Professional Documents
Culture Documents
Ketan Parekh 1992 Stock Scam Judgement Special Court Mumbai
Ketan Parekh 1992 Stock Scam Judgement Special Court Mumbai
Ketan Parekh 1992 Stock Scam Judgement Special Court Mumbai
..... Complainant.
V/s
1. Saranathan Mohan
...
2. N. Balasubramaniam
Accused No. l.
....Accused No.2.
Accused No.3.
3. B.R. Acharya
..
....Accused No.4.
..
Accused No.5.
6. S.K. Jhaveri
....Accused No.6.
7. Pallav Seth
....Accused No.7
....Accused No.8
9. Ketan V. Parekh
....Accused No.9
....Accused No.10
11. B. V. Srinivasan
--" ,
---- --
-----
Mr. Shailesh Shah with Ms. Mamta Sadh Vb Dhru Leeladhar & Co,
advocates for accused No.6.
Mr. Purandhare with Mr. Vivek Sharma & Ms.
Reshma Ruparel,
3
ORAL JUDGMENT:
1.
in
It was
was
4
the accounts of Canfina and Canbank Mutual Fund were manipulated.
The details of the said transaction were mentioned in the FI
After
the FIR was lodged, accused No. 7 Mr. Pallav Seth was arrested on
07/07 /1994
and
released
was
on
bail
on
09/07 /1994.
On
the
charge-sheet, it was
2.
The
prosecution
case
in
Mutual
Fund,
brief
is that an amount of Rs
Bombay
ostensibly
for
the
purchase
of
The fourth
---------
was for
an amount of Rs 7 crores.
3.
4.
transaction
6
funds were diverted in favour of late Manubhai Maniklal.
5.
6.
in this particular case. It is alleged b y the prosecution that S. Mohan accused No.1 made an entry dated
10/10/1991
in Canfina's book
-'.1';'-'
.
lO/lO/f9 91
by Canfina, Bangalore.
10/1 0/1991
was
On
prepared
in CBMF to show that the said amount was wrongly received and that
it was to be paid back in due course of time.
reality,
the
amount
accused No.3
cheque dated
was
It is alleged that, in
but B. R.. Acharya -
10/10/1991
o f Rs
8.99
7
accused No.6 and the cheque for Rs 8.30 crores in favour of
Narbharam Harakchand, which was a
Mis
V. Parekh
illegally passed on to the said brokers who did not have any deal
either with Canfina or with CBMF in connection with the receipt of the
said amount.
7.
for Rs 12 crores from Canbank Mutual Fund while Canfina did not
have any such deal with CBMF.
UW
On receipt of the
was
being paid
8.
that
after
this
accused No.4
P.J.
in "Cansigo
not connected in any way with the said amount. It is alleged that after
in
the account of Hiten P. Dalal - accused No.5 who did not have any
deal with Canfina or CBMF in respect of receipt of the said amount of
Rs 5 crores.
accused
No.2
an
entry
dated
07/02/1992
regarding
the
purchase of 14% NCDs for Rs 5 crores from CBMF though there was
no such deal either from Canfina or with CBMF and this amount was
transferred to CBMF on the basis of the said entry. After this amount
was
received
in
CBMF,
accused
No.4
issued
cheque
dated
9.
who, again, did not have any deal with Canfina or with
CBMF.
53,77,82,500/-
was
Bangalore through an
This was
10
(i)
10/10/1991)
(ii)
5 crores
on
16/01/1992,
Rs.
5 crores
on
that the alleged amount of Rs 8.99 crores had been placed for 15
days @ Rs 24%.
10.
11
security.
was
The Canbank
shares as also to lend money and make advances. Clause 15 (iii) of its
Trust Deed empowered the Trustees of the CBMF to (a) acquire, hold,
manage, trade and dispose off shares and debentures & (b) borrow or
otherwise raise money with or without securities subject to the limits
as may be decided by the Trustees. At the relevant ti.me, accused No.1
- S. Mohan was the Assistant Vice President and dealer of Canfina at
its Headquarters in Bangalore,
was
Headquarters at Bangalore,
was
Manager,
was
12
the Funds Manager, Canbonus.
11.
All the accused were charged for the offences punishable under
section 120B read with section. 403, 409, 467, 471, 477-A of the
Indian Penal Code and section 13 (1)(c) read with section 13(2) of the
Prevention of Corruption Act, 1988.
12.
13.
14.
__
13
Jh.averi, Pallav Seth and Manubhai Maniklal who were stock brokers
from Bombay to divert funds from the three Financial Institutions in
favour of the brokers and
to
create
a record
on the basis
of
The
prosecution case is, therefore, that the accused persons during the
period from October, 1991 to April 1992 in order to defraud the
Canbank Financial Services Limited at Bangalore of the said amount,
forged various documents and made five ready forward deals of RIL
and
15.
P.W.
1 is Mrs
14
Virakthi S. Hegde who was working as a Secretary in Canbank Mutual
Fund at the relevant time. She has stated in her evidence that, as a
Secretary, her work
work.
was
Mr B. N. Srikantha.
He was
was
Mr. M.
Papa Rao was working in the Canbank Mutual Fund at the relevant
time.
was
working
with CBMF.
P.W.
10
Mr.
was,
at the relevant
Dilip
Jagmohandas
15
was
as
Chief Executive
was
He
was
Mukesh Joshi
After the case was initially registered by Mr. Arup Patnaik, the
was
16
16.
All the accused pleaded not guilty to the charge which was
17.
FINDINGS
except
against
Yes,
acrused Nos.2,
4& 11.
of Canfina
to
the
of Rs
tune
47,70,68,200/-?
(2)
Whether
prosecution
that,
in
it
is
proved
by
reasonable
beyond
furtherance
of
the
the
doubt
criminal
(RF)
transaction
22/10/1991,
securities
dated
16/1/1992,
which
were
ready forward
10/10/1991,
of
certain
vaguely
and
Yes, except
against
acrused Nos.2,
4& 11
17
"14oo/ NCD" for the purpose of showing
that Canfina had sold/purchased the said
securities to/from
aforesaid
dates
and
criminally
the
funds
in
the
respective
manipulated
created
false
and
under section
Penal
and/or
Code
120-B
and/or
of the
section
34
409,
read
with
section
section
13(2)
13(1)(c),
of
the
read
with
Prevention
of
Corruption Act?
(3)
Whether
it
is
proved
by
the
YES
18
behalf of Canfina to the extent of R.s 50
lacs
and
that
he
had,
with
dishonest
delegated
fictitious
and
to
him
nonexistent
involving purchase of
and
made
transaction
Rs 17,29,00,000/
thereby
committed
the
offence
(4)
offecnes
punishable
under
YES
19
(5)
Whether,
it
LS
proved
by
the
YES
without
any
consideration
and
(6)
YES
falsified
the
books/papers
exceeded
powers
which
were
entered
into
non-existent
NO
20
Whether
(8)
it
is
proved
by
the
YES
branch
at
Cunigham
Road,
transaction
involving
an
(9)
Whether
it is
proved
by
the
making
false entry
regarding
the
NO
21
transaction involving Rs 12
crore s
and
(1 O)
Whether
it
is
proved
by
the
delegated to
of
securities
and
abused
enter
and purchase
his
pretending
to
Bangalore
fictitious
and
transaction
involving
purchase
NO
deal
office
by
pad
at
non-existent
of Rs 5
(11)
Whether
it
is
proved
by
the
YES
22
Code.?
(12)
Whether
it
is proved
by
the
accused
No.2
books/documents
falsified
belonging
to
the
NO
C anfina
an
(13)
Whether
it
is
proved
by
the
the
accused
No.2
exceeded
the
NO
offence
punishable
under
section
(14)
Whether
it
is
proved
by
the
committed
an
NO
offence
23
(15)
Whether
it
is proved
by
the
NO
committed
an
offence
punishable
Wheth.er it is proved
( 16)
by
the
conspiracy
respect
of
NO
fictitious
Security
and
committed
an
offence
punishable
(17)
Whether
it is proved
by
the
committed
an
offence
so-called
NO
24
Whether
(18)
it
i.s
proved
the
by
books
documents
of
of
accounts
Canfina
and
NO
other
regarding
the
Whether
(19)
it is proved
by
the
NO
forward
(RF) transaction
involving
an
his
office
and
com mitted
an
(20)
Whether
it
JS
proved
by
the
NO
25
and caused the said amount of Rs 7 crores
to
paid
be
to
CBMF
by
issuing
IBA
No.32886
Whether
(21)
it
proved
is
by
the
conspiracy,
the
regarding
made
transaction
false
NO
entry
involving
an
Canfina
punishable
and
committed
under
section
an
offence
477A
of the
(22)
Whether
prosecution
it
beyond
proved
is
reasonable
by
the
doubt
the
material times
10/10/91
directed
accused
of
Rs
No.11
17.29
on
crores,
9/10/1991
YES
26
accused No.6
the Proprietor
was
and
cheque
No.488906
Rs
for
10/10/1991
dated
8,30,00,000/-
Whether
(23)
it
is
proved
by
the
accused
No.6
aided
and
abetted
committed
an
offence
punishable
read
with
13(2)
section
of
the
13(1)(c)
Prevention
and
of
YES
27
(24)
Whether
the
prosecution
has
Office
crediting
before
Mumbai,
the
proceeds
of
aforesaid
17,29,00,000/-, directed
No.11 on
cheque
9/10/1991
dated
itself
Harakchand
to
10/10/1991
8,30,00,000/- favouring
which
of
accused
prepare
for
Rs
M/s. Narbheram
accused
No.10
bearing
10/10/1991
accused
delivered
to
No.3 knew
Rs
for
alongwith
Narbheram
No.488906
8,30,00,000/-
No.11
and
representative
Harakchand
that CBMF
dated
while
got
of
it
M/s
accused
cheque
authority
had
and
been
with
no
issued
without
consideration
YES
28
cheque accused No.3 knew that funds lil
the account of CANBONUS from which the
cheque had been drawn, were insufficient
and,
yet,
cheque
accused
drawn
N o.3
had
the
said
knowing
that
necessary
his said
act
amounts
to
criminal
under section
13 (1)(c) read
(25)
Whether
prosecution
that,
in
it
beyond
furtherance
is
proved
by
reasonable
of
the
the
doubt
criminal
Mis.
committed
an
offence
punishable
YES
29
of the Prevention of Corruption Act and
section 409 of the Indian Penal Code?
Whether
(26)
it
is
proved
by
the
NO
account
illegally credited
Nc
Scheme
Tamrind
the
with
Road
Mutual
same
the
Branch,
Fund
but
in Cancigo
Canara
Bank,
Mumbai
and
13(1)(c)
and
13(2)
of
the
by
the
Whether
(27)
prosecution
that,
in
it
b e yond
lS
proved
reasonable
doubt
and committed an
YES
30
13(1)(c)
and
section
13(2)
of
the
(28)
Whether
it
is
proved
by
the
YES
to
an
(29)
Whether it is
proved by
the
YES
crores
punishable
and
committed
an
offence
of
the
''
___J
31
(30)
Whether
it is
proved
by
the
NO
broker
Manubhai
Maniklal
by
(31}
Whether
it
is proved
by the
Nahar
Spinning
Mills
through
Rs
5.10
crores
to
Canfina
and
corresponding illegal gain to Pallav Seth accused No.7 and also issued IBA No.3334
dated 2/4/1992 for consolidated amount
of Rs 20,92,14,300/-
inclusive
of Rs
YES
32
cost memo, contract note or the security in
ph ysical or in the form of bank receipt
and
committed
an
offence
(32)
Whether
it
is
proved
by
the
YES
accused No.8
and
committed
the
(33)
Whether
it
is
proved
by
the
conspiracy,
exceeded
YES
the
..J
------- - - ------- - - - - -
33
though he
13(1)(c)
read
(34)
Whether
it
is
proved by the
YES
(35)
Whether
it is
proved
by the
NO
- -
,-- --1
34
Rs.
8,30,00,000/
Narbharam
benefiting
favouring
Harakchand
accused
M/s.
for wrongfully
No. 9
and
10
and
Corruption Act?
(36)
Whether
it
is
proved
by
the
that
of
the Prevention of
Corruption Act?
(3 7)
Whether
it
is
proved
by
the
the same in
Branch,
did
knowing
not belong
that
the
to them
and
NO
35
consideration and committed an offence
punishable under section 403 of the Indian
Penal Code.
Whether
(38)
it
is
proved
by
the
accused
Nos.
and
11,
being
except
acrused No.11.
Yes,
and
committed
an
(39)
Whether
it
is
proved
by
the
Code?
(40)
Whether
it
is
proved
by
the
YES
36
the
accused
No.3
being
employee
of
aforesaid
act
of
criminal
Whether
( 41)
it is proved
by
the
the
accused
22/10/1 991
deposited
Nos.
at Mumbai
cheque
and
received
No.587347
on
and
dated
accused
No.3,
their joint
of the
account
belong
received
to
the
them
same
and
dishonestly
without
any
(42)
Whether
it is
proved
by
the
YES
37
aided and abetted accused Nos. 6 and 7 to
commit
an
offence
misappropriation
by
issuance I realization
of
criminal
facilitating
and
or
the
criminal
Whether
(43)
is proved
it
by
the
Bank,
Fort
Branch
Mumbai,
dishonestly
without
any
him
receiving
consideration
or that he
the
same
thereof and
YES
38
( 44)
Whether
it
is
proved
by
the
NO
criminal
of
act
aforesaid
(45)
beyond
reasonable
accused
have
offence
NO
they
had
obtained
sanction
to
(4 7)
Whether
it
is
proved
by
the
YES
YES
necessary?
