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BEFORE THE SPECIAL COURT AT BOMBAY


CONSTITIITED UNDER THE SPECIAL COURT (TRIAL OF OFFENCES
RELATING TO TRANSACTIONS IN SECURITIES) ACT, 1992
SPECIAL CASE NO. 3 OF 1996

Central Bureau of Investigation

..... 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.

4. Mr P.J. Subb arao


5. Hiten P. Dalal

..

Accused No.5.

6. S.K. Jhaveri

....Accused No.6.

7. Pallav Seth

....Accused No.7

8. M.K. Ashok Kumar

....Accused No.8

9. Ketan V. Parekh

....Accused No.9

10. Navinchandra N. Parekh

....Accused No.10

11. B. V. Srinivasan

.... Accused No.11.

Mr. V.G. Pradhan with Mr. S. Mhamane, Special Public Prosecutors


for C.B.I.

--" ,

---- --

-----

Mr. A.Z. Mookhtiar, advocate (Legal Aid) for accused No.1.

Mr. Girish Kulkarni, advocate for accused No.2.

Mrs. B.A. Jakhade (Legal Aid), advocate for accused No.3.

Mr. P.D. Sawardekar, advocate for accused No.4.

Mr. Sunil Kale, advocate for accused No.5.

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,

advocates for accused No.7.


Mr. Mr. Amit Desai with Ms. Maya Sarkar i/b Madhukar Munim &
Co., advocates for accused No.8.
Mr. Mahesh Jethmalani with Mr. Amol Chougule & Mr. Ajit Karwande,
advocates for accused No.9 and 10.

Mr. D.R. Pinge, advocate (Legal Aid) for accused No.11.

CORAM: V.M. KANADE, J.


Judge, Special Court
DATE

: 7th March, 2008 & 1st April, 2008

3
ORAL JUDGMENT:

1.

On 01/06/1994, a complaint came to be registered in the Bank

Securities and Fraud Cell of Central Bureau of Investigation vide R.C.


No.3/BSC/94-BOM under section 120-B read with sections 409, 420,
477-A of the Indian Penal Code and section 13(2) read with section
13(1)(d) of the Prevention of Corruption Act, 1988. In the FIR, it was
stated that reliable information was received in the Office to the effect
that Canbank Financial Services Limited, which had its Headquarters
at Bangalore and which was a wholly owned subsidiary of Canara
Bank, had participated in the secondary market activities.
alleged

in

It was

the FIR th.at during 1991-92, Mr. S. Mohan (Accused No.1)

and Mr. N. Balasubramaniam (Accused No.2) were posted as Assistant


Vice President in the Canfina Headquarters at Bangalore and that Mr.
S. Mohan

was

a dealer and Mr. N. Balasubramniam was looking after

Funds Management Department.

It was alleged that there was a

conspiracy between employees of Canfina and Canbank Mutual Fund


and some brokers and it was agreed between them that the funds
belonging to Canfina and Canbank Mutual Fund would be diverted in
the account of the brokers and, thereafter, the said amount which was
diverted would be returned back with interest and for the said purpose

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

25/03/1996, other accused were arrested and were released on bail.


Charge-sheet was filed against the accused. In

the

charge-sheet, it was

alleged that the accused had committed an offence punishable under


section 120-B read with section 409, 420, 477-A of the Indian Penal
Code and 13(2) read with section 13(1)(d) of the Prevention of
Corruption Act. After the charge-sheet was filed, a charge was framed
against the accused.

The prosecution examined 19 witnesses in

support of its case.

2.

The

prosecution

case

in

47, 70,68,200/- was transmitted


Canbank

Mutual

Fund,

brief

is that an amount of Rs

in five instalments from Canfina to

Bombay

ostensibly

for

the

purchase

of

securities by Canbank for canfina. The first transaction took place on


10/10/1991 and the amount involved in this transaction was Rs 17.29
crores. The second transaction took place on 22/10/1991 and it was
for the amount of Rs 12 crores.

The third transaction took place on

16/01/1992 and was for an amount of Rs 5 crores.

The fourth

---------

transaction was initiated on 07/02/1992 and was also for an amount


th
of Rs 5 crores. The 5 transaction was dated 11/02/1992 and

was for

an amount of Rs 7 crores.

3.

During the course of argument, Mr. V.G. Pradhan, the learned

Special Public Prosee utor appearing on behalf of the prosecution


submitted that the prosecution did not wish to press charges in respect
of the transaction dated 07/02/1992 and 11/02/1992 i.e transaction
No.4 and 5 since it was essentially a transaction which was in respect
of the accused Manubhai Maniklal who had expired during the
pendency of the trial

4.

It is the case of the prosecution that so far as the first

transaction

is concerned i.e dated 10/10/1991, the funds to the tune of Rs 17.29


crores were diverted in favour of accused Nos. 9 and 10 and accused
No.6 through the Bank of India. In respect of the second transaction,
which was for an amount of Rs 12 crores, the funds were diverted in
favour of accused Nos.6 and 7 through the Bank of India and in
respect of the third transaction dated 16/01/1992 the funds to the
tune of Rs 5 crores were diverted in favour of accused No.5 through
the Andhra Bank and in respect of the fourth and fifth transaction, the

6
funds were diverted in favour of late Manubhai Maniklal.

5.

The prosecution has examined 19 witnesses in order to establish

that these funds were diverted from Canfn


i a and eventually these
funds landed in the hands of accused/brokers, who utilised the same
and, thereafter, this money came to be refunded to Canfina alongwith
interest.

6.

It is essential to briefly state the transactions which are involved

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

regarding purchase of "RIL'' from Canbank Mutual Fund for Rs 17.29


crores while there was no such deal between Canfina and CBMF. Even
in the absence of any deal, an amount of Rs 17.29 crores was
transferred to CBMf.\,.,on
-iut .

-'.1';'-'

.
lO/lO/f9 91

by Canfina, Bangalore.

receipt of the said amount, voucher dated

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

not refunded to Canfina

It is alleged that, in
but B. R.. Acharya -

along with B.V. Srinivasan - accused No.11, issu

10/10/1991

o f Rs

8.99

crores in favour of S.K. Jhaveri -

7
accused No.6 and the cheque for Rs 8.30 crores in favour of
Narbharam Harakchand, which was a

firm in which Ketan

Mis

V. Parekh

and Navinchandra N. Parekh, the accused Nos. 9 and 10 respectively


were associated.

Thereafter, this amount of Rs 17.29 crores was

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.

It is further alleged that in furtherance of the aforesaid criminal

conspiracy, N. Balasubramaiam - accused No.2 made an entry dated


22/10/1991 in the Canfina records regarding purchase of "14o/o NC Ds"

for Rs 12 crores from Canbank Mutual Fund while Canfina did not
have any such deal with CBMF.

It is alleged that even then

UW

amount of Rs 12 crores was transferred to Canbank Mutual Fund


Mumbai by Canfina, Bangalore on 22/10/1991.

On receipt of the

amount in CBMF, a voucher was prepared showing the said receipt of

Rs 12 crores as "wrongly remitted" from Canfina which

was

being paid

to S.K. Jh.averi, as per Canfina's instructions and, accordingly, an


amount of Rs 12 crores received in CBMF from Canfina without any
deal was passed on to S.K. Jhaveri - accused No.6 who did not have
any deal either with Canfina or with CBMF in connection with the

receipt of the said amount.

8.

It is alleged by the prosecution that N. Balasubramaniam -

accused No.2 made an entry dated 16/01/1992 in Canfina's record


regarding purchase of l4o/o of NCDs from Canbank Mutual Fund for
an amount of Rs 5 crores, though Canfina did not have any such deal
It is

with Canbank Mutual Fund (herein.after called as ''CBMF").


alleged

that

after

this

amount was received,

accused No.4

P.J.

Subbarao issued directions to Canara Bank, Tamarind Lane Branch,


Bombay to credit this amount

in "Cansigo

Scheme", though CBMF was

not connected in any way with the said amount. It is alleged that after

this amount was credited

in

the Cansigo Scheme, it was transferred to

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

It is the prosecution case that N. Balasubramaniam made

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

10/02/1992 in favour of late Manubhai Maniklal though he did not

have any deal either with Canfina or with CBMF.

9.

It is the prosecution case that, similarly, accused No.2 - N.

Balasubramaniam made entry dated 11/02/1992 in Canfina's record


showing purchase of 14o/o NCDs for Rs 7 crores from CBMF though
Canfina did not have deal with CBMF and th.is amount was transferred
to CBMF for the purchase of NCDs. When this amount was credited in
the account of CBMF, accused No.4 - P.J. Subbarao alongwith another
Officer signed cheque dated 11/02/1992 in favour of late Manubhai
Manildal

who, again, did not have any deal with Canfina or with

CBMF.

The prosecution case, further, is that an amount of Rs

53,77,82,500/-

was

received from Ws Y.B. Desai on 31/03/1992 and

this amount was transferred on 31/03/1992 by Canfina, Mumbai to


Canfina,

Bangalore through an

IBA which was signed by Mr. R.

Venugopal who was not made an accused in the trial. It is the


prosecution case that by virtue of these five transactions, an amount of
Rs 47,70,68,200/- was utilized by the brokers and again remitted back

with interest. The amount of Rs 53,77,82,500/- was transferred on


31/03/1992 by Canfina, Mumbai to Canfina, Bangalore.

This was

done by an IBA signed by R. Venugopal and after this amount was


received by Canfina, Bangalore, accused No.2 - N. Balasubramaniam

10

made the following appropriations:-

(i)

Rs 17,29,00,000/- (against remittance dated

10/10/1991)
(ii)

Rs 12,96,46,000/- (against remittance of

Rs 12 crores on 22/10/1991 to CBMF)


(iii)

Rs 17,45,22,200 (against remittance of Rs

5 crores

on

16/01/1992,

Rs.

5 crores

on

16/01/1992, Rs 5 crores on 07/02/1992 and Rs


7 crores on 11/02/1992 to CBMF)

It is alleged by the prosecution that n o interest had been deducted i n


respect of placement dated 10/10/1991 although the record shows

that the alleged amount of Rs 8.99 crores had been placed for 15
days @ Rs 24%.

