex P6 and

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Ex P7) have gone unrebutted;

(iii) The prosecution has surely proved payment of interest on those

FDRs to B. Satyajit Reddy even after pre-mature closure thereof,

but that payment was made by the Appellant from his personal

account and no public fund has been divested for such payment;

(iv) B. Satyajit Reddy has been receiving interest even after premature

encashment of the FDRs. He may or may not have got undue

monetary gain but definitely he suffered no loss in any manner.

66. Having given our anxious thought to these facts, we are of the

considered opinion that the Prosecution has failed to establish the

charge of criminal breach of trust against the Appellant beyond a

reasonable doubt. We are inclined to agree with the learned Senior

Counsel for the Appellant that the non-examination of B. Satyajit Reddy

has been materially fatal to the case of the prosecution. Furthermore, it

appears that B. Satyajit Reddy was deliberately not examined as he

would have deposed against the prosecution. Undoubtedly, some of the

proven facts, like deposit of interest amount from the account of the

appellant to that of B. Satyajit Reddy, do create a strong suspicion

against the Appellant, but as held by this Court time and again,

suspicion cannot take the place of proof, howsoever, strong it may be.

We are, therefore, of the firm belief that in the absence of cogent and

unimpeachable evidence to prove that the Appellant has

misappropriated the funds of the Bank and/or of B. Satyajit Reddy, it

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would not be safe to convict him under the provisions of Section 409

IPC.

67. So far as the charge under Section 420 IPC is concerned, once

again, the best and the only person who could throw light on whether

or not he had voluntarily agreed to transfer his FDR amount in the

account of the Academy or there was an element of inducement,

cheating or a false promise, was B. Satyajit Reddy himself who has

chosen not to enter the witness box. In the absence of even an ordinary

complaint by B. Satyajit Reddy regarding misuse of his FDRs, it will be

too far-fetched to hold that the Appellant had any mens rea to deceive

or to misappropriate or destroy valuable property of B. Satyajit Reddy.

68. We may at this stage, briefly note that learned Senior Counsel for

the Appellant had raised another contention, namely, that the charges

under Section 409 and Section 420 IPC cannot go together. He

eloquently argued that the essential ingredients of the two offences are

conflicting in nature. Section 409 (or 405) IPC deals with offences where

the accused has been ‘entrusted’ with the property and Section 420 IPC

deals with offences where the accused has ‘dishonestly induced’ the

victim/complainant to depart with the property in question. It was,

therefore, argued that an accused cannot be charged under both the

sections simultaneously. This contention, however, has been rendered

academic in the light of the afore-stated discussion and conclusion(s).

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We thus do not express any opinion and leave this question open for

adjudication in an appropriate case.

69. Having held so, we hasten to add that the Appellant acted brazenly

contrary to the norms and internal instructions of the Bank. Although

he was clever enough to not trespass into the prohibited area(s) of

Sections 409, 420 and 477-A IPC, he ran the risk of causing financial

loss to the Bank. Despite his subsequent act of depositing the interest

accrued upon the FDRs of B. Satyajit Reddy, from his personal account,

and thereby absolving the Bank from such liability, the actions of the

Appellant constitute gross departmental misconduct and are

unbecoming of a senior Bank Officer. The management of the Bank

rightly lost faith in the Appellant and the punishment of dismissal from

service imposed on him vide order dated 06.01.2006, on the basis of his

conduct which led to his conviction by the Trial Court, is fully justified.

In the peculiar facts and circumstances of this case, there was no legal

necessity to hold any departmental enquiry to reiterate the same factual

conclusions which have surfaced during the course of criminal trial.

Such findings though may not be sufficient to fasten criminal liability

on the appellant, his dismissal from service of the Bank is fully

legitimised and the punishment so awarded, is proportionate to the

proven misconduct. We say so, also for the reason that neither can the

Appellant be allowed to take undue advantage of the benefit of doubt

being extended to him, nor is a recourse to a departmental enquiry

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desirable at this belated stage. On the other hand, upholding the order

of dismissal dated 06.01.2006 will serve the cause of public interest and

send a befitting message amongst the Appellant’s peers.

70. We are also constrained to observe that in this case the CBI has

either adopted a casual and callous approach or there was some hidden

pressure to derail a fair investigation. The resultant effect is that though

there is a strong suspicion of criminal breach of trust, cheating and/or

fabrication of the Bank records against the Appellant, but such

suspicion falls short of a conclusive proof to hold him guilty of the

criminal charges. The best evidence having been withheld by the

prosecution, the benefit of doubt must be extended to the Appellant, for

no conviction can be sustained on the basis of conjectures and

surmises. Non-production of the records of the Bank also adversely

comments on the fairness and independence of the investigation

conducted in the instant case.

71. To sum-up the above-stated discussion, the following

incontrovertible factors have emerged in the present appeal:

First, no financial loss was caused to the Bank.

Second, the record before us does not indicate that any pecuniary loss

was caused to B. Satyajit Reddy or to any other customer of the Bank.

Third, the material before us does not disclose any conspiracy between

the accused persons. In the absence of any reliable evidence that could

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unfold a prior meeting of minds, the High Court erred in holding that

Appellant and other accused orchestrated the transactions in question

to extend an undue benefit to Accused No.3.

Fourth, the Appellant committed gross misconduct by misusing his

position as the Branch Manager. Notwithstanding the final outcome, the

Appellant’s abuse of powers clearly put the Bank at the risk of financial

loss.

Fifth, despite dereliction of his duties, none of the acts proved against

the Appellant constitute ‘criminal misconduct’ or fall under the ambit of

Sections 409, 420 and 477-A IPC.

CONCLUSION:

72. We face no difficulty in holding that the prosecution has failed to

prove the charges under Sections 409, 420 and 477A IPC against the

Appellant beyond reasonable doubt. As a necessary corollary thereto,

his conviction under Section 13(2) read with Section 13(1)(d) of the PC

Act can also not be sustained. However, the benefit of doubt being

extended to him on account of a thin margin between ‘strong suspicion’

and ‘conclusive proof’, shall not entitle him to initiate a second round of

lis to seek his reinstatement or to claim other service benefits from the

Bank. We have already held that the Appellant is deemed to be guilty

of gross departmental misconduct, for which the punishment of

dismissal from service has been adequately awarded. It requires no

repetition that standard of proof to establish a misconduct in a domestic

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enquiry i.e. even preponderance of evidence, is drastically different to

those of proving a ‘criminal charge’ beyond any reasonable doubt. The

Appeal is accordingly disposed of in the above terms. Bail bonds, if any,

furnished by the Appellant stand discharged.

……………………….. CJI.
(N.V. RAMANA)

………..………………… J.
(SURYA KANT)

…………………………...J.
(HIMA KOHLI)
NEW DELHI
DATED :13.12.2021

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