(48)
What order?
39
18.
are
and some of th.em in their submissions have tried to shift the burden
on the other accused. This being the case, it would be appropriate to
briefly note down the submissions made by each of them.
submitted that the accused No.1 was charged under section 34, 109,
120-B, 409, 477-A of the Indian Penal Code and section 13(l)(c) and
read with section 13 (2) of the Prevention of Conuption Act in respect
of the said transactions.
following submissions:-
'--------
40
(v)
20.
1,41,68,200/- on these
transactions
(a)
CONSPIRACY
He submitted
that
an essence
of
He submitted that,
circumstances
this
case
are
and
so
concerned,
far
as
the
r
I
41
statements of Mr.
(c)
was
no
entrusted
with
the
funds
or
He
in fact, from
from
Merchant
Banking
42
Department
or
from
the
General
so
far
as
He th.en
Act
are
concerned,
the
43
AIR
(3)
1992 SC 604
(4)
(5)
(6)
(7)
SC 343.
(8)
(9)
(1995)
(10)
sec 142
------
(11)
21.
Cri. W. 2815
SUBMISSIONS ON BEHALF OF
ACCUSED N0.2
22.
- N. BALASUBRAMANIAM:
accused No.2 submitted that the following charges have been levelled
against this accused viz Charge Nos. 1, 6, 8, 9, 11, 12, 13, 14, 15, 16;
17. Out of these charges, Charge Nos.2, 4, 6, 9 and 15 are in respett
Charge No.1 is
in respect of the
45
Penal code.
was
He
if the evidence is accepted as it is, the offence under section 477-A and
409 was not made out. He also submitted that the offence punishable
under Prevention of Corruption Act also was not made out. He invited
my attention to the evidence of P.W.14, P.W.6, P.W.2.
He also
th
dealing
was
to
buy,
SUBMISSIONS ON BEHALF OF
ACCUS ED N0.3 - B.R. ACHARYA:
23.
Ms. Jakhade,
(i)
She
submitted
Management
Persons
that
were
the
Senior
neither
made
(ii)
(iii)
She
was
no criminal
(iv)
47
or between any of them. She submitted that
no complaint has been filed by the employer
viz. Canfina against the accused.
(v)
(vi)
(vii)
$t.JlJMISSIONS ON BEHALF
tit- ACCUSED N0.4 P J SUBBARAO:
-
24.
, .
48
SANCTION
of
non-application
submitted
that
the
of
mind.
charge-sheet,
He
in
its
sanction
order was
passed
on
of
P.W.15
G.A.
Shenai
and
JURISDICTION
respect
10/10/1991,
five
transactions
22/10/1991,
dated
1 6/1/199.2,
all
th
the
- ------
49
OMISSION
ON
THE
PART
OF
TO
NAME
PROSECUTION
CERTAIN
PERSONS AS ACCUSED:
(iii)
for the
CHARGE
UNDER
PREVENTION
OF
COAAUPTION ACT IS NOT ATTRACTED:
(iv) He then submitted that the charge under
section 13(1) (c) and 1 3 (2) of the Prevention
of Corruption Act was not attracted to the
accused No.4 since he was
Canbank Mutual Fund which
an
employee of
was
admittedl
oi
ile
---
--
50
He then invited my
comments were
invited
on the
AIR
Mohd.
V/s.
The
State
of
51
(7)
SUBMISSIONS ON BEHALF OF
ACCUSED N0.5 IDTEN P. DAIAL:
25.
No.5 submitted that the defence taken by the accused No.5 was not
an
an
He
further submitted that the information which was furnished had been
corroborated by the respective replies by the other persons involved in
the transaction. He thirdly submitted that no investigation has been
carried out to find out whether the explanation which was given by
the accused No.5 was false.
notice which was given to the Corporation Bank being Exhibit A-5(4)
and the Credit Voucher dated 16/01/1992.
He also invited my
attention to the notice given to the Andhra Bank at Exhibit A-5 (2) and
the reply given by the Canfina at Exhibit-A-5(1) confirming what was
52
said by the accused No.5. He submitted that the Canfina has, in fact,
paid that amount on 16/01/1992.
No.5 was involved by the prosecution in Charge Nos. 1, 9, 10, 11, 22,
23, 39 and 40.
P.W.4, P.W.9, P.W. 12 and P.W. 13. He submitted that the statement
of these witnesses cannot establish the case of the prosecution.
He
Exhibit-106,
Exhlbit-51
and
Exhlbit-52.
He
has
also
this
witness does
the commission of
not
He further
He relied upon
Emperor -
in
Huntley V/s.
53
(a)
this
(b)
L.
------
54
signatories of Exhibit-51 who could have been
deposed about the payment of 16/01/1 992
which would have established the innocence
of accused No.5.
(c)
is
16/01/1992.
the
only
relevant
date
was
and
(d)
evidence
None of the
He further
in
Maruti's
case
but
it
Apex
can
be
55
SUBMISSIONS ON BEHALF OF
ACCUSED NO. 6 SJ{. JHAVERI
-
26.
No.6
with charge Nos.1, 19, 32, 35, 37 and 38. He submitted that so far as
the first transaction is concerned dated 10/10/1991, none of the
witnesses had named the accused No.6
attention to the statement of P.W.9.
Narichania, who was the co-accused at the relevant point of time, was
later on dropped as an accused and he was also not examined by the
prosecution.
to
the
statement
Investigating Officer.
of accused
He also invited my
No.11
and
P.W.19
56
documents at Exhibit A-6(18) clearly established that a substantial
payment was made by the accused No.6 to Canbank after 1 1/10/1991
and
this
(b)
(c)
(d)
11/10/1991
(e)
57
Seth - accused No.7 was dealing with the
Canbank.
(f)
and
connected
10
and he was
with
the
in no way
transaction
dated
10/10/1991.
(g)
statement
of
P.W.18
Assistant with Ws
invited
my
was
Accounts
Harackchand.
He also
attention
Exhibit A-6(8),
who
to
Exhibit A-9(1),
Exhibit A-9(4),
Exhibit a-
He submitted that
(h)
(i)
58
He
1953
216.
was
not
and in
SUBMISSIONS ON BEHALF OF
ACCUSED N0.7 PALIAV SETH:
-
27.
was
59
for non production of material documents. He invited my attention to
the evidence of P.W.6 K. Ashok Kumar Kini, P.W. 13
Omprakash,
P.W.7, P.W. 9 and P.W.8. He submitted that the evidence which was
brought on record did not indicate in any manner that the accused
No. 7 was in any way involved with the alleged offence. In a nutshell,
he submits as under:-
(a)
(b)
There
substantial
was
contradictions
in
the
internal
depositions
of the
(c)
between f'
..anfina, Canbanl< and the brokers
and thee were as many as 300 transactions
in respect of Canbank.
(d)
The
books
of accounts
were
not
properly maintained.
(e)
60
SUBMISSIONS ON Bf!.HALF OF
ACCUSED N0.8 - M.K. ASHOK KUMAR
28.
He
D1souza
who
Manager of CBMF.
was
the
He submitted
Divisional
that the
(b)
No.8.
In a
61
placed by the prosecution in support of the
charge, did not establish that the accused No.8
was involved in the commission of the offence.
(c)
was placed,
w
as
(d)
incriminating
evidence
against
the
accused
No.8.
(e)
circumstantial
evidence
against
the
accused
(f)
1
62
SUBMISSIONS ON BEHALF OF
ACCUSED N0.9 - KETAN V. PAREKH &:
ACCUSED N0.10 - NAVINCHANDRA N. PAREKH
29.
He
He invited my attention to
He also
He also
63
and did not take any steps to verify whether the explanation was
correct or not. He submitted that no case therefore is made out by the
prosecution against these accused.
SUBMISSIONS ON BEHALF OF
ACCUSED N0.11 - B.V. SRINIVASAN:
30.
B.V.
Officer
the
of the signatories
along with the General Manager B.R. Acharya - accused No.3 for the
operation of the Current Account of the Canbonus Fund. He submitted
th.at since there were no clear cut duties and responsibilities specified
by the
Management,
investment decisions
the Fund
and
Managers were
not taking
any
the fund i.e bringing the transactions into books of accounts as per
bank entries, receipts and payments.
No.11,
while issuing
crores dated
cheque for
10/10/1991
which are
Exhibits
14
and
15,
64
B.R.
instructed him to issue the said two cheques on 9/10/1991 itself and
these cheques were signed by the accused No.3 as signatory No.1 and
accused No.11 has sign.ed
as
operation. He submitted that the accused No.3 had neither given any
information nor details of the
transactions.
was
not in Mumbai on
He further invited my
He
submitted that the I.O. had admitted in his cross-examination that the
name of accused No.11 was not mentioned in the FIR.
He also
T.Ravi when the entries in the attendance register were shown to him.
He submitted that, therefore, the accused No.11 had acted in good
faith and had carried out the instructions of the higher authorities i.e.
65
accused No.3 and that the accused No.11 had no freedom of choice or
authority to question the bonafides of accused No.3.
31.
32.
invested in Nationalized and other Banks were siphoned off for the
purpose of dealing in public securities and these. huge amounts which
were utilized for the purchase of public securities were not backed up
by any physical securities or other collateral securities such a.S BR, SGL
etc.
Soon, thereafter, the scam broke out and the investigation was
as
Jankiranian
Committee, which
disclosed
large
scale
66
irregularities which were committed by Public Sector Undertakings,
Mutual Funds, Nationalized Banks with the help of brokers.
The
In
Bombay, (5)
into
crirnin.al
conspiracy
and
had
siphoned
off Rs
47, 70,68,200/- and that the said amount was returned back without
interest illegally. In the complaint, details of these five transactions
67
have been mentioned and the refund alongwith interest
indicated.
was
also
33.
therefore,
his
name
was
also
dropped
from
the
charge-sheet.
.____
68
accused No.11 had left the service during the course of investigation.
34.
Sr.No.
Date
Scheme
Diverted to
Can bonus
Can cl.go
Amount
17.29 crores
1.
10.10.1991
2.
22.10.1991
12 crores
3.
16.01.1992
5 crores
4.
07.021992
5 crores
Can cigo
Accused No.5
Andhra Bank
Late
Manubhai
Maniklal
5.
11.021992
7 crores
Manubhai
Late
Maniklal
and thereafter the funds were returned back th.rough illegal means.
The amount was received from Canara Bank "F11 & "I" Section to the
tune of Rs 53,77,82,500/-.
Principal
(Rs)
Particular.i
Amount&2nronriated
(Rs.)
17,29,00,000
Ril.
17,29,00,000
12,00,00,000
14% NCD
12,96,46,000
17,00,00,000
14%NCD
17,45,22,200
47.70,68,200
53,77,82,500
6,07,14,300
69
Out of these amounts,
the
accused:-
35.
S. K Jhaveri
Narbharam Haracl<dumd
Hi.ten P. Dalal
Rs.
Manubhai Maneklal
Rs.
11,25,638.50
Rs.
3,15,05,231.19
Rs.
1,56,01,6 10.41
Rs.
1,31,91 ,246.04
15,86,736.24
Mr. V.G. Pradhan made a statement that he was not pressing charges
in respect of transactions dated 7/2/1992 and 11/2/1992 in respect of
remittance of Rs 5 crores and Rs 7 crores from Canfina to late
Manubhai Maneklal.
36 .
Before I deal with the evidence on record and consider the rival
briefly
(c)
Canbank
consider
the
(F
(b)
(a)
Canbank Financial
manner
in which
Canfina
entered
into
70
37.
Qmfina
on business
higher purchase
and
merchant banking
has
has brought
marked at Exhibit-57.
Act and
clause 20 of
same are
the
Articles/Memorandum of Association,
However, by virtue
local Office in Mumbai and also has its accounts in Canara Bank,
Mumbai. (Emphasis supplied).
38.
71
his evidence
in para 6. He
of Canfina.
39.
(a) to acquire, hold, manage, trade and dispose off shares and
40.
were regulated through the directions issued by the RBl from time to
time and these directions were issued under section 21 and 35A of the
Ban.king Regulations Act.
.
72
PROSEClITION WITNESSF.S:
41.
Mr. M. Papa Rao (Exhibit-71), P.W. 9 Mr. Ravi Tirumalai (Exhibit101), P.W. 15
P.W.
2 - Mr.
B.N.
- Mr.
&
Canfina.
P.W. 3 - Mrs. Shaila Madhukar (Exhibit-35) and P.W. 8 - Mr.
Pronob Ray (Exhibit-75), both were working in Bank of America.
P.W. 4
73
working with the Andhra Bank,
Fort Branch.
DEFENCE WITNF.SSF.S:
On behalf of defence, three witnesses have been examined viz.
42.
(1) D.W. A-6(1) - Nishit Rasiklal Joshi [Exhibit A-6(9)] who was
working as accountant with
Shrenikbhai Jhaveri
accused No.6,
Office
share
Harakchand.
sub-broker
and was
employed
with
Mls
Narbheram
43.
Prosecution,
--
---
in
has
not been m a
74
position to bring on record any direct evidence in respect of the
alleged criminal conspiracy hatched between the accused.
It has,
examined CBMF employees to show that they had received funds and
the documents to establish conspiracy have been brought on record.
Thereafter, the accounts of the individual brokers in various
ban.ks,
such as Bank of India, Bank of America, Andhra Bank etc. have been
brought on record to show that these amounts were credited in the
said accounts.
is
reflected
of these securities viz "RIV' & 1114% NCDs" on the relevant date on
which purchase was made has not figured
75
entries were made to show that there was a wrong remittance of that
particular amount, as reflected in the transaction
7 crores, charges have not been pressed by the prosecution) and these
documents were later on altered to show that the wrong remittance
was
repaid .