10.

lt has to be noted here that Canfina Financial Services (Caruma)

is a Company registered under the Companies Act and clause 20 of the


Articles of Association authorizes Canfina to make investment in
Government Units and other securities including shares. Under clause
21, Canfina was empowered to lend, advance money with. or without
-1

11

security.

It, however, prohibited Canfina from doing business of

banking as defined in the Banking Regulation Act.


Mutual Fund is a trust and it

was

The Canbank

authorized to make investments in

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

accused No.2 - N. Balasubramaniam

the Assistant Vice President and the dealer of Ca.nfina at its

Headquarters at Bangalore,

accused No.3 - B.R. Acharya was the

General Manager and member of the Board of Trustees of CBMF,


accused No.4 - PJ. Subbarao

was

the Assistant General

Manager,

Canbank Mutual Fund, Bombay, accused No.5 - Hiten P. Dalal was


share/stock & finance broker, accused No.6 - S.l{.. Jhaveri

was

share/stock broker, accused No.7 - Pallav Seth was share/stock broker,


accused No.8 M.K. Ashok Kumar at the relevant time was the Assistant
Vice President of Canfina, Bangalore, accused No. 9 - Ketan V. Parekh
was also share/stock broker, accused No.10 - Navinchandra N. Parekh
was also a share/stock broker and accused No.11 - B.V. Srinivasan 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.

Accused No.1, 2, 4, 5, 6, 7, 8 and 10 were alleged to have

committed substantive offences under section 403, 409 and 477-A of


the Indian Penal Code .

13.

Accused Nos. 1, 2, 3, 4 and 8 were alleged to have committed

substantive offences under section 13(1)(c) read with section 13(2) of


the Prevention of Corruption Act, 1988 and under sections 403, 477A,
405, 409, 467, 471 of the Indian Penal Code.

14.

In a nutshell, therefore, it is the prosecution case that the modus

operandi in these five transactions whih


c
was adopted by the accused
was that the officials of the three Institutions viz. Canbank Financial
Services Limited, Canbw Mutual Fund and 'F' & 'f Section of Canara
bank entered into criminal conspiracy in Bombay and other places
during 1991-92 with Mis Narbheram Harakchand, Hiten P. Dalal, S.K.

__

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

misrepresentation of facts and falsification of documents so as to


indicate that the Canfina has placed funds with Canbank Mutual Fund
for the purchase of non-convertible debentures but, in actual reality,
no such transaction of purchase of non-convertible debentures had
actually taken place and, in this manner, funds to the tune of Rs

47,70,68,200/- were illegally placed in the hands of brokers.

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

14o/o NCDs securities with CBMF at Mumbai and, thereby,

diverted funds o f Canfina at Bangalore to Mumbai and thereafter


diverted funds of Canfina at Bangalore to CBMF at Mubai so that the
amount could be diverted for the use of accused Nos. 5, 6, 7, 9 and 10
and, thereafter, again, false and fictitious entries were made to make it
appear that the said deals were reversed.

15.

The prosecution has examined 19 witnesses.

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

to prepare vouchers and other fund related

The second witness examined by the prosecution i.e P.W.2 is

Mr B. N. Srikantha.

He was working as a Probationary Secretary in

Canfina at the relevant time.

P.W. 3 is one Mrs. Shalla Madhukar

Dighe who was working as an employee of the Bank of America at the


relevant time. P.W. 4 is Mr Ajay Kumar Nagendranath Kar.

He was

working at Tamarind Branch of Canara Bank as an Officer. P.W. 5 is


one Mr. Jarugumilli Rabindra Nath.

He was, at the relevant time,

working in Canfina as Assistant Vice President from November, 1992.


He has brought on record Articles of Association of Canfi.na. P.W.6 is

Mr. K. Ashok Kumar Kini. He was working as Senior Vice President in


Canfina and he

was

on deputation from Canara Bank. P.W. 7

Mr. M.

Papa Rao was working in the Canbank Mutual Fund at the relevant
time.

He has stated that one Mr. D'souza

was

Department when he was working with CBMF.

the head of the

P.W. 8 is Pronab Ray,

who was, at the relevant time, working in the Accounts Department of


Bank of America. P.W.9 is Ravi Tirumalai. He
time

working

with CBMF.

P.W.

10

Mr.

was,

at the relevant

Dilip

Jagmohandas

Ummergaonwala was working at the relevant time at the Stock

15

Exchange Branch of Bank of India. He has stated that, at the relevant

time, he was handling the account of M/s. Narbheram Harakchand.


P.W.11 is Mr. Ki.shore Mahadeo Ajgaonkar and, at the relevant time,
he

was

working in Stock Exchange Branch of Bank of India between

1992 to 1998. P.W. 12 is Mr. Vasanth Kumar Damaraju and he was


working with the Andhra Bank, Fort Branch as an Officer during the
relevant period. P.W. 13 is Mr Omprakash Kuckian. He was working

with Canfina between 1989 and 1984 as a Secretary and he was


posted in Bombay at that time. P.W.14 is Mr. Narsimba Karnath. He
was the Chairman and Managing Director of Canfina. P.W. 15 is Mr.
Gurpur Anantharama Shenai, who was working

as

Chief Executive

Officer of Canbank Mutual Fund at Bombay. P.W. 16 is one Mr. S.R.


Ramaraj and he

was

in the Canbank. Mutual Fund, Mumbai. P.W. 17

is Mr. Yogesh Ramesh Bhambardekar.

He

was

working with the

Bombay Stock Exchange at the relevant time. P.W. 18


was

Mukesh Joshi

the Accounts Assistant with Mis Narbheram Harakchand. P.W. 19

is the Investigating Officer Shiva Shankar Jha, son of Shyamsunder


Jha.

After the case was initially registered by Mr. Arup Patnaik, the

then S.P., the investigation of the case

was

later on handed over to

him and he recorded the evidence of various witnesses. He also seized

the documents and records under seizure memo or receipt memo.

16
16.

All the accused pleaded not guilty to the charge which was

framed by this Court.

17.

The points for determination are as under:POINTS

FINDINGS

(1) whether the prosecution has proved


beyond

reasonable doubt that between

the period October, 1991 and April, 1992


in Mumbai and Bangalore, all the accused

except
against

Yes,

acrused Nos.2,
4& 11.

entered into criminal conspiracy with an


object of dishonestly siphoning off the
funds

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

conspiracy of dishonestly siphoning off of


funds of the Canfina to the tune of Rs

47,70,68,200/-, all the accused jointly and


severally decided to execute three bogus,
fictitious and nonexistent

(RF)

transaction

22/10/1991,
securities

dated

16/1/1992,

which

were

ready forward

10/10/1991,
of

certain

vaguely

and

deceptively described as, to wit "RlL" 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

the Canban.k Mutual

Fund (CBMF) at Mumbai and, by using


this device, diverted the aforesaid funds on
the

aforesaid

dates

and

criminally

misappropriated the proceeds thereof and


diverted

the

funds

in

the

respective

accounts of accused Nos. 5, 6, 7, 9 and 10


and, in order to conceal the said intention,
and

manipulated

created

false

and

fictitious documents and also made entries


in the dealer pads, security stock register,
credit/debit vouchers, inter-bank advises
(IBA) and thereby committed an offence
punishable
Indian

under section

Penal

and/or

Code

120-B

and/or

of the

section

34

109 read with section 403, 405,

409,

and 477A of the Indian Penal Code

read

with

section

section

13(2)

13(1)(c),

of

the

read

with

Prevention

of

Corruption Act?

(3)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.l was the Assistant Vice
President and was empowered to deal in
sale and purchase of securities by and on

YES

18
behalf of Canfina to the extent of R.s 50
lacs

and

that

he

had,

with

dishonest

intention, while wrongfully disposing of


the funds of the Canfina, exceeded the
power

delegated

fictitious

and

to

him

nonexistent

involving purchase of

and

made

transaction

Rs 17,29,00,000/

of a so called Security "RIL" with CBMF


and

thereby

committed

the

offence

punishable under section 13(1)(c) read


with section 13(2) of the Prevention of
Corruption Act?

(4)

Whether the prosecution has proved

beyond reasonable doubt that the accused


No.1 had, pursuant to the conspiracy of
entering into ready forward transaction
involving Rs 17.29 crores of the Security
"RIL" with the CBMF issued Jnter Bank
Advise (]BA) No.32100 dated 10/10/1991
for R.s 8,00,00,000/-and IB No.32107 for

Rs 9,29,00,000/- favouring CBMF without


actually receiving any cost memo, contract
note or security in physical or in the form
of Bank Receipt from CBMF and thereby
committed

offecnes

punishable

under

section 13(1)(c) read with section 13(2)


of the Prevention of Corruption Act?

YES

19

(5)

Whether,

it

LS

proved

by

the

prosecution beyond reasonable doubt that

YES

the accused No.1 con.spired in remitting


the amount of Rs 17.29 crores to CBMF
ostensibly for the purpose of sale and
purchase of securities, though this was
done

without

any

consideration

and

thereby committed an offence punishable


under section 409 of the Indian Penal
Code?

(6)

Whether the prosecution has proved

beyond reasonable doubt that the accused

YES

No.1 has, with an intention to defraud


Canfina,

falsified

the

books/papers

belonging to Canfina by making a false


entry regarding transaction involving Rs
17.29 crores and committed an offence
punishable

under section 477A of the

Indian Penal Code?

(7) Whether the prosecution has proved


beyond reasonable doubt that the accused
No.2

exceeded

powers

which

were

delegated to him to deal in sale and


purchase of securities on behalf of Canfin.a
and

entered

into

non-existent

NO

20

transaction involving purchase of Rs 12


crores of a so called security "14% NCD"
with CBMF and has committed an offence
punishable under section 13(1)(c) read
with section 13 (2) of the Prevention of
Corruption Act?

Whether

(8)

it

is

proved

by

the

prosecution beyond reasonable doubt that


the

accused No.1 was entrusted with the

YES

funds of Canfina lying with the Canara


Bank's

branch

at

Cunigham

Road,

Bangalore and that he has, in violation of


the terms of entrustment, entered into a
non-existent

transaction

involving

an

amount of Rs 12 crores of the Security


"140/o NCD" with the CBMF and transferred

an amount of Rs 12 crores by making


entry in JBA Register favouring CBMF
without any consideration and committed
offence punishable under section 409 of
the Indian Penal Code?

(9)

Whether

it is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.2 falsified the books of
accounts/documents belonging to Canfina
by

making

false entry

regarding

the

NO

21
transaction involving Rs 12

crore s

and

committed an offence punishable under


section 477-A of the Indian Penal Code?

(1 O)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the

accused No.2 exceeded the powers

him for the sale

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

crores of 1114% NCD" with the CBMF and


thereby committed an offence punishable
under section

13(1)(c) read with section

13(2) of the Prevention of Corruption Act?

(11)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.1, who was entrusted with
the funds of the Canfina, in furtherance of
the Conspiracy, made a bogus transaction
involving an amount of Rs 5 crores of the
Security "140/o NCD11 with the CBMF and
transferred the said amount in favour of
the CBMF without any consideration and
thereby committed an offence punishable
under section 409 of the Indian Penal

YES

22
Code.?

(12)

Whether

it

is proved

by

the

prosecution beyond reasonable doubt that


the

accused

No.2

books/documents

falsified

belonging

to

the

NO

C anfina

involving transaction of Rs 5 crores and


committed

offence punishable under

an

section 477A of the Indian Penal Code.

(13)

Whether

it

is

proved

by

the

prosecution beyond the reasonable doubt


that

the

accused

No.2

exceeded

the

NO

authority delegated to him by the Canfina


by enteri ng into fictitious and non-eltistent
transaction of Rs 5 crores and committed
an

offence

punishable

under

section

13(l)(c) read with section 13(2) of the


Prevention of Corruption Act?

(14)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.2 i n furtherance of the
conspiracy

committed

an

NO

offence

punishable under section 409 of the Indian


Penal Code.

23

(15)

Whether

it

is proved

by

the

prosecution beyond reasonable doubt that


the accused No.2 made false entry in the

NO

books and documents of the Canfina in


respect of the transaction of Rs 5 crores
and

committed

an

offence

punishable

under section 477A of the Indian Penal


Code?

Wheth.er it is proved

( 16)

by

the

prosecution beyond reasonable doubt that


the accused No.2 in furtherance of the said
m

conspiracy

respect

of

NO

fictitious

transaction of purchase of Rs 7 crores of

Security
and

as "14% NCO", abused his office

committed

an

offence

punishable

under section 13(1)(c) read with section


13(2) of the Prevention of Corruption Act?

(17)

Whether

it is proved

by

the

prosecution beyond reasonable doubt that


the accused No.2, in furtherance of the
conspiracy,

committed

an

offence

punishable under section 409 of the Indian


Penal Code in respect of the

so-called

fictitious transaction of Rs 7 crores?

NO

24

Whether

(18)

it

i.s

proved

the

by

prosecution beyond reasonable doubt that


the accused No.2 made fictitious entry in
the

books

documents

of
of

accounts
Canfina

and

NO

other

regarding

the

transaction of Rs 7 crores and committed


an offence punishable under section 477A
of the Indian Penal Code?

Whether

(19)

it is proved

by

the

prosecution beyond reasonable doubt that


the accused No.2, in furtherance of the

NO

conspiracy, exceeded powers delegated to


him and pretended to enter into ready

forward

(RF) transaction

involving

an

amount of Rs 7 crores of the Security "140/o


NCD" dated 11.2.1992 with CBMF and
abused

his

office

and

com mitted

an

offence punishable under section 13(1)(c)


read with section 13(2) of the Prevention
of Corruption Act?

(20)

Whether

it

JS

proved

by

the

prosecution beyond reasonable doubt that


the accused No.2 was entrusted with the
domain of the said funds, entered into
fictitious t ransaction involving Rs 7 crores

NO

25
and caused the said amount of Rs 7 crores
to

paid

be

to

CBMF

by

issuing

IBA

dated 11.2.1992 without any

No.32886

consideration and committed an offence


punishable under section 409 of the Indian
Penal Code?

Whether

(21)

it

proved

is

by

the

prosecution beyond reasonable doubt that


the accused No.2, in furtherance of the
said

conspiracy,
the

regarding

made

transaction

false

NO

entry

involving

an

amount of Rs 7 crores in the books/papers


of

Canfina

punishable

and

committed

under

section

an

offence

477A

of the

Indian Penal Code?

(22)

Whether

prosecution

it

beyond

proved

is

reasonable

by

the

doubt

that, in furtherance of the said conspiracy,


the accused No.3, at

the

material times

being the General Manager of CBMF at


their Office at Mumbai, before crediting of
the proceeds of the aforesaid transaction
dated

10/10/91

directed

accused

of

Rs

No.11

17.29
on

crores,

9/10/1991

itself to issue cheque for Rs 8.99 crores in


favour of Mis S.K. Jhaveri of which the

YES

26

accused No.6

the Proprietor

was

and

accused No.7 was sub-broker and also


signed the said cheque alongwith accused
No. 11 without any authority and for no
consideration favouring accused No.6 and
another

cheque

No.488906
Rs

for

10/10/1991

dated

8,30,00,000/-

favouring Mis Narbheram Harakchand for


wrongly benefiting accused Nos. 9 and 10
and diverted funds to accused Nos. 6,7
and 9 and thereby committed an offence
punishable under section 13(1)(c) read
with section 13(2) of the Prevention of
Corruption Act?

Whether

(23)

it

is

proved

by

the

prosecution beyond reasonable doubt that


the

accused

No.6

aided

and

abetted

accused No.3 in the aforesaid transaction


and

committed

an

offence

punishable

under section 109 of the Indian Penal


Code
section

read

with

13(2)

section

of

the

13(1)(c)
Prevention

and
of

Corruption Act and section 409 of the


Indian Penal Code?

YES

27
(24)

Whether

the

prosecution

has

established beyond reasonable doubt that


the accused No.3, at the material time
being general Manager of CBMF at their
at

Office
crediting

before

Mumbai,

the

proceeds

of

aforesaid

transactions dated 10/10/1991 amounting


to Rs

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

Navinchandra Parekh was partner and on


behalf of which firm accused No.9 - Ketan

V. Parekh was dealing with CB:MF and


since accused No.3 was not to be available
on 10/10/1991 in Mumbai, he had signed
cheque

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

had no dealing with

Ws N arbheram Harakchand for which


said

cheque

authority

had

and

been

with

no

issued

without

consideration

favouring accused Nos. 9 and 10 and that


at the time of drawing of the aforesaid

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

funds would wrongly be made available


through CANFINA by accused N o.1 and
that

his said

act

amounts

to

criminal

breach of trust and as such, accused no.3


is guilty of abusing his office as a public
servant and thereby committed an offence
punishable

under section

13 (1)(c) read

with section 13(2) of the Prevention of


Corruption Act?

(25)

Whether

prosecution
that,

in

it

beyond

furtherance

is

proved

by

reasonable
of

the

the

doubt

criminal

conspiracy, the accused No.9 got the said


cheque credited to the account of

Mis.

Narbheram Harkchand without any deal


and consideration and the accused N o.10
utilized the said amount by issuing cheque
dated 10/10/1991 for Rs 8.25 crores and
thereby aided and abetted accused No.3
and

committed

an

offence

punishable

under section 109 of the Indian Penal


Code read with section 13(l)(c) and 13(2)

YES

29
of the Prevention of Corruption Act and
section 409 of the Indian Penal Code?

Whether

(26)

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.4, in furtherance of the

NO

said conspiracy, being an Assistant General


Manager of the CBMF, received an amount
of Rs 5 crores vide IBA No.32686 dated
16/1/1992 for crediting the same to the
of Canbank

account

illegally credited
Nc

Scheme
Tamrind

the

with

Road

Mutual
same
the

Branch,

Fund

but

in Cancigo

Canara

Bank,

Mumbai

and

thereby illegally transferred the same to


the account of accused No.5 and thereby
committed an offence punishable under
section

13(1)(c)

and

13(2)

of

the

by

the

Prevention of Corruption Act.

Whether

(27)

prosecution
that,

in

it

b e yond

lS

proved
reasonable

doubt

funherance of the said conspiracy,

the accused No.5 got the amount of Rs 5


crores credited to his account without any
deal or consideration

and committed an

offence punishable under section 109 of


the Indian Penal Code read with section

YES

30

13(1)(c)

and

section

13(2)

of

the

Prevention of Corruption Act and section


409 of the Indian Penal Code?

(28)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that

YES

the accused No.8, being the Vice President


of

Caniina, exceeded powers delegated

him and abused

to

his Office by making an

entry in IBA Register being IBA No.32886


dated 11/2/1992 regarding fictitious and
non-existent transaction s howing purchase
of "14o/o NCD" and thereby committed

an

offence punishable under section 13(1)(c)

read with section 13 (2) of the Prevention


of Corruption Act?

(29)

Whether it is

proved by

the

prosecution beyond reasonable doubt that


the accused No.8, in furtherance of the

YES

conspiracy, falsified the books of Canfina


and committed an offence in respect of
transaction dated 11/2/1992 involving Rs
7

crores

punishable

and

committed

an

under section 4 77A

offence
of

the

Indian Penal Code.

''

___J

31

(30)

Whether

it is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.4, who was at the material

NO

time the Assistant General Manager of


CBMF, transferred the amount of Rs 7
crores th.at was credited to the account of
Cancigo Scheme of CBMF and transferred
the same to the account of the deceased
stock

broker

Manubhai

Maniklal

by

passing a voucher dated 11/2/1992. and


committed an offence punishable under
section 13(1) (c) read with section 13(2)
of the Prevention of Corruption Act?

(31}

Whether

it

is proved

by the

prosecution beyond reasonable doubt that


the accused No.8 exceeded the authority
which was delegated to him and on
25/3/1992 made entry in the Sauda Book
regarding purchase of 85,000 shares of
Ws.

Nahar

Spinning

Mills

through

accused No.7 Pallav Seth and caused loss


of

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

12,75,00,000/- without any receipt of any

YES

32
cost memo, contract note or the security in
ph ysical or in the form of bank receipt

(BR) and caused illegal transfer of funds


of the Canfina without any security in
hand and abused his position as public
servant

and

committed

an

offence

punishable under section 13(l)(c) read


with section 13(2) of the Prevention of
Corruption Act?