It
is
documents that wrog remittance was made to CBMF and, later on,
word "CBMF"
was
scored off.
It is argued
that
Canfina.
Point-B
Le. CBMF to
Point-A i.e.
is
of securities
beyond
the particular
limit
authority, they had allegedly entered into the said transaction and,
76
therefore,
trust
punishable under section 409 of I.P .C. and had misappropriated the
arno.unt and committed an offence punishable under section 403 of
I.P.C. and section 13(1) (c) read with section 13 (2) of the Prevention
of Corruption Act and, for that purpose,
had created
fabricated
44.
estabfuhed which
present
case,
the
points
out
prosecution,
to
Jn the
it
is 100% subsidiary
Though
77
the provisions of section 21 of the Banking Regulations Act and the
guide-lines laid down by the RBI from time to time which have
statutory force, it did not have the authority to lend money since this
c."Ould be done only by the bank withln the meaning of the provisions
of section 21 of the Banking Regulations Act and, admittedly, Canfina
was not a bank within the meaning of the said section. It has come in
evidence that CBMF
of Canfina.
P.W. 9
was
has stated in
there
was
This evidence
That being the
from
Canfina which,
the brokers viz. accused Nos.5, 6, 7, 9 and 10. It has been brought on
record that on the very same day when the payment was made
from
Canfina to CBMF, either on the same day or one day before that,
78
This clearly
indicates that there was complete chain and all the accused had
knowledge that the amount would be remitted from Canfina and on
the same day the amount would be remitted from CBMF to the
brokers. The chain, therefore, is established from the various entries
which are made in the account of the respective brokers and the
vouchers were prepared by CBMF.
entries in the Deal Pad were made and though physical securities and
Bank Receipts were n.ot obtained, the amount was remitted. No entry
was made in the Sauda Book. The vouchers which were prepared viz
was
utilized the money and, thereafter, remitted the. amount back after it
was used for their own purposes. The theory of the accused that there
were regular transactions in respect of purchase and sale of securities,
therefore, falls to the ground and the case of the prosecution that
fictitious entries were made for the purpose of remitting the amount
79
by showing that there were ostensible purchase and sale transactions
stands established from the evidence which
record.
has
been brought on
Canfina
lt
has
This
been argued
on behalf of the accued that there is no basis for the prosecution cae
that
all
the Sauda Book. Even assuming for the sake of arguments that this is
true , yet the vouchers which were prepared by the officials of CBMF
show that there was no such transaction, otherwise they would have
created a record to indicate that the amount was received for the
purchase of RlL and NCD securities. On the contrary, the vouchers
indicate that the amount was wrongly remitted to CBMF.
Coupled
with this fact, there is evidence on record to show that CBMF was not
dealing in purchase or sale of securities on behalf of Canfina.
If
,.
80
This further
as
offence of conspiracy,
established.
45.
46.
to
Canfina.
47.
like
to discuss the
I
I
81
evidence which is brought on record, regarding the purchase of shares
by Chief Dealer and dealer of Canfina at Bangalore.
48.
P.W.
followed
in respect of
He has
stated in his evidence that accused No.8 - M.K. Ashok Kumar was
authorized to undertake sale and purchase transactions in shares on
behalf of
Canfina
and
that
he
had
no powers
to
undertake
sale
and
purchase
He has
82
basis upto Rs 50 crores per transaction, the total not exceeding Rs 300
crores per day for sale and purchase separately.
Under Exhibit-18
By Exhlbit-19
Mr. P.N. Narayanrao who was the Executive Vice President. The office
note was also signed by the Managing Director Mr. A.P. Rao.
49.
In his
evidence
P.W.6
in which
the purchase and sale transactions were made. In the transactions, dt.
10.1.91, 22.10.91 & 16.1.92 since we
are concerned
with purchase of
his evidence
-------.Ml
83
he would note it down in Sauda Book and the payment for those
purchases as and when
The IBA is
contain IBA number, date, and the Canara Bank Branch name and the
amount.
the
eque
On the
basis of that cheque, the Canara Bank Branch would prepare JBA
which is generally taken delivery of by Funds Dept. of Canfina,
Bangalore and sent over to the Canara Branch
purchase, the averments are that the vouchers are prepared for sale
and purchase on the basis of Sauda book.
These vouchers
are
The
84
Vouchers would contain the nature of the security, quantum, purchase
or sale rate, the brokers name and the aggregate amount receivable or
payable.
In so far
as
as
the portfolio
SO.
Canfina.
has
dealers in
Funds
Department.
He has stated
He has stated
as
that accused No.1 and accused No.8 used to give him Deal Pad and,
thereafter, P.W.2 used to take xerox copy of the relevant Deal Pad for
-
the purpose of making entry in their record and after taking out xerox
copy, the original Deal Pad was returned back to accuseq No.1 or
accused No.8.
85
51.
P.W. 1 -
has
stated in her
in
case of
52.
P.W. 9 - Mr. Ravi Tirumalai has further stated that Can Bank
Mutual fund (CBMF) was a trust created by the Canara Bank which
was
the
principal trustee
and,
at
the
relevant
ti.me,
it
had
53.
86
54.
S. Mohan and accused N o.8 - M.K. Ashok Kumar were dealers in Funds
Department and they concluded the deal. He has stated that they used
to fulfill particulars in the Deal Pad. Accused No.1 made entry in his
handwriting in respect of purchase on 10/10/1991 for RIL for the
aggregate amount of Rs 1 7,29,00,000/- from CBMF. RIL indicates
Reliance 1ndustries Limited. It is indicated in the column made for
the amount was re.mitted by IBA No.32100 for Rs 8 crores and IBA
No.32107 for Rs. 9,29,00,000/- from Canara Bank, Tamarind Lane
Branch, Bombay. The Deal Pad has been exhibited at Exhibit-59 The
87
prosecution has then relied on the evidence of P.W. 6 Mr. A.K. Kini.
P.W. 6 has also stated the same thing as has been stated by P.W.2. In
para 18 he
has
stated that
in
again
He
At
That entry is
issued on Tamarind
has
these IBA numbers are same as are mentioned in Exhibit-59, the total
of the amount of these two IBAs is Rs 17 .29 crores, which is the
amount mentioned in Exhibit-59. (Emphasis supplied).
55 .
in
Book contained 170 pages and it was for the period from 27/05/1990
to 29/05/1992 and it contained entry with regard to sale and purchase
of shares and also other securities. Upon being shown entries on page
54, he
has
stated that the entries on that page were for the period
fro
nd in
l Nos.
35.
These-
.l
..
88
He has further
himself would write down the IBA number in the IBA Issue Register
which would contain IBA number, date,
Bombay and the amount. P.W. 2 has stated that dealer accused No.l
s. Mohan and accused No.8 - M. I<. Ashok Kumar used to give Deal
Pad to him and he would take xerox copy of the relevant Deal Pad for
the pu.rpose of making entry in the IBA Register.. He has stated that in
respeci of this transaction, th entry was on page 62 with regard to
IBA NQ._3 2100 regarding Rs 8 crores issued on Canara Bank, Tamarind
Lane Branch, Bombay. The said entry is at Exhibit-39 and in respect of
the balance amount on page 63, the entry is in regard to IBA No.32107
regarding amount of Rs 9.29 crores issued on Canara Bank, Tamarind
Lane.B ranch Bombay. The entry is at Exhibit-40 and the IBA numbers
are same as were mentioned in Exhibit-59. The total amount of
twp
JBAs was Rs i7.29 crores which was the amount mentioned in Deal
89
Pad - Exhibit-59 and both the entries in Exhibits-39 and 40 were in the
handwriting of accused No.1 - S. Mohan.
that the Back-up Office would prepare a cheque on the basis of these
details and, accordingly, a cheque
was
It was
to
Tamarind Lane
P.W.2 has further stated that he has prepared another cheque in his
own handwriting dated 10/10/1991 of Canara Bank, Bangalore,
drawn in favour of "Yourselves IBA on Tamarind Lane, Bombay", for a
sum of Rs 9,29,00,000/- and was signed by A.K. Kini.
The said
amounts.
90
56.
57.
brought on record that the Canbank Mutual Fund had an account with
Canara Bank, Tamarind Lane Branch and transfer was made from one
Branch to another Branch by a telegraphic transfer or by mail transfer.
The head office of Canara Bank is situated at Bangalore.
58.
message on phone from the Head Office and it prepared Dummy Debit
Slip, Head Office Account dated 10/10/1991 for a sum of Rs 8 crores
and another Slip for a sum of Rs 9.29 crores and both these amounts
were credited in Account No. 3980 of Canara Bnk and debit slip was
brou ght on record by P.W. 4
at Exhibit-54(1).
59.
P.W.9 - Mr. Ravi Tirumalai has deposed in his evidence that the
91
remittances of funds to CBMF from Canfin.a, Bangalore, were in the
form of IBA and the Canara Bank, Tamarind Lane Branch was the
banker.
any .official from Canfina, Bangalore and, thereafter, the physical IBA
of the same number used to be received from Canfina, Bangalore and
from that they would learn about the transfer from Canfina, Bangalore
to ara Bank, TaJJ?.arind Lane Branch.
forwarded
effecting
in the
prescribed
form
for
credit
in funds
(Schemes) account and if the physical was not received, IBA number
would be mentioned in the prescribed form. He has further stated that
th.ere was an extension counter of Canara Bank in CBMF itself.
60.
He has stated
that in this transaction there was deviation from this normal practice.
He
has
Ms virakthi
het
respect of debit entry and the lower part was in respect of credit entry.
This voucher
has
In the
92
upper part of the document, there is a mention of "Can bonus" and the
debit entry amount is Rs 1 7.29 crores.
Sundry Creditors
debited to
was
Srinivasan - accused No.11. The lower part of the document - Exhibit178 i.e. the credit part refers to the amount of Rs
credit to Bankers Tamarind Lane.
Cheques No.488905/906.
wrongly
re.paid."
remitted
In
this
There is an endorsement
to CBMF.
"as amount
endorsement
the
words
"remitted
to
Canfina
Bangalore" were scored off and the word "repaid11 was written. P.W.1
has stated that she
has
done
this
as
61.
is
dated
issued
No.3
B.R.
Acharya,
Officer
of CBMF.
One
cheque
93
Srinivasan and accused No.3 - B.R.. Acharya and another cheque dated
10/10/1 991 for a sum of Rs 8,30,00,000/- bearing No.488906 issued
in favour of Mis Narbheram Harakchand and signed by accused No. 1 1
and accused No.3.
and 1 5 respectively.
that on the
that the
62.
that he had written those ch.euqes on the instructions of accused No.3B.R.. Acharya who was
will be considered
63.
The prosecution
and entries
regarding
----
94
October, 1991 were brought on record at Exhibit- 105 (2) collectively.
This was shown to establish that accused No.3 - B.EL Acharya was not
in Mumbai but he w at Bangalore for official duty.
This document
64.
-- -
95
that cheque No.488906 dated 10/10/1 991 for Rs 8,30,00,000/- issued
in favour of M/s Narbheram Harak.chand is signed by the accused
No.11
of
Rs
Exhibit-15 for
The
is
Srinivasan and accused No.3 - B.R. Acharya. This credit slip has been
has
hlc.h
Narbheram
03/10/1 991
Branch.
Harakchand
from
Stock Exchange
96
65.
After
the
Navinchandra
said
amount was
received,
accused
No.
10
8,30,00,000/-,
accused
No.10
remitted
an
amount
of
Rs
account at Exhibit 113 and 113 (2) shows that accordingly debit entry
was made after the payment of Rs 8,25,00,000/- in the account of M/s
Prosecution case, therefore, is that the
Narbheram Harakchand.
which
is
at
Exhlbit-113,
opening
balance
as
on
97
66.
Out of the other cheue for Rs 17.29 crores which was received by
CBMF, again accused No.3 - B.R. Acharya and accused No.11 - B.V.
Srinivasan issued cheque bearing No.488905 dated 10/10/1991 for a
sum of Rs 8,99,00,000/- in favour of Mis S.K. Jhaveri which
was
signed by both the accused and which is at Exhibit- 14. This cheque
was deposited by accused No.6 - S.K. Jhaveri in his account No.19186
with Bank of India, Stock Exchange Branch, Mumbai by pay-in-slip of
Bank of India on the _same date. The pay-in-slip has been brought on
record by P.W. 1 1 - Mr. Kishore Mahadeo Ajgaonkar and is at Exhibit1 17 and the name and date of the cheque at Exhibit-14 tally with the
pay-in-slip at Exhibit- 117.
for Rs 24,75,65,324/-
in favour of
Stock Exchange
98
House could be issued by accused No. 6 - SJ(_ Jhaveri only because
these two amount.s viz Rs 8.25 crores and 8.99 crores were credited
into his account. The case of the prosecution is that, therefore, though
accused No.6 - S.I<. Jhaveri had no transaction with Canfina or with
CBMF, these amounts were deposited in his account without any deal
or security transaction and these amounts were utilized by
other purposes.
him
for
submitted that he had sufficient amount in the Bank and that he had
several transactions with CBMF and Canfina.
99
Department and they were the persons who were concluding the deal
on behalf of Canfina.
Prosecution case
to transaction dated
68.
When such
100
telephone IBA number and, thereafter, mention IBA number in the IBA
Issue Register. P.W.2 in his evidence
S.
Mohan and accused No.8 - M.K. Ashok Kumar used to give him Deal
Pad and, thereafter, P.W.2 used to take out xerox copy of the relevant
Deal Pad for the purpose of making entries in IBA Register.
In this
69.
The
rubber stamp
the
amount
has been
This
101
No.26645 maintained by Canfina with Canara Bank, Cunningham
Road Branch, Bangalore and it is at Exhibit-162, which indicated that
the cheque
was
Branch in Bangalore.
70.
P.W.2 in his evidence has stated th.at the credit slip would. be
was
as
Exhibit- 26.
71 .
P.W.4 in his evidence has stated that the transfer of money from
telephone from the Head Office, Canara Bank Tamarind Lane Branch,
Mumbai prepared credit advise dated 22/10/1991 of Canara Bank
authorizing credit of Rs 12 crores to account No.3914 CBMF Cancigo .
On this credit advise Mr. Mani had put his initials. This credit advise is
102
72.
was
Ravi Tirumalai of
which were remitted to CBMF were in the form of IBA and it was used
to be conveyed on telephone by any official from Canfina, Bangalore.
He
has further stated th.at the physical IBA of the same number used to
come from Canfina, Bangalore. He has stated that, after perusing IBA,
they used to leam about transfer of funds from Canfina, Bangalore
Canara Bank Tamarind Lane Branch. Depending upon
to
the scheme to
103
73.
The
Canfina was received by CBMF. He has further stated that the voucher
dated 22/10/1991
was
two
was
debit
portion and the lower portion was credit portion and below the
signature of Mr. Rajesh Pawar, P.W. 9 had signed since he had
checked it. He has stated that accused No.4 - P.J. Subbarao also had
signed the voucher for
Exhibit-102. P.W.9
is at
was wrongly
as
per the
104
wrongly
received by CBMF on
Jhaveri though, he was one of the brokers dealing with CBMF. The
evidence of this witness establishes that though in the record of CBMF,
the amount was wrongly received by CBMF, instead of remitting back
the said amount, the money was paid
to
74.
P.W. 9 - Mr Ravi Tirumali has further stated that one day before
asked B.R. Acharya the reason why the cheque was to be prepared in
favour of Jhaveri.
to
105
Narichania and when he did so he was asked by
was
told to
him
Anil Narichania
also signed the cheque. He then took the cheque to B.R. Acharya. The
cheque
was
was
prepared at the
was
75.
crores
had been
received from Canfina, Bangalore through IBA and it was meant for
Cancigo Scheme.
P.W. 9
The
It has been
established by the prosecution that the accused No.6 - S.K. Jhaveri and
accused
No.7
Pallav
Seth
had
Joint
Account
bearing
106
No.047860111 with Bank of America, Mumbai.
76.
P.W. 8 - Mr. Pronab Ray has stated in his evidence that he was
was
77.
P.W.8 has further stated in his evidence that the opening balance
after the cheque was credited in the account, the amount was utilized
for making payment to Mr. R.R. Bohra vide cheque dated 22/10/1991
for Rs 59,37,000/-. The said cheque is also on record at Exh.J.oit-80.
107
He has stated that the another cheque of the same date for Rs
1,11,78,600/- was issued by accused No.6 - S.I{. Jhaveri in favour of
Bank of India A/c. BOI Mutual Fund.
Exhibit-81.
A/c. BOI Mutual Fund drawn on Bank of America. Th.is cheque is also
brought on record at Exhibit-82. Another cheque at Exhibit-83 of the
same date for Rs 40,63,000/- issued by Shrenik Jhaveri - accused No.6
78.
----------
108
the Joint Account, the accused No.6 and accused No.7 were m a
position to make several payments to various parties.
From the
had misutilised the funds which were not meant for them and have
thereby misappropriated the said amount for their own use and
accused Nos.1, 8,
3,
under sections 120-B read with sections 403, 409, 109 of the Indian
Penal Code read with
13(1)(c)
PURCHASE
(IIO
OF 14%NCDS FORRS5CRQRF.S
FROM CBME ON 16/01/1992
79.
In this transaction,
accused
109
have been involved.
22 and 23.
this
transaction,
prosecution has examined P.W.1, P.W.2, P.W.6, P.W.4, P.W. 19, P.W.9
and P.W. 12.
107,
.106,
51,
80.
ln
this
has
Nos. 1 and 8 created the record to show th.at there was purchase of
14% NCDs at Rs 100/- from CBMF of Rs 5 crores on 16/01/1 992. A
debit voucher was prepared, showing the said amount being debited in
the account of Canfina and the CBMF, instead of remitting this amount
to Canfina, paid the said amount to Hiten P. Dalal - accused No.5 who
utilised the said amount for his own purposes.
remitted by informing CBMF lBA number.
Thereafter, the
remitted, no entry was made in the Sauda Book. The IBA Issue Book
shown the entry with regard to IBA which, in
this case,
was No.32686
110
issued on
crores. P.W.l, P.W.2 and P.W.6 have deposed about the manner in
which the amount was remitted from Canfina to CBMF, how the
entries were made in the Deal Pad and how the amount which was
received by CBMF was transmitted to accused No.5 - Hiten P. Dalal.
This amount was deposited in the account of accused No.5 - Hiten P.
Dalal who issued a cheque in favour of Corporation Bank.
The
in his Account, he
i- - -
111
The telegraphic transfer application is at Exhibit-28 which mentioned
IBA No.32686. The Canbank Mutual Fund rubber stamp indicates that
the
receipt of
this
crores
Bangalore to CBMF.
X-18(2). The
crore.s
is at Exhibit-51.
On
with cheque
in Tamarind
52.
81.
-----
- - -
112
"BC/11/9211 on the requisition form at Exluoit-52. P.W. 12 - Vasanth
Kumar Damaraju has stated that during the course of investigation,
Andhra
Bank, vide
its
82.
was
received
was
of H.P. Dalal. P.W. 12 has brought on record the said voucher and it is
exhibited at Exhibit-121.
83.
113
received
No. 11.
The accused
Officer, was duty bound to follow the instructions and the amount was
remitted from CBMF to the account of Hiten
Further, the evidence of P.W.
utilized by Hiten
the Corporation
Bank.
84.
entries in the Statement of Account of H.P. Dalal and they are marked
as Exhibit
said cheque of Rs
25,96,95,205.48 in his
account
the balance of Rs
Account.
16/01/1992
_J
114
was
85.
the amount of
Rs 5 crores was siphoned off from Canfina via CBMF and it was paid to
was
result of the money which was made available, H.P. Dalal could pay Rs
5 crores to Corporation Bank and, therefore, he utilized the money
which did not belong to him and misappropriated the said amount.
H.P. Dalal - accused No.5, on the other hand, has submitted that the
amount of Rs 5 crores was paid by him by cheque dated 15/01/1992
115
which is one day before the said amount was deposited in his Account.
It is his case that
this
subsequent stage.
86.
that
the
Special Public
during the pendency of the case, the prosecution did not wish to press
these
two
transactions
and,
therefore,
he
did
not
make
any
an illegal
manner from
Canfina
to
the
tune
of Rs
47 crores
--
--- -
--
--------
116
remitted from Canfina and what was brought back which difference
works out to Rs 6,07,14,300/-. Out of this amount, further amounts
were paid to the brokers and balance of about rupees one crore and
odd .remained with Canfina. Prosecution case is that, therefore, there
was a temporary misappropriation and, later on, these funds which
were ostensibly paid for purchase transactions were again brought
back ostensibly for sale transactions. It would be relevant to see what
is the evidence regarding sale transactions.
88.
(1) to generate funds and (2) to take advantage of the price movement
in the market and as and when the situation arises in this manner,
brokers were contacted over telephone by the Chief Dealer Mr. M.K.
Ashok Kumar - accused No.8 and sometimes by S. Mohan - accused
No.1 and, thereafter, the transactions were concluded With the broker.
The sale transaction involved quantity of the shares and the price and,
thereafter, contract notes would come from the broker and would be
monitored by the Backup Department or by the dealers themselves.
_
_
....
._
117
Thereafter, the deliveries and realisation of the sale proceeds also were
monitored by the dealers. He has further stated that in case of shares.
delivery always used to be
in physical or by BR or by
point where the brokers were situated and the payments were received
at the Canara Bank, Bombay and transmitted to Canfina's account in
Bangalore by way of telephonic instructions followed by IBAs. In case
of sale transactions the broker would deposit the cheque with Canara
bank with instructions to make onward remittances to Canfina,
Bangalore.
to
in
Bangalore.
Actual receipt of IBAs would take two to three days. However, the
credit would be given by the Bank in Canfina's account on the basis of
,----
118
telephonic instructions received by the Funds Department. On receipt
of telephonic instructions, the concerned Officer would transmit those
instructions to the Bank in writing on the basis of which the credit
would be given by the Bank. On getting the written instructions by the
Bank, it would prepare dummy IBA and give credit to the Canfina's
account.
Canfina, the same would be sent to the Bank and the Bank would
replace the dummy IBA by the original IBA. He has stated further that
in this manner, nothing would remain in the Funds Department of
Canfina and the said Funds Department would not keep any record
with regard
instructions.
After the
securities, the Chief Dealer would first note the fact of conclusion of
the deal on a rough sheet and at the end of working hours, the rough
sheet would be handed over to the Back-up Department. The Back-up
Department would note all these deals in the Deal Pad. (Emphasis
supplied)
89.
119
was
received on behalf of
was
found "an
This cheque
was
90.
M/s.
V.B. Desai had remitted the said amount to Canfina as per unwritten
instructions of Pallav
Seth -
accused No.7.
--------
120
equal value from Pallav Seth - accused No.7. P.W. 13 in his evidence
has stated that the entry in respect of amount of Rs 53,77,82,500/- is
in his handwriting and there is mention of IBA No.F/214/92 dated
31/03/1992.
transaction.
The particulars of
the transaction also are not mentioned. The said entry is marked at
Exhibit 124. Prosecution case is that, therefore, though there was no
transaction, the said entry has been made and, therefore, the amounts
were received by Canfina, Bangalore by IBA dated 31/03/1992 being
No.F/214. The said IBA is at Exhibit-70.
91.
towards
(ii)
12 crores 14o/o NCO @ 108.04 and (iii) 1 7 crores 14% NCD @ 102.66
and it was shown that against the transaction of purchase of securities
which were at Rs 47,70,68,200/- an amount of Rs 53,77,82,500/- was
received and, as such, there was an excess amount received by Canfina
to the tune of Rs 6,07,14,300/-
92.
Again P.W.2 in his deposition has stated that there was a deal
121
pad
dated
31/3/1992
in
which
the
above
mentioned
three
transactions have been mentioned and the said excess amount was
shown to be paid on 02/04/1992.
93.
Seth by IBA
No.33242
and
the
following
details
were
(iii)
122
amount of Rs 12,75,00,000/- being payment towards purchase shares
of Nahar Spinning and also an amount of Rs 2,10,00,000/- being
payment towards purchase of shares of Castrol without receipt of any
cost memo, contract note or security in physical or in the form of Bank
Receipt. He has stated that, accordingly, deal pad entry was made and
it was used to prepare cheque for a sum of Rs 20,92,14,300/- which
was signed
by
rubber stamp of Canara bank indicated that the amount had been
transferred to Tamarind Lane Branch of Canara Bank, Bombay vide
cheque at Exhibit-33.
on
record
at Exhibit-34.
Accordingly,
cheque
bearing
P.W. 8
has
This
cheque was given to Pallav Seth, who deposited the cheque bearing
No.82331 in Bank of America by pay-in-slip dated 02/04/1992 in to
account No.4941-011 of Pallav Seth - accused No.7. The pay-in-slip is
123
at Exhibit- 77.
94.
Accused No.7 - Pallav Seth and accused No.6 - S.K. Jhaveri had
joint account in their name in the Bank of America. The cheque and
pay-in-slip at Exhibits-76 and 77 were deposited in the said account
and the credit entry is reflected in the Statement of Account Exhibit-38
and the entry is at Exhibit-38(1).
95.
time
was
M.K. Ashok Kumar caused Canfina to pay Rs 600/- per share and, as
such, total loss of Rs 5.10 crores was caused to Canfina and
corresponding gain to said accused No. 7 - Pallav Seth. To prove this
fact, prosecution has examined P.W.17 - Yogesh Bhambardekar
working with Bombay Stock Exchange, who has stated about the
original quotation sheets for that particular period which were brought
on record at Exhibits-137
to
P.W.7 who has stated that Mis Nahar Spinning Mills had informed
124
Bombay Stock Exchange vide their letter dated 12/02/1992 about
record date for their right issue as 25/03/1992 and, therefore, under
BSE rules, transactions upto 20/02/1992 were on cum rights basis and
from 21/02/1992 onwards were on ex-rights basis .
He has stated
that accused No.8 - M.K. Ashok Kumar did not take any contract note
from Pallav Seth - accused No.7 in connection with the said purchase
of
his
11ex-righ.ts11
the
term "cum
the
He
has
125
till mid July 1992 and after the scam was known to the public at large,
Mills through
also
applied
for
the
rights
issue
thereunder0
96.
made
an
entry
in
the
dealers
pad
dated
126
per share from Pallav Seth - accused No.7. The deal was finalised by
accused No. 8 - M.K. Ashok Kumar and on the basis of the said entry,
transferred
on 08/04/1992 to Canfina
Mumbai for credit of the same in the account of Pallav Seth - accused
A cheque bearing No.082334 dated 08/04/1992 for Rs 25
No.7.
crores was issued and the same was deposited in the joint account of
accused Nos. 6 - Shrenik Jhaveri and accused No.7
the Bank of America.
- Pallav Seth in
The pay-in-slip
97.
98.