(32)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.7 got the said amount

YES

credited to his account without any deal


and consideration and aided and abetted
the

accused No.8

and

committed

the

offence punishable under section 109 of


the Indian Penal Code read with section
13(1)(c) and 13(2) of the Prevention of
Corruption Act and section 409 of the
Indian Penal Code?

(33)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.8, in furtherance of the
criminal

conspiracy,

exceeded

YES

the

authority delegated to him and entered


into purchase transaction of 40,000 shares

..J

------- - - ------- - - - - -

33

of A.C.C. aggregating to Rs 25,00,00,000/


from Pallav Seth (accused No.7), that was
not within his competence,

though he

knew that the transaction was of fictitious


nature and thereby committed an offence
punishable under section

13(1)(c)

read

with section 13(2) of the Prevention of


Corru ption Act?

(34)

Whether

it

is

proved by the

prosecution beyond reasonable doubt that

the accused No.8 was entrusted with the

YES

funds of Canfina and made an entry dated


08/04/1992 in dealers pad and illegally
transferred Rs 25 crores to accused No.7 Pallav Seth without any deal, security, BR,
cost memo etc and committed an offence
punishable under section 409 of the Indian
Penal Code.

(35)

Whether

it is

proved

by the

prosecution beyond reasonable doubt that


the accused No.11 wrongfully credited the
said amount by issuing cheque No.488905
dated 10/10/1991 for Rs 8,99,00,000/
favouring M/s. S.K. Jhaveri for wrongfully
benefiting the accused No.6 and another
cheque No.488906 dated 10/10/1991 for

NO

- -

,-- --1

34
Rs.

8,30,00,000/

Narbharam
benefiting

favouring

Harakchand
accused

M/s.

for wrongfully

No. 9

and

10

and

diverted funds of Canfina to accused Nos.


6, 7 and 9 and committed an offence
punishable under section 13(1) (c) read

with section 13(2) of the Prevention of

Corruption Act?

(36)

Whether

it

is

proved

by

prosecution beyond reasonable doubt

the

that

the accused Nos. 6, 7, 9 and 10 aided and


abetted accused No.11 and committed an
offence punishable under section 109

of

the Indian Penal Code read with Section


13(1)(c) and 1 3 (2) of

the Prevention of

Corruption Act?

(3 7)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused Nos. 9 and 1 0 deposited the
cheque No.488906 dated 10/10/1991 for
Rs 8,30,00,000/ issued by the accused

No. 3 and 1 1 and deposited

the same in

their account with the Bank of India, Stock


Exchange
amount

Branch,
did

knowing

not belong

that

the

to them

and

dishonestly received the same without any

NO

35
consideration and committed an offence
punishable under section 403 of the Indian
Penal Code.

Whether

(38)

it

is

proved

by

the

prosecution beyond reasonable doubt that


the

accused

Nos.

and

11,

being

except
acrused No.11.
Yes,

employees of CBMF, aided and abetted the


accused Nos. 9 and 10 to commit criminal
misappropriation

and

committed

an

offence punishable under section 109 of


the Indian Penal Code read with section
403 of the Indian Penal Code?

(39)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.6 received and deposited
cheque No.488905 dated 10/10/1 991 for
an amount of Rs 8,99,00,000/- issued by
the accused Nos.3 and 1 1 and deposited
the same in his account, knowing that the
said cheque did not belong to him and
thereby committed an offence punishable
under section 403

of the Indian Penal

Code?

(40)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that

YES

36

the

accused

No.3

being

employee

of

CBMF, in furtherance of the conspiracy,


aided and abetted accused No.6 to commit
the

aforesaid

act

of

criminal

misappropriation and committed an act


punish.able under section 109 read with
section 403 of the Indian Penal Code.

Whether

( 41)

it is proved

by

the

prosecution beyond the reasonable doubt


that

the

accused

22/10/1 991
deposited

Nos.

at Mumbai
cheque

and

received

No.587347

on
and

dated

22/10/1991 for Rs 12 crores which was


issued

as per the instructions

accused

No.3,

their joint

of the
account

No.0478601 1 with the Bank of America,


Mumbai knowing that the said cheque did
not

belong

received

to

the

them
same

and

dishonestly

without

any

consideration and committed an offence


punishable under section 403 of the Indian
Penal Code?

(42)

Whether

it is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.3, being an employee of
CBMF, in furtherance of the conspiracy,

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

misappropriation of the amount against


the said cheque and committed an offence
punishable under section 109 of the Indian
Penal Code read with section 403 of the
Indian Penal Code?

Whether

(43)

is proved

it

by

the

prosecution beyond reasonable doubt that


the accused No.5 on 16/1/1992 received
cheque No.587664 dated 16/1/1992 for
Rs 5 crores issued/passed by the accused
No.4 vide voucher dated 16/1/1992 and
deposited the same in his account with
Andhra

Bank,

Fort

Branch

Mumbai,

knowing that the amount against the said


cheque did not belong to
was

dishonestly

without

any

him

receiving

consideration

or that he
the

same

thereof and

thereby committed an offence punishable


under section 403
Code.

of the Indian Penal

YES

38

( 44)

Whether

it

is

proved

by

the

prosecution beyond reasonable doubt that


the accused No.4, being the employee of

NO

CBMF, in furtherance of the conspiracy,


aided and abetted accused No.5 to com mit
the

criminal

of

act

aforesaid

misappropriation and thereby committed


an offence punishable under section 109
of the lndian Penal Code read with section
403 of the Indian Penal Code?

(45)

Whether the prosecution has proved

beyond

reasonable

accused

have

doubt that all the


committed

offence

NO

punishable under section 467 & 471 of the


Indian Penal Code?

(46) Whether the prose cution has proved


that

they

had

obtained

sanction

to

prosecute the accused Nos. 2 and 4 ?

(4 7)

Whether

it

is

proved

by

the

prosecution that the sanction to prosecute


the

YES

accused Nos. 1,3,8 & 11 was not

YES

necessary?

(48)

What order?

As per final order

39
18.

Before I consider the rival submissions, in my view, it would be

appropriate if the submissions of the learned Counsel appearing on


behalf of the accused are noted. This has become necessary because
the submissions of some of the accused

are

contradictory to each other

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.

SUBMISSIONS MADE ON BEHALF


OF ACCUSED NO. I - S. MOHAN:
19.

The learned Counsel appearing on behalf of accused No.1 has

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.

The Counsel for accused No.1 made the

following submissions:-

(i) He submitted that there was no conclusive


proof to show that the accused No.1 entered into
any of these transactions.

(ii) He submitted that the prosecution has not


produced rough sheet which, according to him,
was the foremost primary record of deals.

(ii)i He submitted that the entries in deal pad

'--------

40

and IBA Register are not relevant for deciding


who was the person who concluded the deals.

(iv) He submitted that the top management was


fully aware of the transactions and did not raise
any objection at any point of time.

He submitted that the deals in question

(v)

were reversed and the Canfina earned profit of


Rs

20.

1,41,68,200/- on these

transactions

In respect of individual charges he submitted as follows:

(a)

CONSPIRACY

He submitted

that

an essence

of

criminal conspiracy was the agreement to do


illegal act and such agreement could be
proved either by direct or circumstantial
evidence or by both.

He submitted that,

admittedly, there was no direct evidence


available

circumstances

this

case

are

and

so

concerned,

far

as
the

prosecution was not in a position to establish


these circumstances by cogent and reliable
evidence. He submitted that the prosecution
had not been able to prove the case beyond
the reasonable doubt.

r
I

41

(b) APVKRSE INFERENCE

He submitted that the prosecution has


not brought on record material evidence
both oral and documentary before this Court
and that though the

statements of Mr.

Praveen Bhat, Mr. P.N. Narayana Rao and


Mr. A.P. Rao

were recorded under section

161 of the Criminal Procedure Code, these


witnesses were not examined and, therefore,
adverse inference was liable to be drawn
against the prosecution.

(c)

CRIMINAL BREACH OF TRUST


It is submitted that the accused No.1

was

no

entrusted

with

the

funds

dominion over the funds of Canfina.

or
He

submitted that the accused No.l had nb


power to enter into any deals. He submitted
that the accused No.I had not signed arty
cheques on behalf of Canfina for the purpose
of transferring the funds (IBAs) towards the
transactions entered into and the persons
who signed the cheuqes were,

in fact, from

the back up Office and the Executive Vice


President

from

Merchant

Banking

42

Department

or

from

the

General

Administration Department. It is submitted


that the accused No.1 has not committed
any criminal breach of trust. He submitted
that none of the witnesses had deposed
against accused No.1 or made any statement
incriminating the accused in the offence. He
submitted that only three documents were
produced by the prosecution against accused
No.1 viz. Exhibits 39, 40 and 59 and that
none of the witnesses has stated that the
accused No.1 committed breach of the duty
in respect of the said exhibits.
submitted that

so

far

as

He th.en

the offences under

sections 34, 109, 120-B, 409, 477A of the


Indian Penal Code and section 13(1 ) (c) read
with section 13(2) of the Prevention of
Corruption

Act

are

concerned,

the

prosecution has not been able to prove


"mens-rea" against accused No.1 which was
the necessary ingredient in these offences.

In support of the said submissions he


relied upon the following judgments:-

(1) Ramesh Kumar Vs. State (N.C.T. of


Delhi) - 2006 AIR sew 1021.

(2) State of Haryana Vs. Bhajan Lal -

43
AIR

(3)

1992 SC 604

Judgment of the Supreme Court in

Jacob Mathew Vs. State of Punjab & Anr in

Appeal (Cri.) 144- 145 of 2004 decided on


August 5, 2005.

(4)

M/s Hindustan Steel Ltd., V. State of

Orissa, 1969 (2) sec 627.

(5)

Mohammed Yusuf & another V/s D. and

another, AIR 1968 Bombay 112.

(6)

Ramji Dayawala & Sons (P.) Ltd. V/s.

Invest Import, AIR 1981 SC 2085.

(7)

Hanumant Vs. State of M.P., AIR 1952,

SC 343.

(8)

State of Karnataka Vs. L Muniswartiy

(1997) 2 sec 699

(9)

P.K. Narayanan V/s State of Kerala,

(1995)

(10)

sec 142

Varkey Joseph V/s. State of Kerala,

AIR 1993, SC 1892

------

(11)

Mehraj Singh (VNk.) Vs. State of U.P.,

(1994) s sec 1ss

(12) Harl.sh Chandra and another etc. Vs.


Stateof U.P., 1991

21.

Cri. W. 2815

Jn support of the said submissions, he invited my attention to the

documents on which reliance was placed by the prosecution as also


the evidence of P.W.2, 6, 13 and 14 and 19. He also made comments
on the said documents. The oral evidence of these witnesses shall be
dealt with at the later stage.

SUBMISSIONS ON BEHALF OF

ACCUSED N0.2

22.

- N. BALASUBRAMANIAM:

Mr. Girish Kulkarni, th learned Counsel appearing on behalf of

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

of the offence punishable under the Prevention of Corruptiott Act.


Charge Nos. 13 and 16 are for the offence punishable under section
409 of the Indian Penal Code.

Charge No.1 is

in respect of the

offence of conspiracy, punishable under section 120-B of the Indian

45

Penal code.

Mr. Kulkarni submitted that the sanction which was

accorded to prosecute the accused No.2 was bad in law. He submitted


that the said sanction is invalid. He submitted that the draft sanction
was not produced and, therefore, an adverse inference was liable to be
drawn.

He submitted that the documents on which reliance

was

placed by the prosecution were forwarded by the accused Nos. 1 & 8


and the accused No.4 had acted on it. He submitted that, therefore,
the sanction was accorded without any application of mind.

He

submitted that the co-signatory having been exonerated, the accused


No.2 also was liable to be acquitted. Thirdly, he submitted that even

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

submitted that the accused No.2 was working in the backup


Department to record the transactions put through by

th

dealing

department and he was reporting to Vice President Mr. K.B. Shenoy.


He submitted that the job of accused No.2

was

to write down the

transactions put through by the dealing department based on the


instructions given by the dealers in the rough sheets. He was neither a
dealer nor had been bestowed with the powers or authority

to

buy,

sale or otherwise deal in shares or securities.

SUBMISSIONS ON BEHALF OF
ACCUS ED N0.3 - B.R. ACHARYA:
23.

Ms. Jakhade,

the learned Counsel appearing on behalf of

accused No.3 made the following submissions:-

(i)

She

submitted

Management

Persons

that
were

the

Senior

neither

made

accused nor examined by the prosecution.

(ii)

She submitted that no injury was caused

to the public since no loss was caused to


Canfina and, m fact, Canfina had earned
handsum profit.

(iii)

She submitted that sections 403 and

405 were mutually exclusive and both these


sections could not go hand in hand .

She

submitted that the transactions were of civil


nature and, therefore, there

was

no criminal

liability attached to the said transactions.

(iv)

She submitted that no evidence has been

adduced to prove that there was a general


criminal conspiracy between all the accused

47
or between any of them. She submitted that
no complaint has been filed by the employer
viz. Canfina against the accused.

(v)

She submitted that the accused No.3 was

not a public setvant and, therefore, charges


under the Prevention of Corruption Act were
not attracted.

(vi)

She further submitted that the accused

No.3 was neither entrusted with the funds nor


had he any dominion over the said funds and,
therefore, section 409 of the Indian Penal
Code was not attracted.

(vii)

She submitted that, at the most, it

would be said that there was an irregularity


and therefore the provisions of the Indian
Penal Code and the Prevention of Corruption
Act were not attracted.

$t.JlJMISSIONS ON BEHALF
tit- ACCUSED N0.4 P J SUBBARAO:
-

24.

, .

Mr. Sawardekar, the learned Counsel appearirig on befuilf of the

accused No.4 made the following submissions:-

48
SANCTION

(i) He submitted that the sanction which was


given by P.W. 15 - G.A. Shenai suffers from
vice

of

non-application

submitted

that

the

of

mind.

charge-sheet,

He
in

its

entirety, was not placed before the authority


when the

sanction

order was

passed

on

04/03/1996. He invited my attention to the


evidence

of

P.W.15

G.A.

Shenai

and

submitted that from the deposition of the said


witness, it was obvious that his mind was
totally influenced by the Legal Department
into giving sanction.

JURISDICTION

(ii) He submitted that the prosecution was in


of

respect

10/10/1991,

five

transactions

22/10/1991,

dated

1 6/1/199.2,

7/2/1992 and 1 1/2/1992. He submitted that

all

these transactions had taken place prior to

06/06/1992 which was the date on which

th

Special Court Act was deemed to have come


into force.

He submitted that, therefore,

the

said transactions were beyond the jurisdictibn


of this Court.

- ------

49

OMISSION
ON
THE
PART
OF
TO
NAME
PROSECUTION
CERTAIN
PERSONS AS ACCUSED:
(iii)

He submitted that certain bankers who

had signed the documents which were the


subject matter of the prosecution were not
named as accused.
Ashok Kumar
prosecution.

One such Officer Shri

Kini has deposed

for the

Other Officers viz. S.M. Satish

and Anil Narichania were not prosecuted. No


explanation was given for the said omission.
He submitted, therefore, that charge under
section 120B could not be attracted since the
persons who were similarly situated were not
prosecuted.

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

a trust and, therefore, as an employee

oi

CBMF, the accused No.4 was not a publl


servant. In support of the said submissions

ile

relied upon the judgment of the Supreme


Court in

Canara Bank & Ors Vs. National

---

--

50

Thermal Power CoIJ>. & Anr. reported in

c2001) i sec 43.

He then invited my

attention to the evidence of P.W. 1 6 - S.R.


Ramaraj, P.W. 14 - K.N. Karnath and P.W.9 T. Ravi and submitted that no case has been

made out "Qy the prosecution against the


accused No.4. He further submitted that the
questions were asked to accused No.4 under
section 3 1 3 of the Criminal Procedure Code
and his

comments were

invited

on the

documents marked as X-1, X-2, X- 1 1 , X-15


and X-16. He submitted that these documents
were not proved and hence did not constitute
evidence and could not be relied upon as
evidence against the accused No.4. He relied
upon the following judgments:-

(1) Sait Tarajee Khimchand V/s Yelamarti


Satyarn - AIR 1971 SC 1865.
(2) Narbada Devi Gupta V/s Birendar
Kumar Jaiswal - 2003(8) SCC 745
(3) Dhafa.pldas Lilaram V/s Emperor

AIR

1932 Sind 169.


(4) Santosh Kumar and others Vs. The King
- AIR (39) 1952 calcutta 193.
(5) Chandrika Prasad V/s. Emperor -

AIR 1930 Oudh 324


(6)Rasul

Mohd.

V/s.

The

State

of

51

Maharashtra-AIR 1972 SC 521.

(7)

Ramaswami Nadar V/s. The State of


Madras - AIR 1958 SC 56

He also invited my attention to the provisions of section 403, 405 and


submitted that the ingredients of these offences were not established
by the prosecution so far as accused No.4 is concerned.

SUBMISSIONS ON BEHALF OF
ACCUSED N0.5 IDTEN P. DAIAL:

25.

Mr. Kale, the learned Counsel appearing on behalf of accused

No.5 submitted that the defence taken by the accused No.5 was not
an

afterthought since he had already given

an

explanation and notice

was issued under section 91 of the Criminal Procedure Code.

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.

He further invited my attention to the

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.

He submitted that the accused

No.5 was involved by the prosecution in Charge Nos. 1, 9, 10, 11, 22,
23, 39 and 40.

He invited my attention to the statements of P.W.2,

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

invited my attention to the various documents such as Cheque No.


587664,

Exhibit-106,

Exhlbit-51

and

Exhlbit-52.

He

has

also

commented on the statement of P.W. 1 2 and submitted that the


evidence given by

accused No.5 with

this

witness does

the commission of

not

in any way connect the

the alleged offence.

He further

submitted that the adverse inference was liable to be drawn on


account of the non-examination of

the witnesses p articularly

respect of the evidence to establish the agreement.

He relied upon

the following judgments of the Apex Court:-

(1) S.P. Bhatnagar Vs. State of Maharashtra -

AIR 1979 SC 826

(2) Sharad V/s. State of Maharashtra

AIR 1934 sec 1622


(3)

Lieu tenant Hector Thomas

Emperor -

in

Huntley V/s.

AIR (31) 1944 Federal Court 66

53

He has also tendered written submissions. In a nutshell his arguments


can be summarized as under:-

(a)

In respect of the charge of conspiracy, he

submitted that the charge, as framed, does not


arise out of the charge-sheet filed in the Court
and, therefore, the charge was unsustainable
in law.

He submitted that the charge was

silent as to which part of the conspiracy was


invoked by the prosecution in respect of the
alleged offence. He submitted that the charge,
even on the basis of the evidence led by the
prosecution, falls to the ground as no evidence
has been ld in support of the prosecution
case.

He the n submitted that so far as charge

Nos. 9th and 11th are concerned, accused

No.5 was not in any way connected which


could be seen from the evidence of witnesses.
He further submitted that the charge Nos.
22ndly and 23rdly are based on the allegation
that the accused No.4 was instrumental in
ma.king payment to the accused No.5 and

this

was falsified by the evidence of P.W. 9.

(b)

He submitted that the prosecution has not

examined the witnesses from CBMF who were

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

He submitted that so far as accused No.5


concerned,

16/01/1992.

the

only

relevant

date

was

He submitted that the defence

of the accused No.5 is that on 15/01/1992, at


the instance of CBMF, he had issued a cheque
of Rs 5 crores favouring Corporation Bank by
way of accommodation

and

that the said

amount was returned on 16/01/1992 and that


he did not receive any amount from Canfina.

(d)

He submitted that none of the documents

on which reliance has been placed by the


prosecution establish their case.
oral

evidence

None of the

which is brought on record

supports the prosecution case.

He further

submitted the reliance has been placed by the


prose cu tion on the judgment of the
Court

in

Maruti's

case

but

it

Apex

can

be

distinguished in the facts and circumstances of


this case.

55

Further detailed submissions of Mr. Kale will be discussed at the


appropriate stage.

SUBMISSIONS ON BEHALF OF
ACCUSED NO. 6 SJ{. JHAVERI
-

26.
No.6

Mr. Sh.ah, the learned Counsel appearing on behalf of accused


-

S.K. Jhaveri, submitted that the accused No.6 was concerned

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.