127
to
Canfina and,
99.
to
are
128
has examined
P.W.2, P.W. 6, P.W. 19, P.W. 4, P.W. 9, P.W.1, P.W. 10, P.W. 18 and
P.W. 1 1 .
further
102. P.W.2
Nos. 3, 4,
P.W.2, in
Counsel for accused No.1 has admitted that the entries in the Deal Pad
are
made on the basis of rough sheets and they are made by the dealer
the Managing Director through Mr. Narayan Rao, who was the
Executive Vice President at the relevant time and that the deals
finalized in the Funds Department were executed at different places at
129
was
not
was
103. In his cross examination by the Counsel for accused No.2, P.W.2
has stated that he did not get rough sheet but only Deal Pad was given
to him and the IBA number was given by the dealer on the Deal Pad
and, accordingly, entty was made in the IBA Register and that entry at
Exhibit-43 in IBA No.2 was in the handwriting of Balasubramaniam.
He further admitted that physical register was for showing the holding
of security and not for the movement of security. He was shown office
note at Exhibit-20. He, however, denied having knowledge about the
contents of office note.
104. The counsel for accused No.5 cross-examined the P.W.2 and in
was
cheques on the basis of Deal Pad and he has stated that IBA used to be
issued only in respect of Canara Banlc. The Counsel for accused No.7
130
He
has
has
also admitted that by the Deal Pad Exhibit-48, the earlier five
transactions of purchase as per Exhibits 21, 23, 25, 27, 29, and 31
were reversed by receiving the amount of Rs 47,70,68,2001- and that
a profit of Rs
1,41,68,200/-
examination of P.W.2
was
earned
by
Canfina.
Cross
105. From the cross examination of P.W.2, it can be seen that none of
can
be seen that accused No.1 has tried to put a suggestion that emphasis
131
could not be led on deal pad entry in the absence of rough sheets
being brought on record.
are not brought on record that does not establish that deal pad entry
which was made by accused Nos. 1 & 8 was genuine. The fact that
the deal pad entry is fictitious has been established from the vouchers
which are prepared by accused Nos. 3 and 1 1 at the CBMF end. These
vouchers clearly establish that, according to CBMF, the amount
amount remitted from Canfina was wrongly received and had to be
repaid back to Canfina. The amount was credited to the account of
sundry creditors in CBMF.
an entry would not have been made in the voucher which was
prepared by the employees of CBMF. Similarly, cross-examination by
learned Counsel for accused No.5 and 8 does not help the accused in
any manner. Even admission of P.W.2 that whenever he used to take
the cheques to P. Narayan Rao and Ashok Kini, they used to check and
sign the cheques also does not establish the innocence of accused
No.8.
The evidence of
132
106.
to
cross-examine him
He has
with regard to each and every transaction was used to be put before
the Managing Director. He has further admitted that there used to be
concurrent audit in Canfina. He has further admitted that he was not
shown rough sheets which were written by the dealer when his
statement was recorded by CBI. fie has denied the suggestion that the
rough sheets and deal pads used to be put up before him before he
,
being
transactions were never written in the Sauda Book and, therefore, did
133
was
aware th.at there was arbitration between Canfina and CBMF. It was
suggested to him that separate register for ready forward transaction
was maintained in the Dealing Department. He, however, stated that
He
was not
rough sheets were initially prepared and then Deal Pad has been
prepared and that there were higher officers than accused No.1 who
were responsible for maintaining day-to-day affairs of
suggestion was also denied by him.
Can.fina. This
other securities were not mentioned in the Sauda Book and he has
accepted
the Sauda Book and, therefore, he did not inform the CBI about it.
107. In the cross examination by the Counsel for accused No.2, P.W.6
has stated that he was the co-signatory alongwith accused No.2 of
cheques at Exhibits 27, 29, 31, and 33. He has further admitted that
for every transaction, there used to be rough sheet and that the
134
has been put by the Counsel for accused No.2 to this witness.
this statement on the basis of Deal Pad at Exhibit- 61 and that the
dealers working in Funds Department of Canfina used to take
decisions with regard to investments even on be.half of the clients.
This witness was asked regarding Port Folio Management Scheme and
he has stated that there were two types of Schemes viz (1) where the
clients issue instructions in respect of each transaction and (2) where
the discretion is given to Funds Manager to deal with the funds of the
clients as the dealer th.inks fit. He has stated that the entry at Exhibit41 was in respect of the transaction of the second category. He has
also admitted that, normally, IBA should contain the details as to
_J
135
whom the payment
109. P.W.6 in
is to be made.
and whether
the Arbitrators that they had received the funds in all the five
transactions.
1 10. P.W.6 in
136
1 1 1 . P.W.6 in his cross examination by Counsel for accused No.8 has
admitted that entries in IBA Issue Register No. I & II were not in the
handwriting of accused No.8 - M.K. Ashok Kumar.
He has further
was one of
th.em and the other was P.N. Narayanrao. and above them were
Executive Director and Managing Director and above them was the
Board of Directors of Canfina and th.at the Chief Dealer had no power
to sign the cheques after 1991 and that the notes in respect of all the
transactions used to be put up to the Managing Director th.rough the
Back-up Department.
three audits of Canfina viz (1) continuous audit, (2) statutory audit
This
He admitted that he
had
this document on the right hand side and other signature was
P.N.
After
Narayanrao
which
has stated that NCO securities were not mentioned in the Sauda
Book and in his re-examination he has stated that it was not possible
to co-relate by mere reference
to
to
which
137
company they belong.
are
listed
on the Stock Exchange. After he was shown Deal Pad at Exhibits 62,
65 and 67, he has stated that there is reference to NCDs but the name
of the company was not mentioned and, thereafter, he has stated that
he was not in a position to explain why the NCO tran5actions were not
entered in Sauda Book.
was
saying that they were not responsible for day-to-day affairs and
management of canfina. A further suggestion was put that the office
note regarding these transactions was put up before the Managing
Director and that the rough sheets which were written by the dealer
were not shown
to
him.
In
__J
138
Counsel for accused No.1, initially he stated that NCO transactions
were never written in the Sauda Book. He was, however, re-examined
by the prosecution and, in the re-examination, he clarified that it
was
was
was no reference
reference
to
to the
NCDs.
The
emphasis by the learned Counsel for the accused was that the theory
of prosecution that the transactions of purchase and sale of securities
were entered in Sauda Book was not established.
solitary
admission
made
by
this
witness
that
In my view, the
NCDs
were
not
mentioned in the Sauda Book does not falsify his earlier evidence that
in his re-examination.
as
to whbm
the payment is to be made and that the dealers working in the Funds
Department
of Canfina
used
to take
__J
139
This cross-examination
It is neither the case of
prosecution nor it has been suggested by the accused that the alleged
purchase or sale of securities was pertaining to any particular client
becuse, normally,
transactions
can
put by the learned O>unsel for accused No.4 that there were
This suggestion does not help the case of any of the accused. The
witness, however,
accused No.5 has made a suggestion that this witness had not signed
any other cheque of Rs S crores on 1 6/01/1992 but that does not
establish the case of accused No.5.
the amount
Prosecution
amount
to
_J
140
admission that the entries in IBA Issue Register 1 and 2 were not in
the handwriting of accused No.8 does not absolve the said accused
since he was the Chief Dealer and he had been entrusted with certain
funds by the Board of Directors and he, alongwith accused No.1, had
remitted these amounts to CBMF.
113. P.W. 1
114. In her cross examination by Counsel for accused Nos. 9 and 10,
P.W. 1
has stated about the vouchers being kept in th.e file serially and
that it was a box file without any specific name and whatever was
written
personal
knowledge
handwritten
about
the
contents
and
that
apart
from
were keyed in
the computer.
accused No.4
141
No.11 and that the amount which was not pertaining to the scheme,
would be shown in the account of Sundry Creditors - others and
if the
amount was wrongly remitted then the amount would be paid back.
She has stated that the cheques at Exhibits- 14 and 15 were not signed
by accused No.4.
the Counsel for accused No.11 that she did not remember if she had
attended the office on 09/10/1991 and she never came to know that
cheques at Exhibits-14 and 15 were
written on 09/10/1991.
The
Counsel for accused No.4 further cross-examined this witness and she
stated that, in the normal course, in the case of wrong remittances
when a corrective action is taken, signature of Subbarao is not
necessary but in that particular case
his
examination.
does not in any manner shake her testimony which has been given by
her in her examination-in-chief.
is concerned, accused
142
question was asked by the Counsel for accused No.3 to
this
witness to
which this witness has replied that as far as he knows, prior to his
joining Canfina, the Managing Director of Canfina was sitting in
Bombay.
116.
So far as P.W. 9
P.W. 9
has
further srated that CBMF did not have Articles of Association since it
was not independently registered Company.
..
117. Jn his cross examination by the Counsel for accused No.4, P.W.9
has
stated that accused No.4 was also over seeing the accounts and
143
concerned with any deals I transactions with the brokers. He has also
admitted that the accused No.4 was not concerned with call money
transactions of purchase and sale of securities and equities.
He was
came into their bankers in High Value Clearing and, at that time, their
account
Subbarao as to what
should be done and he has stated that accused No.4 was not aware
the transaction and, therefore, accused No.4 told
inquire about it and let
accused No.4 gave
of
him IBA number and that he told him that this IBA
him by
This
he
has admitted that in the credit portion of this voucher, earlier, Canfina
Bangalore
"IBA No."
was
was
Earlier
144
also shown the cheque at Exhibit-51 for Rs 5 crores. He has admitted
that it was signed by Mr. Anil Narach.inia and Mr. Satish and it was in
favour of Canara Bank and not in favour of Hiten
Dalal as indicated in
this
transaction.
3, 4, 5, 7, 8 and 11.
examination by the Counsel for accused No.6 has stated that their
Firm had transaction with S. K. Jhaveri - accused No.6. and they were
maintaining his account in their Firm. When he was shown cheque at
Exhibit-112, he was unable to say with which transaction it was
concerned.
No other suggestion
has
been put to
him
by the Counsel
accused Nos. 9 and 10 has stated that he used to maintain the carbon
copy of cheque issued on behalf of the Firm. His attention was drawn
to the carbon copy No. 577597.
was
narration as
this
145
No.10.
was issued for purchase of 5,00,000 shares of Reliance and the letters
''NH" means Narbehram Harakchand. He
form of "KNP".
However, he
was a ledger folio numher and 11CB" stands for Canara Bank. The cross
examination of this witness does not in any manner affect the
testimony
his crossexami.nation he
maintained
the firm
119.
So far as P.W. 10
146
on behalf of accused Nos. 1 to 8 and 11 have not cross-examined
The only cross-examination
was
him.
In the cross-examination, he
has
stated that before 1990, he was not aware whether the account of
Narbheram Harakchand
part of
was
in existence.
He
was
his statement
was
Exhibit 112.
He
has stated
recorded by CBI.
therefore, does not in, any way, further the case of the accused Nos. 9
and 10.
was
The cross-examination of
this witness is
In
his cross
was
Rs,
..
147
day the amount of Rs 4.19 crores was credited to S.I<. Jhaveri's
account.
121. P.W. 19 has been cross-examined by the Counsel for all the
accused.
122. Apart from this evidence the accused No.6 has examined one
witness Nishit
Rasiklal
Joshi - DW A-6(1).
He was working as an
Accused No.7
Companies.
of
Manish
first
------
148
Ketan V. Parekh and accused No.10 - Navinchandra N. Parekh and in
respect of amounts of Rs 8.30 crores and Rs 8.99 crores in favour of
accused No.6 - S.K. Jhaveri and accused No. 7 - Pallav Seth in their
Joint Account in the Bank of America. There is no cross-examination
on the point of documents which show the remittance of the said
amount from
Canfina
has
Prosecution
the time when the said amount of Rs 17.29 crores was remitted to
CBMF and false entries were created in order to show that the
transaction was entered into with Canfina for purchase of securities,
though, in fact, no transaction was taken place.
has
Though an attempt
been made on behalf of the accused to show that, in fact, the said
because
the
amount
which
was
remitted
in
the
five
149
and
10 that the amount which was received by them was utilized for their
own purposes, which has been established by number of cheques
which have been issued by them from their Account.
The
as
Statements
of accused Nos.
6 and 7
and CBMF
and
from Canfina,
In my view, prosecution
has
6, 7,
8,
3 and 1 1 and
was
actual
transaction of purchase
150
and sale of securities by showing certain endorsements, the defence of
about Rs 1 crores but the fact remains that a huge amount of Rs 17.29
crores
overt
act in
as
such,
accused Nos. 1 and 8 were dealers who were authorized to enter into
deals in respect of purchase and sale of securities and on the basis of
instructions given by these two accused, the accused No.2 was asked
to make entries.
151
S. Mohan
has
In my view, evidence of
P.W.2, P.W.6, P.W.1, P.W. 9 and P.W.10 clearly establishes the role
played
by accused No.1.
accused No.1 is that he did not have any authority, yet, he and
accused No.8 were responsible for remitting the amount of Rs 17 .29
crores in this transaction. The submission of the learned Counsel for
accused No.1 that the entries made in the Deal Pad and IBA Register
are
was
-----
--------
152
responsible
for
was
always open
for the accused No.1 to have asked for the proper security before
entering into transaction or he should have obtained sanction from
the higher authorities for the said transaction. This, admittedly, was
not done by accused No.1. Merely because accused No.1 was working
under accused No.8, does not absolve him from the commission of
offence. The evidence which is brought on record by the prosecution
clearly discloses that this amount of Rs. 1 7.29 crores could not have
been remitted by accused No.8 alone without the actual help and
connivance of accused No.1.
accused No.1 to show that higher-up were not made accused and that
153
the accused No.1 was comparatively a lower ranking Officer. Merely
because the prosecution
high ranking officers, that by itself does not take the acts committed
by accused No.1 out of the purview of the offence punishable under
the provisions of the Indian Penal Code. The second submission made
by the learned Counsel for accused No.1 is that the rough sheet is the
foremost and primary record of deals and that this evidence not
having. been brought on record, the prosecution has not established
the case in respect of remittance of Rs 17.29 crores. This submission
also cannot be accepted.