S.K. Jhaveri. He invited my

He further submitted that Anil

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.

He submitted that even if the prosecution case is taken

as it is, it would establish that the accused No.6 had no way of


knowing that the amount belonged to Canfina. He submitted that the
P.W.9 in his statement has categorically admitted that he had never
informed the accused No.6 - S.K. Jhaveri.
attention

to

the

statement

Investigating Officer.

of accused

He also invited my
No.11

and

P.W.19

He invited my attention to the documents at

Exhibit A-6(5) & Exhibit A-6(6).

He also pointed out that the

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

was not in consonance with the conduct of the person who

wanted to misappropriate the amounts from Canfina or Canbank. In a


nut shell he submitted as under:-

(a) The evidence adduced by the prosecution


did not disclose the criminal conspiracy.

(b)

There was no evidence to indicate that

the accused No.6 had knowledge that money


belonged to CBMF

(c)

There was no evidence to indicate that

the accused No.6 induced any bank official to


issue cheque of Rs 8. 99 crores.

(d)

There was nothing to indicate that there

was any deficiency in the bank account on

11/10/1991

(e)

The documentary evidence which was

brought on record by the prosecution clearly


indicated that it was a regular transaction
and that, in fact, he never had any direct
connection with the Bank and that Pallav

57
Seth - accused No.7 was dealing with the
Canbank.

The evidence clearly indicated that

(f)

there were regular transactions with accused


Nos.

and

connected

10

and he was

with

the

in no way

transaction

dated

10/10/1991.

(g)

He also invited my attention to the

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),

9(16) . and Exhibit A- 6(1).

Exhibit a-

He submitted that

all these documentary evidence as also the


oral evidence could not establish the case of
the prosecution.

(h)

He further invited my attention to the

statement of P.W.7 wherein he has stated

that the shares belonging to S.K. Jhaveri were


handed over to Canfina worth about Rs 12
crores and the suit was filed by accused No.6
for recovery of the said amount which was
pending in this Court.

(i)

He submitted th.at in respect of the first

58

charge of conspiracy there was no evidence


regarding involvement of accused No.6.

He

relied upon the judgment of the Apex Court


in Ram Nath Mad.hoprasad and otbers vs.
State of Madhya Pradesh reported in

1953

SC 420 and in Pandurang. and otbers Vs.


State of Hyderabad reported in AIR 1955 SC

216.

He submitted that the charge for the

offence under section 409 and 403

was

not

established. He relied upon the judgment of


the Apex Court in

Ramaswamy Nadar Vs.

The St;ate of Madras reported in 1958 SC 56


U. Dhar and another Vs. State of

and in

Jharkhand and others reported in AIR 2003


SC 974.

SUBMISSIONS ON BEHALF OF
ACCUSED N0.7 PALIAV SETH:
-

27.

Mr. Purandhare, the learned Counsel appearing on behalf of

accused No.7 submitted that the prosecution had not examined


certain witnesses and also had not produced relevant documents viz.
Stock Register and the Register regarding movement of shares in the
Department. He submitted that, therefore, the adverse inference

was

liable to be drawn for non examination of the relevant witnesses and

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)

An adverse inference was liable to be

drawn against the prosecution.

(b)

There

substantial

was

contradictions

in

the

internal

depositions

of the

witnesses of the prosecution.

(c)

There were substantial transactions

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)

The charge of conspiracy has not been

established against the accused No. 7.

60

SUBMISSIONS ON Bf!.HALF OF
ACCUSED N0.8 - M.K. ASHOK KUMAR

28.

Mr. Amit Desai, the learned Counsel appearing on behalf of the

accused No. 8 - M.K. Ashok Kumar,

submitted that the charge No.1,

24, 25, 27, 29 and 30 were framed again.st accused No.8.

He

submitted that, at the stage of final arguments, the prosecution had


made a statement that they were not pursuing charges in respect of
transactions dated 7/9/1992 and 1 1/9/1992. He invited my attention
to the statement of witnesses on which reliance was placed by the
prosecution viz. P.W.2, P.W.6, P.W.7, P.W. 17 as also the relevant
documents on which reliance was placed by the prosecution.
nutshell, he submitted as under:-

(a) An adverse inference was liable to be drawn


against the prosecution for not examining Mr.
Joseph

D1souza

who

Manager of CBMF.

was

the

He submitted

Divisional
that the

prosecution made an attempt to show that such


person, in fact, did not exist.

(b)

There was no material against accused

No.8.

The documents on which reliance was

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)

None of the documents on which reliance

was placed,

w
as

either signed by the accused

No.8 or had his initials.

(d)

It was urged that no witness had given any

incriminating

evidence

against

the

accused

No.8.

(e)

There was neither direct nor indirect or

circumstantial

evidence

against

the

accused

No.8 in respect of any of the charges.

(f)

The only circumstance against the accused

No.8 was he was Chief Dealer of Canfina at the


relevant time.

He made his detailed submissions in respect of the evidence and


documents on record which would be considered at the relevant stage.
The learned Counsel relied on number of judgments of the Apex Court
which will be dealt with at the relevant stage.

1
62

SUBMISSIONS ON BEHALF OF
ACCUSED N0.9 - KETAN V. PAREKH &:
ACCUSED N0.10 - NAVINCHANDRA N. PAREKH

29.

Mr. Mahesh Jethmalani, the learned Counsel appeanng on

behalf of accused Nos. 9 and 10 invited my attention to the FlR and


the charge-sheet. He submitted that the accused Nos. 9 and 10 were
involved only in one transaction, namely, dated 10/10/1991.

He

submitted that accused Nos. 9 and 10 had purchased 5 lakhs shares of


R1L from accused No.6 - S.K. Jhaveri. He submitted that these accused

Nos. 9 and 10 were said to have been committed offences mentioned


in charge Nos. 1, 20, 21, 31, 32 and 33.

He invited my attention to

the evidence of P.W.l, P.W. 2 P.W.7, P.W.16 and P.W.18.

He also

invited my attention to the statement of P.W.19 - Investigating Officer.


He invited my attention to the documents at Exhibits A-9(3), A-9(4),
A-9(8), A-9(9), A-9(10), A- 9(11), A-9(12) and A-9(13).

He also

invited my attention to the the deposition of defence witness Manish


Thakkar at Exhibit A-9(1). He further submitted that in response to
the notice which was is.sued under section 91 of the Criminal
Procedure Code, accused Nos. 9 and 10 had already given an
explanation. He submitted that the Investigating Officer had not taken
into consideration the explanation which was given by these accused

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.

The learned Counsel appearing on behalf of accused No.11

Srinivasan, submitted that the accused No.1 1 was the Junior

B.V.

Officer

and was Fund Manager of Canbonus Fund of Canbank Mutual Fund.


He submitted that

the

accused No.11 was subject to dayto-day

superintendence and direction and control of accused No.3 - B.

Achacya and also Assistant General Manager, Divisional Manager etc.


He submitted that the

accused No.11 was merely one

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

they were merely doing accounting work of

the fund i.e bringing the transactions into books of accounts as per
bank entries, receipts and payments.
No.11,

while issuing

crores dated

He submitted that the accused

cheque for

10/10/1991

which are

Rs 8. 99 crores and Rs. 8.30


at

Exhibits

14

and

15,

64

had merely adhered to the instructions given by accused No.3


Acharya.

B.R.

He submitted that accused No.3 - B.IL Acharya had

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

the other signatory for current account

operation. He submitted that the accused No.3 had neither given any
information nor details of the

transactions.

He submitted that the

attendance register indicated that B.R. Acharya

was

not in Mumbai on

10/10/1991. He submitted that, therefore, accused No.11 had acted


merely on instructions of accused No.3.

He further invited my

attention to the statement of P.W.19 - Investigating Officer.

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

admitted that during investigation, it transpired that the accused No.3


had given instructions on 9/10/1991 to accused No.1 1 to prepare two
cheques dated 10/10/1991 and one cheque was given to accused No.9
and other cheque was given to accused No.7, being the representative

of accused No.6. He submitted that this fact was confirmed by P.W.9 -

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.

FINDINGS AND CONCLUSION:

31.

After having perused the oral and documentary evidence on

record, in my view, prosecution has proved beyond reasonable doubt


the charges against accused Nos. 1, 8, 3, 5, 6, 7, 9 & 10. However, it

has failed to establish charges levelled against accused Nos. 2, 4 & 11


for the following reasons set out hereinafter.

32.

Between 01/04/1991 to 06/06/1992, it was noticed by the

Government that there were large scale irregularities in banking


transactions

and funds of Public Sector Undertakings which were

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

made and a report was submitted by a Committee which is popularly


known

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

investigation was made by the Central Bureau of Investigation (CBJ)


and criminal complaints were re.gistered against various persons.

In

the present case, complaint was lodged on 1/6/1994 at 15.00 hours


and, in the complaint 1 1 persons were shown as accused viz (1) Shri
S. Mohan, Assistant Vice President, Canfina Bangalore, (2) Shri N.
Balasubramaniam, Assistant Vice President, Can.fina, Bangalore, (3)
Shri B.R. Acharya, General Manager, Canbank Mutual Fund, Bombay,

(4) Shri Anil Narichania, Chief Dealer, Canbank Mutual Fund,

Bombay, (5)

Shri B.S Subba Rao, Assis tant General Manager, Canbank

Mutual Fund, Bombay, (6) M/s Narbharam Harakchand, Share &


Stock Broker, Bombay, (7) Shri Hiten P. Dalal, Share & Stock Broker,
Bom,bay, (8) Shri S.K. Jhaveri, Share & Stock Broker, Bombay, (9) Shri
Pallav Seth, Share & Stock Broker, Bombay (10) Shri Manubhai
Maneklal, Share & Stock Broker, Bombay and (11) Shri R. Venugopal,
Officer, Canara Bank, F & I Section, Bombay. In the said complaint, it
was alleged that all the accused and other stock brokers of Bombay
had entered

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

It was alleged that certain amounts were paid to Pallav

Seth, though, at that time, he owed several crores of rupees to Canfina


and, in the said process, Canfina suffered a loss of Rs 3,12,58,715.76
and interest with effect from 2/4/1992 till filing of the complaint.