Though P.W. 2
that entries in the Deal Pad were made on the basis of rough sheets
and
that the
rough sheets
on record by the
prosecution does not further the case of accused No.1. The Deal Pad
entries have been proved by the prosecution.
The remittance of Rs
17.29 crores also has been proved by the prosecution and, therefore,
merely because rough sheets are not brought on record, it
said that the
case
ot be
cann
The
third submission of the learned Counsel for accused No.1 is that the
entries
in the Deal Pad and IBA Register are not relevant for deciding
has
154
in the
submitted that the witnesses have only identified the person who
made entries in the Deal Pad/IBA Register and nothing beyond that.
He submitted th.at P.W.2 has merely identified the handwriting of
accused No.1 in the Deal Pad dated 10/10/1991 at Exhibit- 59 and
also IBA Register at Exhlbit-39 and Exhibit-40 and that P.W. 6 also has
identified the handwriting of accused No.1 at Exhlbit-59 and in the
IBA register, at Exhibit-41. He submitted that P.W.2 had also some
times prepared the Deal Pad based on rough sheet.
stated that the Back-up Department would note all these deals in the
Deal Pad.
maintaining the IBA Register and the stock of the security register and
he was also making entry in the IBA Register on the bas of Deal Pad.
These submissions made by the learned Counsel for accused No.1
cannot
be accepted.
Deal Pad concerned with the remittance of Rs 17.29 crores was made
by accused No.1 and
his
and P.W.6.
putting
suggestion
in
the
cross-examination
or
otherwise
It is
155
accused No.1 that the deals in question were reversed with profit and
that Canfina had earned profit of Rs 1,41,68,200/- . This also, by itself,
as stated hereinabove, does not make the transaction dear.
is
Canfina
as such, money which was remitted from Canfina was public money
and, therefore, the amount could not have been paid without there
being proper security in the form of physical security or atleast in the
form of Bank Receipt (BR). There
is
any such security was obtained before remitting the said amount. The
fact th.at the amount
factors
which
will
was
have
to
be
taken
into
consideration
while
126.
also submitted that the investigation carried out by the Officer of CBI
i.e. P.W. 19 was perfunctory and not proper. He submitted that rough
sheets were not seized.
19
has
admitted that he did not recollect whether he had seized the office
note put. up to the Managing Director or whether he had seized RF
diary from the Back- up Department, the ready forward note book
156
the Back-up
Department of Canfina
and
this
the
In
P.W.19 in para 18. He further submitted that the prosecution did not
examine
the
relevant witnesses
whose
statements
were
already
recorded by CBI viz. Mr. Praveen Bhat, Mr. P.N. Narayan Rao and Mr.
A.P. Rao.
has
not taken charge of I produced best evidence available so that the true
picture about the transactions in question could have been brought
before this Court.
circumstantial evidence
In
accepted. Merely because rough sheets have not been produced, does
not establish that the entries made in the Deal Pad were not correct.
157
Prosecution has established the
Deal Pad entry till the remittance of the amount through IBA, which
was conveyed on telephone and the remittance of the amount on the
same day to CBMF and from CBMF to brokers viz. accused Nos. 6, 7, 9
and
10.
Prosecution has
established
was
no
towards the guilt of the accused viz. accused Nos. 1 and 8, 3 and
and 7 and 9 and 10 so far as
127.
The admitted
158
by the prosecution.
The
evidence which has come on record indicates that the accused No.2
merely was given a job of recording the transactions, procedure of
purchase and sale transaction which is undertaken and it has come on
record through evidence of P.W.2 and P.W.6 which indicates that the
decision is taken by the dealers and the instructions are given to the
execution centers which are noted down by the dealers in rough
sheets.
way,
the
Department
accused
was
No.2
concerned
who
with
was
the
working
actual
in the
decisions
Back-up
regarding
159
128.
were signed by one official. Latter on, the cheques were signed jointly
by any two officials viz. Ashok Kumar Kini, K.B. Shenoi, P.N. Narayan
Rao and accused N o.2. It has to be noted here that the cheques in this
transaction appear to have been signed as a mere formality since the
transactions
had
out and
the
funds
were
129.
having mens rea and was not involved in conspiracy with any of the
accused as alleged by the CBI.
160
403 has not been proved since the evidence on record shows that
there was no dishonest intention and the alleged property had not
been used for his own wrongful gain or his institution i.e. CBMF and,
therefore, it is submitted that the ingredient of section 403 regarding
"dishonestly misappropriates or converts to
property" is not satisfied.
transferred
161
another person and, thus> the nature of transaction was between two
persons and, therefore, CBI had no locus standi to file a complaint. It
is then submitted that the offence under section 405 also is not made
out.
provisions of
All these submissions cannot be accepted. The accused No.3 was the
He instructed
amount was returned back to Canfin.a, does not absolve the accused
No.3 of his responsibility and liability on account of temporary
misappropriation.
130.
162
evident that accused No.4 was handling administration as well as
accounts and, therefore, he had powers to pass the accounting
vouchers, credit & debit vouchers and the accused No.4, as can be
seen from the evidence of P.W.9, was overseeing the accounts and
looking after administrative work of CBMF and he was not concerned
with the deals/transactions with. the brokers and he was also not
concerned with call money transactions or transactions of sale and
purchase of securities and equities.
P.W.l also, it can be seen that
Thus, from the entire evidence, the prosecution has not been
able to establish that the accused No.4 was connected in any way with
the criminal conspiracy of siphoning off funds from Canfina to CBMF
and from CBMF to the brokers - accused. It
the statements of witnesses that he was not concerned with the actual
deals/transactions and he was only looking after the administrative
work.
163
131 .
Ravi
know the accused No.6 and the said witness had prepared a cheque
for Rs 12 crores in favour of accused No.6.
had stated that CBMF was dealing with Pallav Seth, the representative
of accuse d No.6 and that this supported the case of accused No.6 that
all dealings with Canara Bank and its Associates like CBMF, Canfina
etc were done only by Pallav Seth - accused No. 7 and th.at the accused
No.6 has no personal knowledge and is not involved in the same. The
learned Counsel further relied on the statements of the witness
wherein he has stated that he has never informed the accused No.6
that the cheque for a sum of Rs 12 crores was issued as per the
instructions
of Canfina,
statements of P.W. 1 9
Bangalore.
Further,
he
relied
on
the
164
accused No.6. It is then submitted th.at the accused No.6 had already
informed the Investigating Officer by reply dated 18/07/1994 that the
accused No.6 had regular transactions with Canara bank and the
cheque in question was part of such regular transactions in normal
He further invited my attention to the cross
course of business.
has
any inquiry with Canara Bank as to whether accused No.6 had any
transaction other than the transaction which was the subject matter
of the special case. He invited my attention to the further evidence of
P.W.19, which, according to the learned Counsel, est.ablished that
none of the documents relied upon by the prosecution showed that
the accused No.6 was involved either in criminal conspiracy or in
diversion.
prosecution to accused No.6 was that the amount was siphoned off in
order to utilize the
learned
said
He submitted
10th October,
165
after about two days of pay-in-day to enable the brokers to get
sufficient balance in their account by depositing the cheques collected
from clients in respect of settlement cheques. It is, therefore, argued
th.at, in the present case, the Stock Exchange deposited accused No.61s
cheque only on 11/10/1991.
was not
cheque
which
was
issued
by
accused
No.6
was
without
(a)
conspiracy;
(b) the accused No.6 had any knowledge that the moneys
(c) the accused No.6 induced Canara Bank/Canfina to issue the said
cheques;
was
IL_
166
132. The said submissions made by the learned Counsel appearing on
behalf of accused No.6 cannot be accepted.
It
has
3.
with Canfina or Canara Bank or CBMF, yet, the fact remains that these
transactions were fictitious transactions and, therefore, charge of
temporary misappropriation has been clearly established.
He
has
167
his evidence that he used to look after the accounts and make entries
from Bank counter-foils and cheque book and cheque counter foils to
the bank book and from the bank book to the ledger account of the
respective clients. He
of accused No.6.
has
collect orders from his own clients, execute them and receive cheques
from and issue cheques to respective clients and that Shrenik Jhaveri
had six sub-brokers besides Pallave Sheth. He has further stated that
Canara Bank and Canbank Mutual Fund were the clients of Pallav
He has stated that all transactions in respect of CBMF were
Sheth.
in
1991-92 around
received
from
Canara Bank
and
were
brought
on
record
in
respect of the
this
witness.
with
the
168
Canara Bank and CBMF and he (accused No.6) had no connection of
whatsoever with the transaction is question and the amount which
was received was, in fact, deposited in the Joint Account and,
therefore, he had not received any amount from CBMF or Canfina and
it was accused No.7 who could be held responsible for the transaction
and not accused No.6.
134.
In
my view,
the
said
defence
number
of transactions
and
of his
evidence
is possible
between
Canfina, Canara Bank and S.K. Jhaveri accused No.6. However, the
fact remaip..s that, that does not by itself make the aforesaid two
transactions legal.
has
particularly
in
the
mentioned
in
the
aforesaid
to
169
Secondly, once it is
that the amount was deposited in the Joint Account of accused Nos.
6 and 7.
it
belong to him.
account and
accused No.6 any further and does not establish his innocence.
135.
So far
as
No.7
also
has
been
established
from
the
oral
Cross-examination of DW A-7(1)
136.
Surendran Nair :
DW A-7(1)
and
170
Surendran Nair.
Department was
folio number of Canara Bank was C00674 and the entries at serial
Nos.27273 to 28170 were concerning the transfer of shares to Canara
Bank and that, as per the said entries, various shares have been
t:ran.sferred from various transferors to Canara Bank
on
25/03/1992
137.
No.8 may not have put his signatures on certain documents could not
171
absolve
him
from
the
comm1ss10n
of
the
said
offence.
The
138.
It
has
Ketan V. Parekh
&
deposited in their account and , on the very same day, that amount
was remitted to accused No.6.
Counsel for accused Nos. 9 and 10 that they had already given reply
regarding the transaction to the Investigating Officer and that shows
the genuineness of the transaction, cannot be accepted.
Once it has
been established that the prosecution has proved the charge of general
criminal conspiracy and has established the flow of the amount on the
basis of creation of fictitious record, merely because reply has been
given by accused Nos. 9 and 10 to the Investigating Officer does not
establish that it was a genuine transaction.
adverse
inference
and
also
relevant
172
witnesses also does not arise since it is a well settled position in law
that the prosecution can examine some witnesses and
if the
sufficient
because
some witnesses
Cross-examination of D.W.A-9( 1)
139.
Manish Mahendra
exam
ined DW A-9(1)
Thakkar :
Mr. Manish
Manendra Thakkar. This witness has stated that he was working with
Mis Nerbheram Harakchand and he was handling the institutions
business and his work was to deliver contracts and shares.
He was
He
has
Canara Bank and that he had delivered those originals to Mr. B.R.
Acharya - accused No.3. He has further stated that accused No.3 had
put his initials by way of
He
has also stated that from the delivery book of the firm K.N. Parekh, it
could be
seen
that
there
was
delivery
of
2,79 ,800
shares of
173
He
has
stated
him
these
shares.
delivery of the shares as also the first and second copy of the delivery
challan. He has stated that the
the
acknowledgment.
firm
Further,
he has stated
him
the cross-examination, he
has
In
Custodial Manager and he had met him many times regarding delivery
of shares to him and also had obtained
his initials as
acknowledgment.
He has stated that the contract note was issued to a party who
has
has
admitted that
and
He
10 the name of
I
I
I
174
Canban.k Mutual Fund was
not mentioned.
However,
he
has
this
witness to the effect that the person by name Mr. D'Souza was
140.
It is
has
this witness
in cross-examination
from the Court and has purposely not examined Mr. D'Souza and,
therefore, adverse inference was liable to be drawn against the
prosecution.
141.
this
_J
175
entered into by CBMF with these brokers and from time to time
delivery of the shares was made to Canara Bank which
was
accepted
by Mr. D'Souza or any other officials. This, however, does not make
the aforesaid
three
transactions
It
has been
after it
was
142.
was
143.
So far as
this
the
also been
176
considered. The evidence of P.W.2, P.W.6, P.W.4, P.W.9, P.W. 19,
P.W.8 conclusively establishes flow of funds from Canfina at the
behest of accused Nos. 1 and 8, false entries being made in the Deal
Pad at Exhibit- 61 in respect of IBA No. 32151. At Exhibit- 60,
Sauda
Book discloses that no entry has been made in respect of Deal Pad at
Exhibit- 61 whereas entry is made in IBA Issue Register at Exhibit-41.
The entry is in the handwriting of accused No.1.
Bangalore
has
The Canfina,
Exhibit-25 vide
cheque No.013453
was
issued
in the
name
of
was
This was
received after 3 to 4
S.K. Jhaveri and accused No. 7 - Pallav Seth with the Bank of America.
Pay-in-slip at Exhibit 79 shows that the amount
was
credited and
Exhibits-SO, 81, 82, 83, 84, 85 disclose that the amount is utilized by
177
accused No.6 on 22/10/1991. Prosecution, therefore, in my view,
has
in
my view, considering
the oral and documentary evidence on record, the case against the
said accused Nos. 1, 8, 3, 6, 7, 9 and 10 has been established so far as
this transaction is concerned.
In respect of
P.W.2, P.W.6 and P.W. 1 9 and P.W.9, I have already discussed the
cross-examination while dealing with the first transaction.
Since the
in
favour of BOA.
He
has
178
is
The evidence of
this
accused No. 7
145.
Exhibit-122
.....-----
179
In
has been
Officer
but
that
by
itself does
not
absolve
the
180
and the mere fact that the amount was returned back also does not
reduce the liability of accused No.5. Therefore, at the Canfina's end,
accused Nos. 1 & 8 were responsible for siphoning off of the amount
to CBMF from which end the accused No.3 siphoned off the money to
Hiten P. Dalal who utilized it and, thereafter, returned it illegally back
to Canfina.
So far
as
examined by the learned Counsel for accused No.5. This witness was
shown
cheque
dated
16/01/1992
Exhibit-51
being
cheque
is a mention of Rs
--
IL
181
He has further stated that the closing balance of the previous day was
the opening balance of the next day. His attention was drawn to the
statement of account Exhibit-120.
balance
was
memo from
Canara Bank dated 16/01/1992. He has stated that this refers to the
said cheque of Rs 5 crores as mentioned in the credit voucher at
Exhibit-121. The memo was t.aken on record as Exhibit A-5 (1).
By
was
..
182
dated 16/01/1992 and the cheque number at Exh.ibit-5 1 is 587664
and that there is a difference in the cheque number as shown in
Exhibit-121 and Exhibit-51. Even if it is assumed that the cheque at
Exhibit 51
was,
name
that the amount of Rs 5 crores was remitted from CBMF to the account
of accused No. 5 - Hiten P. Dalal.
clearly shows that CBMF deposited the money through their cheque
with Canara Bank, who, in tum, issued a cheque of different number
as
was
__J
183
laid by Mr. Kale, the learned Counsel appearing on behalf of accused
An
attempt has been made to show that the said amount of Rs S crores
was paid by him to the Corporation Bank for the purpose of
adjustment.
were part of the same conspiracy for siphoning off the funds and it is
established that the funds were deposited in the account of accused
No.5, it cannot be said that accused No.5 was not involved either in
conspiracy or in misappropriation of the amount for his own use.
Fourth
beneficiary
of
this
147.
The
transaction
was
Manubhai
Maniklal.
184
Fifth transaction dated 11/02/1992 in
Further
149.
was
siphoned off
This
185
through accused Nos. 6 and 7.
was
150.
was
I
_J
186
respect of purchase and sale of securities. This has been the consistent
theme of the Counsel appearing on behalf of the accused. It has also
been argued that the accused had already given explanation in respect
of the transaction when notice was issued to them by the Investigating
Officer under section 91 of the Criminal Procedure Code and that it
was a duty of the Investigating Officer to have verified the said
explanation by making inquiry with the Canara Bank and CBMF and
the 1.0. failing to do so, the case against the accused had not been
established beyond the reasonable doubt. It is also argued that it is
the duty of the prosecution to place relevant material before the Court
so that the Court can give its finding whether the accused are guilty or
not of the alleged charges which are levelled against the accused. It is
also strenuously urged that adverse inference was liable to be drawn
against the
witnesses. It is also urged that some of the persons who were named
as accused were later on dropped and no explanation has been given
by the prosecution as
to
prosecuted.
respect of
__
187
made in the Deal Pad and other vouchers to create an impression th.at,
in fact, there
was
was no such transaction, (c) CBMF was used as a conduit to siphon off
the amount.
was
was
this
two
transfer
The
the funds
from CBMF to accused Nos. 6 & 7 and they retained the amount of Rs
from purchase of
__
188
reason to buy or sell these securities through CBMF. It is brought on
record that CBMF was not dealing either
in purchase or sale of
For
all
P.W.7.
P.W.2,
P.W.1 9,
transaction.
P.W.8
and
P.W.6
while
considering
the
first
P.W.17 and P.W.7 are concerned, none of the Counsel for accused has
cross-examined
P.W.13
Omprakash
Kuckian.
This
witness
was
189
purchase or sale transaction. The entry
124.
has
transferred to
Thus th.is
evidence has not been challenged which indicates that the reversal
has
if the
and
if the
quotation
quotation
is
is received ''X
right.
"XR" is
written, otherwise
He was shown
in
respect of Nahar Spinning and on that day the quotations were 800850.
He has
further stated that on the earlier day i.e. on 20/02/1992 the quotation
of
on
----- - - -
entry
is at Exhibit-
_J
- --
--------
190
A-7(2) (A)(l). In my view, the cross-examination of this witness does
not change his original testimony
as
given by him
in his
examination-
inchief.
152.
to prosecute
by the
sanctioning
and
Kumar who were working with Canfina were removed from service
----I-'
191
during investigation.
accused No.1 1
of investigation.
- N. Balasubramaniam is
Subbararo.
154.
was
an employee of
13(l)(c) reatl with section 13(2) are not attracted. In respect of the
said submission he relied upon the judgment of the Apex Court in the
case of
I
I
_J
l-
192
Counsel appearing on behalf of accused No.4 has also submitted th.at
the sanction was not properly given and there was non-application of
mind.
155.
P.W.14.
He also
156.
So far as
It will be
193
relevant to refer to the provisions of section 2(c) (viii) of the said Act
which reads as under:-
(ii)
(ill) ............ .
.........
(iv) ............ .
(v)
.......
(vi) ............
(vii)
(viii) any person who holds an office
.
duty;"
_J
194
has been defined in the Law Lexicon, reads as under:-
of goods
or
of interests;
in
property
acquired
during
law,
conventional
when
created
by
Community,
Society.
Community
anything
constitutes a community ; a
common interest, a common language, a
common government, is the basis of that
for business.
The
term
community is
Similarly, the word "community" has been defined in the World Book
195
wue.
-
The
conjoint
community,
II
reading
therefore,
of
section
clearly
implies
activities
2(b)(c) (viii)
as
that
with
the Trust
the
word
which
is
Bank
and,
Similarly,
196
the term "public duty" which is defined m section 2(b) and more
particularly the explanation which is given beneath the said definition
discloses that the word "State" includes a corporation established by or
under
owned or controlled
public
servants
15 7.
has relied on the judgment in the case of Canara Bank & Others
(supra).
Jn my view,
facts of the present case. Jn the first place, the issue which was before
the Apex Court in the said case was
not
(:orruption Act and, therefore, the question before the Apex Court in
the said case was not whether employees of such a Trust are public
servants within the meaning of section 2(c) (viii) of the said Act.
the said case the appellants were Canara Bank and others,
In
were
_J
197
aggrieved by the judgment of the High Court in Company Appeals
Nos. 23 and 22 of 1996 by which the orders passed by the Company
Law Board had been set aside and the disputes allegedly existing
between the parties were referred to the high-powered Committee. It
was contended before the Apex Court in the said case that the dictum
of the Apex Court in ONGC's case [1995 Supp (4) SCC 541] was not
applicable to the facts of the cases under appeals since there did not
exist a genuine dispute between the parties which could be referred to
the high-powered Committee. Jn the ONGC's case the Apex Court has
observed that the disputes between two public undertakings and
particularly frivolous litigation between government departments and
public sector undertakings of the Union of India should not be dragged
in courts and be amicably resolved by the Committee.
In the context
of the said case, the Apex Court observed th.at the rafio of the
-
judgment of the Apex Court in ONGC's case was not applicable in the
facts of the said case and while ooming to the conclusion has made
general observations which reads as under:-
styled
as
government company or
198
public sector undertak ing.
This observation
has
11
The Apex Court was considering the dispute between the two public
sector undertakings and whether the dispute was frivolous and
termed
as government company
or public sector
facts
of the
present
case.
The
question
which
falls
for
has
if the
facts
are
Telefilnis Ltd. and another vs. Union of India and others reported in
(2005) 4 sec 649
has
199
"Precedent
254.
A decision is an
A judgment,
the
receive
observations
consideration
made
in
the
therein
light
should
of
the
255.
256.
It is
_J
200
In my view, the ratio of the said judgment squarely applies to the facts
of the present case. For the said reasons the judgment of the Apex
Court in Canara Bank & Others (supra) will not apply to the facts of
the present case.
158.
159.
_J
201
behalf of accused No.2 regarding sanction is concerned, in my view.
Mr. K.N. Karnath - P.W.14 has, in his evidence, stated that whenever
reference
was
he
has
documents
verified
the
original books
of
Canfina
and
other
for
accorded
him,
sanction to prosecute
was
accused No.2.
He
which
required and
In the cross
his
cross-examination that he
did not recollect how many volumes were there. Nothing much turns
on the cross-examination. A suggestion was put to him that there was
arbitration proceedings between Canfina and Canbank Mutual Fund
and that the case was presented by him before the arbitrator and that
all the funds
which were
_J
202
case were received back on 31/03/1992. Further, suggestion was put
that the sanction
was
given by
No.2 since he had filed Writ Petition in the High Court when he was
the Managing Director of Canfina.
suggestion which has been put to
P.W.14 had applied his mind to the papers which were produced
before
160.
P.W. 15 in
him by
the Legal Department and he had gone through the details of the
transaction and found that there is prima facie case against accused
No. 4 - P. J. Subbarao and, therefore, he issued sanction order. In the
cross-examination by the Counsel for accused No.4, a suggestion was
_J
203
put to him that the letters were addressed by accused No.4 to him.
However, the witness has stated that he did not remember whether
there was any correspondence between him and accused No.4.
He,
therefore, did not admit or deny the suggestion that he was not
conversant with the signature or handwriting of accused No.4.
He
also did not remember having received any draft sanction order from
CBI.
has stated that he did not remember that this letter was placed before
him by the Legal Department and that the letter was not connected to
CBMF but was connected to Canfina. He was also shown two cheques
dated 19/01/1992 for Rs 5 crores at E:xhibit-108 and cheque dated
11/02/1992 for Rs 7 crores at Exhibit- 109 and he has stated that,
according to him, these cheques may not have been placed before him
by the Legal Department.
He
also
Canbank Mutual Fund during the relevant period. He has also stated
that the entire charge-sheet of the case was not placed before him by
the CBI. A question was asked, apart from the material mentioned in
the sanction order, no other material was placed before him by CBI
and to
this question
this
In my view,
204
there was non-application of mind on the part of P.W.15 for granting
sanction to prosecute accused No.4.
invalid.
cannot be
accepted.
For
the
same reasons
the
that
161.
relevant sections
in order
477A
205
1 988.
162.
For proving the offence under IPC with which the accused
have been charged and more particularly sections 403, 405, 409, the
burden is on the prosecution to establish the dishonest intention on
the part of
the
accused
and,
reasonable doubt, that the accused have committed the said offences
with which they are charged.
Section 24
reads as under:-
024.
"Dishonestly".-
Whoever
does
206
as
under:-
"403.
Dishonest misappropriation
property.-
Whoever
of
dishonestly
the purpose of
207
owner, or before
claim it.
his own
Section 405, on the other hand, defines what i.s criminal breach of
trust. In both these sections, it has to be established that the accused
merely talks
about
t.lie
it
was
_J
L__
208
that it should be entrusted in any manner with the property or with
the dominion over the property.
163.
accused
Nos.
to
4,
B and
11
that
there
was
no
dishonest
the
learned
Counsel
appearing on
has
& 8 that they had acted on the instructions of their superior officers
who were very well aware of the transactions and, therefore, it we.is
one of the many regular transactions.
th
there
In support of the
said
submissions, the
has
relied on
209
number of judgments.
164.
sale of securities and that the money was returned back and, in the
process, Ca.nfina had earned profit of more that Rs 1 crore. It is also
urged that no claim
was
arbitration proceedings.
CBMF and, therefore, CBI did not have any locus to file complaint
under sections 403, 405 of the IPC. It is also urged that section 403
and 405
are
It is urged that,
If the
provisions of sections 403 and 405 are examined, it can be seen th.at
the movable property in section 403 comes in possession of the
accused in some neutral manner and, thereafter, it is misappropriated
_J
210
so
is
on
record
Exhibits-17
and
18
which
are
the
Board
Exhibit- 57 is an
has not been questioned by accused Nos. 1 & 8. They have not put
any suggestion, denying the said entrustment. For the offences under
section 403, 405 and 409, dishonest intention of the accused has
to
be
211
though the accused did not have power to enter into any transaction
beyond Rs 50
lakhs,
if
they had
entered into a regular transaction. After having prepared the Deal Pad
entry or after having instructed accused No.2 and other Officers to
prepare Deal Pad entry, no entry was made in the Sauda Book. This is
the first act which shows dishonesty on the part of accused Nos. 1 & 8
from Canfina. Further, they did not have any authority beyond Rs 50
lakhs without obtaining sanction from the higher executive viz Board
of Directors either by way of written permission or in the form of a
Resolution by the Board. This is the second circumstance which
establishes dishonesty on the part of the said accused. The
third
212
correspondence on their part to check whether a contract note
received from the broker or whether physical securities
are
is
received or
to see whether the said amount has reached the person to whom it
was sent. This is another circumstance which shows dishonesty on the
part of the accused. This dishonest intention is further fortified when
a
could have been seen if the amount was promptly remitted back to
Canfina. Instead of doing so, this amount is transmitted in favour of
the brokers viz accused Nos. 5, 6, 7, 9 and 10. Accused No.3 on the
one hand directs accused No.4 and 11 to prepare a cheque on
09/10/1991, though the Deal Pad entry is made by accused Nos. 1 & 8
on 10/10/1991.
prosecution shows that the accused No.3 was not present in office on
10/10/1 991 and that he had got this cheque prepared on 9/10/1991
itself. This is a clear indication of collusion between accused Nos. 1 &
8 and accused Nos. 3 and these accused, simultaneously, on the same
_J
213
day, remitted this amount to the accounts of accused Nos. 6,7,9 and
10 in respect of transaction dated 10/10/1991 and 22/10/1991 and in
favour of accused No.5 in respect of. transaction dated 16/01/199 2.