33.

The charge-sheet was filed on 24/9/1996 and, out of the

accused mentioned in the FIR, the name of Shri R. Venugopal was


dropped.

Shri Manubhai Maniklal had expired by that time and,

therefore,

his

name

was

also

dropped

Similarly, though the charge-sheet was

from

the

charge-sheet.

filed against Shri Anil

Narichania and Shri Vinaychandra N. Parekh, their names were also


dropped.

The sanction to prosecute was granted by K.N. Karnath,

Chairman and Managing Director of Canbank Financial Services Ltd


vide letter No.2477:NR:96 dated 23/2/1996 for the prosecution of N.
Balasubramaniam - accused No.2.

Shri G.A. Shenai, Chief Executive

Officer Canbank Mutual Fund, accorded sanct.ion to prosecute PJ.


Subbarao - accused No.4 vide letter No.CMF/P & A/011/96 K.J. dated
4/3/1996. Shri S. Mohan - accused No.1 and S.hri M.K. Ashok Kumar
- accused No.8 were removed from service during investigation.
Similarly, Shri B.R. Acharya - accused No.3 and Shri B.V. Srinivasan -

.____

68

accused No.11 had left the service during the course of investigation.
34.

The case of the prosecution, therefore, is that the funds of

Canfina were diverted in five different transactions as shown below:-

Sr.No.

Date

Scheme

Diverted to

Can bonus

Accused No.9 and

Can cl.go

Accused Nos. 6 and


7 B.O.A.

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

10, accused No.6.


B.0.1.

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/-.

Thus the amount was remitted in the

following manner and excess amount was received.

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

Amount received from


Canara Bank F & I
Section, Bombay
Excess received

53,77,82,500
6,07,14,300

69
Out of these amounts,

the

following amounts were paid to the four

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

During the course of arguments, the learned Public Prosecutor

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.

Hence, we are concerned with only three

transactions of remittances viz dated 10/10/1 991, 22/2/1991 and

16/01/1992 and reversal to the tune of Rs 53,77,82,500/-.

36 .

Before I deal with the evidence on record and consider the rival

submissions, it is essential to take into consideration the organizational


set up of the three financial institutions viz
Services, Bangalore (Canfina),
(CBMF) and
to

briefly

(c)

Canbank

consider

the

(F

(b)

(a)

Canbank Financial

Canban.k Mutual Fund, Bombay

& I Section), Bombay. It is also necessary

manner

in which

transactions of sale and purchase of securities.

Canfina

entered

into

70

37.

Qmfina

on business

is 100% subsidiary of Canbank.


of leasing,

higher purchase

Canfina was carrying

and

merchant banking

activities. As a part of merchant banking activities, Canfina made


investments in stocks and also in the secondary market i.e sale and
purchase of shares.

P.W.5 in his evidence

has

stated that he joined

Canara Bank in December, 1971 and in November, 1992 he was


deputed to Canfina as an Assistant Vice President and he

has brought

on record Memorandum and Articles of Association and the

marked at Exhibit-57.
Act and

clause 20 of

same are

Canfina is registered under the Companies

the

Articles/Memorandum of Association,

authorized Canfina to m.ake investtnents in unit Government and other


securities, including shares. Under clause 21 Canfina was empowered
to lend, advance money with or without security.

However, by virtue

of the said clause, it was prohibited from doing any business of


banking as defined in the Banking Regulations Act.

Canfina has its

local Office in Mumbai and also has its accounts in Canara Bank,
Mumbai. (Emphasis supplied).

38.

Accused No 1 - S. Mohan was Assistant Vice President and was


.

working at the registered Office of Cafina at Bangalore. Accused No.8

71

- M.K. Ashok Kumar was Executive Vice President, working in the


same Office and accused No.2

N. Balasubramaniam was Assistant

Vice President working in the back-up department of the same Office.


P.W.2

Mr. B.N. Srikantha has said so in

has also stated that


No.1

his evidence

in para 6. He

accused No.8 - M.K. Ashok Kumar and accused

S. Mohan were authorized to buy and sale securities on behalf

of Canfina.

39.

Canbank Mutual Fund (CBMF) is a trust and it was authorized

to make investments in shares and also lend money and make


advances and it had accounts in Tamarind Lane Branch of Canara
Bank, Bombay.
trustees

Clause 15 (iii) of the Trust Deed empowered the

(a) to 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.

athara Bank is a nationalized Bank and it is a main trustee of CBMF

40.

All the scheduled banks which are nationalized or otherwise

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.

Prosecution has examined in all 19 witnesses. Out of these 19

witnesses, P.W. 1 Ms. Virakthi Sudhakar Hegde (Exhibit-13), P.W. 7

Mr. M. Papa Rao (Exhibit-71), P.W. 9 Mr. Ravi Tirumalai (Exhibit101), P.W. 15

Mr. Gurpur Anantharama Shenai (E:xhibit-128) and

P.W.16 - Mr. S. Rakraj (Exhibit-130) are all Canbank witnesses.

P.W.

2 - Mr.

B.N.

Srikantha (Exhibit- 16), P.W. 5

- Mr.

Jarugumilli Rabindra Nath (Exhibit-56), P.W. 6 - Mr. K. Ashok Kumar

Kini (Exhibit-SS), P.W. 1 3 - Mr. Omprakash Kuckian (Ex.h.ibit- 123)


P.W. 14

&

Mr. K. Narasimha Karnath (Exhibit-126) are witnesses from

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

Mr. Ajay Kumar Nagendranath Kar (Exhibit-49) is a

witness who was working in the Tamarind Lane Branch of Canara


Bank.
P.W. 10- Mr. Dilip Jagmohandas Ummergaonwala (Exhibit- 110)
and P.W. 11

Mr. Kishore Mahadeo Ajgaonkar (Exhibit-114) were

working in the Stock Exchange Branch of Bank of India.


P.W. 12 - Mr. Vasanth Kumar Damaraju (Exhibit- 188) was

73
working with the Andhra Bank,

Fort Branch.

P.W. 1 7 - Mr. Yogesh Ramesh Bhambardekar (Exhibit-136) was


working with the Bombay Stock Exchange.

P.W. 18 - Mr. Mukesh Joshi (Exhibit-144) was working a


Accounts Assistant with M/s Narbheram Harakchand.
P.W. 19 - Shiva Shan.kar Jha (Exhibit- 145) was the Investigating
Officer who investigated the said complaint.

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,

(2) D.W. A- 7( 1) - Surendran Nair [Exhibit A-7(7)], who was working


in the Administrative Department of Nahar Group of Companies in its
Mumbai

Office

and its Head Office was situated at Ludhiana and

(3) DW A-9( 1 ) - Mani.sh Mahendra Thakkar [Exhibit A-9(14)], who


was

share

Harakchand.

sub-broker

and was

employed

with

Mls

Narbheram

His work involved delivery of contracts and shares and

he was handling institutions business.

43.

Prosecution,

--

---

in

order to establish its case

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,

however, attempted to prove the charge of criminal conspiracy by


trying to bring on record movement of funds from Canfina to Canbank
Mutual Fund (CBMF) and from there to the respective brokers and
again return of funds from the brokers to Canbank Mutual Fund
(CBMF) and, ultimately, to Canfina. Through the evidence of Canfina
employees, the prosecution has stated the manner in which the
purchase and sale of securities were made and the procedure that was
The prosecution has

followed in respect of keeping of record.

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.

Correspondingly, the prosecution case is that though

the purchase or sale of securities

is

reflected

in Sauda Book, purchase

of these securities viz "RIV' & 1114% NCDs" on the relevant date on
which purchase was made has not figured

in Sauda Book and,

therefore, it has sought to argue that these transactions of purchase of


securities were fictitious and bogus transactions and the money, in

75

Further, it is argued that

fact, was siphoned off through brokers.

entries were made to show that there was a wrong remittance of that
particular amount, as reflected in the transaction

of each of the three

dates (because in respect of two transactions i.e of Rs 5 crores and Rs

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

argued that, initially, it was shown in these

documents that wrog remittance was made to CBMF and, later on,
word "CBMF"

was

scored off.

It is argued

that

this was done to

suppress transfer of funds from CBMF to

the brokers and when the

amo.unt was repaid, it was not shown that

it was repaid by CBMF to

Canfina.

Prosecution has laboriously brought on record all these

documents to establish the link of travelling of funds from


from Canfina to

Point-B

Le. CBMF to

Point-A i.e.

Point-C i.e. brokers and Point-D

i.e. again re-flow of money to Canfina.

It is argued, therefore, that

without ensuring receipt in physical form of securities when purchases


were made, huge

amounts in crores of rupees were diverted. It

is

argued by the prosecution that accused No.1 - S.Mohan and accused


No.8 - M.K. Ashok Kumar were not authorized to deal in purchase and
sale

of securities

beyond

the particular

limit

and yet, without

authority, they had allegedly entered into the said transaction and,

76
therefore,

they had committed an offence of criminal breach of

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

documents and, there.fore, had committed an offence punishable under


section 477-A of I.P.C.

44.

In the present case, submission made by the learned counsel for

the accused that there is no direct or indirect evidence to show that


there was conspiracy to divert funds from Canfina to the brokers,
cannot be accepted.

It is well settled law that it is difficult to get

direct evidence in respect of ,conspiracy to commit an offence and in


case of circumstantial evidence the chain of circumstances has to be

estabfuhed which
present

case,

the

points

out

prosecution,

to

the guilt of the accused.

Jn the

inter alia, has successfully brought on

record all the documentary evidence to establish that Canfina is a


Company registered under Copanies Act but

it

is 100% subsidiary

Company of a Canara Bank which is a nationalized bank.

Though

article 21 of the Articles of Association permits Canfina to buy and sell


securities and or to lend money with or without security, by virtue of

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

not purchasing or selling securities on behalf

has stated in

his evidence that CBMF was not

purchasing or selling securities on behalf of Canfina.


has not been challenged by any of the accused.
position,

there

was

This evidence
That being the

no question of remitting the various amounts

which were remitted in. different transactions to CBMF. CBMF, on the


other hand,

after having received money

from

Canfina which,

according to the vouchers which were prepared by their officials viz.


accused No.3 and 11 clearly indicated that the amount was wrongly
remitted from Canfina to CBMF and, in such cases, where there were
wrong remittances received, the
Canfina.

money had to be sent back to

The accused No.3, on the contrary, remitted the amount to

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

cheques were prepared for

the same amount for being remitted in

favour of brokers viz. accused Nos. 5, 6, 7, 9 and 10 and the brokers,


in tum, on the same day, had made remittances to various parties
though the balance in their account was not sufficient.