Accused Nos. 5, 6, 7, 9 and 10 were aware that the said amount was
going to be received by them, which is evident from the fact that on
the very same day, they utilized the said amount for their own
purposes. It is, therefore, clearly established that there was a
conspiracy on the part of the accused to siphon off the money in order
to enable the brokers to use that money for their own purposes. The
offence of criminal breach of trust & misappropriation has been
established against accused Nos. 1 and 8 and accused Nos. 3
brokers
therefore
have
abetted
the
said
act
of
and
criminal
Another aspect
which also proves the dishonest intention on the part of the accused is
the fact which has come on record that CBMF
was
not regularly
_..
_
....
..__
214
which evidence has not been challenged by any of the accused.
If
that was the admitted position, there was no occasion for accused Nos.
1 and 8 to remit
the
brokers. Since Canfina itself was dealing in the purchase and sale of
securities, it could have directly sent the money to the brokers after
having received physical security or collateral security in the form of
B.R.
That being the position, the accused Nos. 1 and 8 who were
aware of this fact, remitted the amount to accused Nos. 3 who, in turn,
were aware that they were not dealing in purchase and sale of
securities on behalf of Canfina, yet, they remitted
accused Nos. 6,7,8, 9 & 10 and accused No.5
this
amount to
The prosecution,
Though an attempt
has
all
the
had
numerous
transactions with Canfina, CBMF and Canara Bank and that the
transactions in question were few of such transactions, this theory
cannot be accepted since the the prosecution has established that these
were fictitious transactions and, for that purpose, fictitious accounts
were prepared and manufactured by the accused.
the view that the defence
has
Therefore, I am of
and, on the
v--
_J
215
as
if CBMF had
wrongly received 5 lakhs shares of RJL and that they were, thereafter,
remitted to Canfina. In my view, the very fact that they had given
explanation to the Investigating Officer in their reply to the showp
_J
216
cause notice which was issued under section 91 of the Cr.P.C., in fact,
fortifies the fact of alleged conspiracy.
It indicates that
they had
166.
as
under:-
public
the
offence
of
criminal
misconduct,(a) ...............
(b)
(c)
.............
if
he
dishonestly
or
fraudulently
217
(i) ........... . .............
..
(ii) ...................... .
(m) ..................... .
(e) ............................ .
lClF1.Cll.itJ11.(2)
...
are
accused Nos.1 and 8 did not have requisite authority and they had
dishonestly misappropriated the property which was under their
control and siphoned off the funds so as to enable accused Nos. 5,6,7,9
and 10 to utilize the funds for their own purposes.
who was
an
Accused Nos. 3
misappropriated the amount which was remitted to CBMF and the said
amount was diverted to brokers Le. accused Nos. 5, 6, 7, 9 and 10. He
_J
218
167. I have already discussed at great length how Deal Pad entries
were fabricated and false vouchers were prepared by accused Nos.1, 8
and 3.
168.
Perusal of the
said judgment indicates that ratio of the said judgments does not apply
to the facts of the present case.
169.
Accordingly,
I record
the
findings
for
POINTS
Point Nos. (1) & (2)
Point Nos.(3) to (6), (8),
(11), (22), (23), (24), (25),
FINDINGS
Yes, except accused
Nos.2, 4 and 11.
Yes
No
Yes, except
No.11
Point No.(48)
accused
___J
iJ. ,.
219
I, therefore, hold that ;
1 70.
(i)
bogus,
fictitious
and
non-existent
involving
funds
the
said
and
created
false
and
fictitious
for having
committed
the
aforesaid
offences.
(ii)
reasonable doubt
220
to
March, 2008.
are,
(v)
_J
221
of the Indian Penal Code and, therefore, they are
acquitted of the said offences punishable under
section 467 and 471 of the Indian Penal Code.
(vi)
has
Prosecution
reasonable
doubt
that
committed an offence
established
Accused
beyond
has
No .1
(vii)
Prosecution
has
established
beyond
read
with
section
1 3 (2)
of
the
(viii)
Prosecution
has
established
beyond
of the
Indian
Penal
Code
and
he
is
222
Prosecution
(ix)
reasonable
doubt
has
established
that the
accused
beyond
No. 6
has
of
the
Indian
Penal
Code
and
he
is
(x)
Prosecution
reasonable
doubt
established
has
that the
beyond
No. 7 has
accused
of
the
Indian
Penal
Code
and
he
is
(xi)
Prosecution has
established beyond
committed
an offence
punishable
under
(xii)
reasonable
doubt
that
accused
No.8
has
and
Corruption Act,
13(2)
1988
of
the
and he is
Prevention
of
accordingly
the
aforesaid
223
Prosecution has also established beyond
(xiii)
reasonable
doubt
that
accused
No.8
has
of
the
Indian
Penal
Code
and
he
is
(xiv)
has
Prosecution
established
beyond
and
they
are
(xv)
Prosecution
has
established
beyond
and
they are
accordingly
convicted
for
[Note:-
When
the
(xv)
(vi)
(vi)
to
(xv)
in para 170.
(vi)
Since it
to
(xv)
224
are incorporated in
the
(v)]
the matter was further adjourned to 1st April 2008 to enable the
learned Counsel for the accused to argue on the sentence.
Date:
1stApril, 2008
171. Heard Mr. Pradhan and Mr. Mhammane, the learned Special
Public Prosecutors appearing on behalf of the CBI. It is submitted that
so
far
and
as
120-B read with section 403, 409, 477-A of the Indian Penal Code read
with section 13( 1 ) (c) and 13(2) of the Prevention of Corruption Act,
1988, the lesser sentence may not be imposed and it was submitted
that considering the nature of the crime and the misappropriation of
the public funds by employees of the Bank and the Trust
illegal use of the money by the
Mr. Pradhan, lean1ed
brokers,
and
the
225
judgment of the Apex Court in
reported in
State
of M.P.
Investigation
no
226
He invited my attention to the case of Ram Narayan Popli (supra) and
submitted that the Court had awarded lesser sentence
in that case.
He
submitted that the Apex Court has observed in the said case that the
accused should be let off on the sentence which they have already
undergone. He submitted that in the said case the accused were in jail
hardly for 10 to 1 5 days.
He invited my attention to
various
was
caused
to the complainant,
sentence
which
should be
in custody in the year 1992. He submitted that the accused No.8 also
had undergone angioplasty after heart attack and that he is suffering
from various ailments.
173. Mr. Shah, the learned Counsel appearing for accused No.6
submitted that accused No.6 was not directly involved and that he had
no knowledge of what had transpired between Canfina and CBMF and
that the accused No.7 was looking after the said transactions. He also
adopted the submissions made by the learned Counsel appearing on
behalf of accused No.8 and submitted that the lesser sentence may be
227
awarded taking into consideration the age of accused No.6.
He
submitted that the accused No.6 had entered into several other
transactions with Canfina and CBMF and he had no knowledge about
the present transaction.
all
No.6.
1 74.
Accused No.1
submitted
that he was
a junior
following the
instructions of accused No.8 - M.K. Ashok Kumar who was the Vice
President and he had no other option but to follow the directions given
by accused No.8. He submitted that it has not been established that he
is benefited in any manner from the entire transaction. He submitted
that lesser sentence may be awarded to him.
175.
adopted the
176.
No. 5 - Hiten P. Dalal submitted that accused No.5 was involved only
228
m one transaction viz. transaction dated 16/1/1992.
that
there
was
no
financial
gain
to accused No.5
He submitted
in
the said
229
lacs had been retained by them towards brokerage but since this
aspect was not accepted by the Court, at the highest, it could be said
that this amount had been retained by them. He invited my attention
to the judgment in the case of Ram Narayan Popli (supra) and the
observations made by the Apex Court in the said judgment.
It is
pending for a very long ti.me and that is one of the factors which
should be taken into consideration. He submitted that the Apex Court
also had observed that the higher officials had not been prosecuted by
CBI and only small flies have been prosecuted and this fact was taken
into consideration by the Apex Court while awarding the sentence.
179.
180.
an.
- - --
230
which was siphoned off from Canfina through CBMF to brokers was
returned back with interest.
fictitious
if
The said
knowledge about the general conspiracy are still liable. However, the
another factor which is also to be taken into consideration is the fact
that the trial is pending for a very long time and some of the accused
have now reached the age and are senior citizens in the sense that
accused No.10 is 73 years of age and accused No.6 is 66 years of age
and some of them are suffering from various ailments. All the brokers
have already been notified under the Special Courts (Trial of Offences
Relating to Transactions in Securities) Act, 1992 and all their assets
have been seized.
A question
231
involving offences which corrode the economic
stability are to be dealt with sternly. lt is,
however, noticed that A-5 has died during the
pendency of the appeal. A-1 and A-3 were
small flies who appear to have been caught in
Apparent
the web of A-S's machinations.
reason for their involvement is greed and
avarice. There may be substance in the plea
raised by the learned counsel for the accused
appellants that higher-ups of MUL and banks
cannot certainly be unaware of the goings-on,
and have not been proceeded with and given a
clear chit. Though this is certainly a matter of
concern, yet that cannot be a ground for taking
a sympathetic view of A-1 and A-3's conduct.
Considering the fact that the occurrence took
place a decade back, and the trial has spread
over a few years, and the death of A-5, we feel
custodial sentence for the period already
undergone (which we are told was for a
number of months) would meet the ends of
justice. While fixing the quantum of sentence,
we have duly considered the fact that in the
instant case the amounts have been paid back,
which as noted above, learned counsel for the
prosecution conceded was a factor for fixing
the quantum of sentence. The fine amounts
imposed remain unaltered with the default
sentence . Appeals by A-1, A-3 and A-5 are
dismissed subject to modification of sentence.
We respectfully agree with conclusions of
learned Brother S though not with the
reasoning in their entirety regarding dismissal
of the appeals against acquittal of A-2, and
setting aside the conviction of A-4."
181.
- --
_J
232
However, there cannot be any strait jacket formula which
can
be
adopted while imposing the sentence and the question of the sentence
will
The Apex Court in the case of State of M.P. Vs. Ghanshyam Singh,
reported in 2003 SCC (Cri) 1935 has observed in paragraphs 10, 1 1 ,
12, 13, 14 and 1 7 as under:-
233
..12.
Therefore,
undue
sympathy
to
impose
It is, therefore,
position was
illuminatingly
stated by this
of T.N. [(1991) 3
sec 471]"
111 3.
Criminal law
principle
adheres
to the principle
in general to the
of proportionality
in
case.
Judges,
in
essence,
affirm
that
considerations.
results
of his
crime.
Inevitably,
these
injustice
that
are
senous
and
widespread."
"14.
it remains
termination
of
strong
sentences.
influence
The
in
practice
the
of
235
punishing all serious crimes with equal severity is
now unknown in civilized societies, but such a
radical
departure
proportionality
has
in recent times.
from
the
principle
of
But in
The
social
impact of the
to offences against
be lost
sight
exemplary
treatment.
imposing
meagre
of and
per
Any liberal
sentences
or
se
require
attitude
taking
by
too
236
and in the case of State of M.P. (supra), in my view, in the present
case, so far as accused No.1 is concerned, he was a junior officer
working under accused No.8 and he was duty bound to follow the
instructions which were given by accused No.8.
No.1
S.
Mohan
is
sentenced
will
to
be appropriate
undergo
if
rigorous
siphoning off the amount from CBMF to the brokers, he was the key
accused who was responsible for siphoning off the funds and without
his assistance the amount would not have been reached the brokers.
However, since the amount has already been received back, in my
view, it would be appropriate
to
sentence
him to
undergo rigorous
237
even
in
respect
of
transactions
dated
10/10/1991,
22/10/1 991 and 16/01/1992. In my view, accused No.8 was also the
"'--'
if
he
is
sentenced to undergo
185.
him
to undergo rigorous
186. So far as accused Nos. 6 and 7 are concerned, they have received
a substantial chunk of the amount which was siphoned off and it
would
be
appropriate
to
sentence
them
to
suffer
rigorous
238
187. So far as accused Nos. 9 and 10 are concerned, in my view, it
that accused No.5 has already undergone two and half years sentence
in respect of conviction in other cases and the period undergone by
- ----
L.
239
application on this aspect.
this aspect.
189.
O R D ER
(i)
punishable
for an
with
13(1)(c)
and
1 3 (2)
of
the
Prevention
of
(ii)
for an
240
is sentenced to
(iv)
punishable
Kumar
are
sentenced
to
suffer
ngorous
r
I
241
(vi)
(vii)
(viii)
403, 409,
and section
242
(ix)
(x)
243
under section 409 of lndian Penal Code.
is sentenced to
(xv)
is sentenced to
(xvi)
Accused No.10
- Navinchandra N. Parekh
is
(xvii)
is
(xviii)
Pallav
Seth
are
sentenced
to
suffer
rigorous
l
244
i.mprisonment for one year for
an
(xix)
Accused
sentenced
to
suffer
10 - Navinchandra N. Parekh is
simple imprisonment for
six
months
(xx)
Accused
10
- Navinchandra
N.
Parekh is
and
Code.
All the
At this
stage,
the learned
Counsel for
245
that
the
conviction
and
sentence
may
be
It is submitted that
in
will
is
suspended
till
31st
bail.
July,
2008.
They should
'
V\T " -