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.

On the other hand, fictitious

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

Exhibit-178 etc. indicate that the amount


wrongly

was

shown to have been

remitted to CBMF and i.rutead of immediately remitting the

amount back to Can.fina,

this amount was sent to the brokers who

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

This evidence dearly establishes that accused Nos. 1 and 8

had no authority to enter into transactions beyond the particular limit


yet, without obtaining sanction from the higher officers, they created
record showing the Deal Pad entries and remitted the amount to
CBMF. At that end i.e. at CBMF's end, accused Nos. 3 and 11 received
money, created vouchers to show that the amount is wrongly received
fro

Canfina

and yet paid

that amount to the brokers.

establishes that th.ere was no actual transaction.

lt

has

This

been argued

on behalf of the accued that there is no basis for the prosecution cae
that

all

transactions of purchase and sale of securities were entered in

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

Canfina wanted to purchase and sale securities it could have done so

,.

80

m its own right by contacting the brokers directly.

This further

establishes that there was a conspiracy, therefore, to use the officials


of the CBMF

as

conduit to siphon off the money from Canfina. The

offence of conspiracy,
established.

therefore, in my view has been clearly

The ratio of the judgment of the Apex Court in Ram

Narayan Popli Vs. CBI reported in (2003) 3 SCC 641, therefore, is


clearly applicable to the facts of the present case.

45.

Considering the evidence which is brought on record, in my

view, the prosecution has established flow of funds in the aforesaid


transactions viz dated 10/10/1991, 22/10/1 991 and 16/0 1/1992 and
reversal of funds back

46.

to

Canfina.

First, however, l would like to discuss the evidence which is on

record in respect of three transactions and the reversal transaction. I


will do so transaction-wise.

47.

However, before that, very briefly, I would

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

6 has in his evidence stated the . procedure which is

in respect of

purchase transaction and sale transaction.

P.W. 6 was promoted as Executive Vice President in 1991.

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

accused No.1 - S. Mohan was working

under accused No. 8 - M.K. Ashok Kumar.

He has stated that the

Board had delegated powers to M.K. Ashok Kumar - accused No.8.


Accused No. 1 - S. Mohan, however, was given limited powers under
the Portfolio Management Scheme of buying and selling securities and,
therefore,

he

had

no powers

to

undertake

sale

and

transactions in shares and securities on behalf of Canfina.


brought on record Exhibit-17-

purchase
He has

sanction note No. 726, Exhibit-18

which is minutes of the Board Meeting and Exhibit-19 which is the


office note dated 23.9.1991. In the Board Note - Exhibit 17, the Board
was asked to authorize accused No.8 - M.K Ashok Kumar to accept the
funds for investments upto the limit of 100 crores per client and under
clause 2, he was empowered to buy and sell securities on outright

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

which are minutes of the Board Meeting dated 30/11/1991, powers


were delegated as recommended under Exhibit-17.
which is a office

By Exhlbit-19

note dated 23.9.1991, the Managing Director

recommended delegation of powers to M. IL Ashok Kumar - accused


No.8.

The recommendations were made by accused No.2 - N.

Balasubramaniam and KB. Shenoy with further recommendations by

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

referred to as "A.K. Kini"

P.W.6

Mr.K.Ashok Kumari Kini(hereinafter

in order to avoid confusion as accused No.8 is

M.K.Ashok Kumar) has given details regarding the manner

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

shares, I shall give details regarding the manner of purchase of shares


as stated by P.W. 6-A.K. Kini. In para 13,14 and 15 of
P.W. 6-A.K. Kini

his evidence

has deposed to the effect that "In case of purchase of

shares, the transactions were concluded by the chief dealer of Canfina


at Bangalore on telephone with the brokers. On conclusion of the deal,

-------.Ml

83

he would note it down in Sauda Book and the payment for those
purchases as and when

it is to be made it is decided upon by the Chief

dealer and he would give instructions on telephone to the Canara Bank


Branch in Bombay to make the payment on behalf of Canfina. While
instructing, he would also convey on telephone the IBA number. The
Chief dealer himself would write down the IBA number which is given
to

the Canara Bank Bombay, in the IBA Issue Register.

prepared by the Back office as per instructions.

The IBA is

JBA register would

contain IBA number, date, and the Canara Bank Branch name and the
amount.
the

On the basis of these details the back office would prepare

eque

favouring the Canara Bank Branch in Bangalore.

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

in Bombay. The Canara

Bank at Bangalore would debit the account of Canfina by the amount


of the cheuqe.

Jn so far as Canfina's own transaction of sale and

purchase, the averments are that the vouchers are prepared for sale
and purchase on the basis of Sauda book.

These vouchers

are

prepared at intervals and not on daily basis. In case of purchases and


sales on behalf of Portfolio clients are concerned, similar vouchers are
prepared by the

Bank Department of the Funds Departmen4

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

Canfina's own transactions are concerned, the

vouchers are prepared in the Investment Department which was under


me and the vouchers would be signed by me. In so far

as

the portfolio

transactions are concerned, the vouchern are prepared by the Back-up


Department and signed by one of the Officials working in the Back-up
Department. The Cheque Issue Register is maintained by the Back-up
Department in the course of business of Canfina."

SO.

P.W.2 - B.N. Srikantha was working in the Funds Department of

Canfina.

He was maintaining the registers and clients register and

used to attend to the other bank work like preparing cheques. He

has

stated that accused No.8 - M. K. Ashok Kumar and accused No.1 - S.


Mohan were working

dealers in

Funds

Department.

He has stated

th.at the dealers used to make entry in the Deal Pad.

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 -

Mrs. Virakth.i Sudhakar Hegde

has

stated in her

evidence that the Bankers of Canfina, Bangalore were Canara bank,


Cunningham Road Branch.

The cheque drawn by Canfina

in

case of

purchase of securities were in favour of Canara Bank, Cunningham


Road Branch, Bangalore. This was done by P.W.2 - B.N. Srikantha as
per the instructions of accused No.2 - N. Balasubramaniam on the
basis of IBA.

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

approximately 13 funds and which were used to be called as product


and there were different schemes, like CAN Shares, CAN Growth,
CANCIGO, CANGlLT etc.
This evidence establishes that money was entrusted to accused
Nos . 1 & 8 and a particular procedure was set up in case of purchase of
securities.

en PURCHASE OF RIL FOR RS 17.29 CRORES


FROM CBMF ON 10.10.1991 .

53.

ln order to prove the movement of funds from Canfina to the

86

tune of Rs 1 7.29 crores and the ultimate destination of these funds to


the various accounts of the brokers, the prosecution has examined
P.W.Nos. 1, 2, 4, 6, 10, 18 and 19.

P.W. 2 and 6 are from Canfina.

P.W. 4 is from Canara Bank, Tamarind Lane Branch, Mumbai, P.W.1 is


Canbank employee, P.W. 9 is also Canbank employee. P.W. 10 is an
employee of Bank of India, P.W. 18 is the Accounts Assistant of Stock
Broker Mis Narbheram Harakchand, P.W. 1 9 is the Investigating
Officer.

54.

P.W.2 in para 21 of his deposition has stated that accused No.l -

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

ready forward. (Rf) that a sum of Rs 8.99 crores is on RF basis for a


period of 15 days at the rate of 24%.

The entry further indicates that

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

the IBA Issue Register No.1 there is an

entry with regard to IBA No. 32100 regarding Rs 8 crores issued on


Tamarind Lane Branch, Bombay.

The said entry is at Exhibit-39.

page 63, there is an entry in regard to IBA No.32107.


regarding the amount of Rs 9.29 crores,

again

Lane Branch Bombay. It is at Exhibit-40.

He

At

That entry is

issued on Tamarind

has

stated that though

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 .

P. W. 6 in his evidence in para 12 has stated that the Sauda Book

was maintained by Chief Dealer


transactions were mentioned.

in

which the sale and purchase

In para 19, he has stated th.at Sauda

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

between 13/09/1991 and 4/1 1/1991


there were five entries

fro

nd in

respect of October 1991,

$enal Nos, 3 l to.

l Nos.

35.

These-

.l

..

88

entries were brought on record as Exhibit-60 colly.

He has further

stated that there was no entorwith regard toDeal Pad - Exhibit-59. In


the evidence of P.W.6, he has stated that the payment for those
purchases as and when it was to be made was decided upon by the
Chief Dealer and he .would give instructions on telephone to Canara
Bank Branch in Bombay to make payment on behalf of Canfina. He
would also convey on telephone IBA number.

The Chief Dealer

himself would write down the IBA number in the IBA Issue Register
which would contain IBA number, date,

the name of canara Bank,

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.

P.W. 2 has further stated

that the Back-up Office would prepare a cheque on the basis of these
details and, accordingly, a cheque

was

drawn in favour of ''Yourselves

IBA on Tamarind Lane, Bombay for a sum of Rs 8 crores.

It was

written by P.W.2 and signed by P.N. Narayanrao. The rubber stamp


indicated that the amount had been transferred
Branch of Canara Bank, Bombay.

to

Tamarind Lane

The said cheque is at Exhibit-21.

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

cheques at Exhibits-21 and 23 were deposited with Canara Bank


Cunningham Road Branch and entry in respect of the said cheque was
made in the statement of Current Account No. 26645 maintained by
the Canfina with Canara Bank, Cunningham Road Branch, Bangalore,
which is at Exhibit-162.

P.W. 2 has further stated th.at on the basis of

the cheque, Credit Slips were prepared by the Back- up Department


which were at Exhibits-22 and 24 respectively in respect of two

amounts.

Accordingly, the said two amounts were remitted by

Canfina for the credit of CBMF. (Emphasis supplied)

90

56.

From the above evidence, the prosecution has established that

the amount of Rs 17.29 crores was remitted by Canfina and was


credited in the account of CBMF. The prosecution has established the
remittance of Rs 17.29 crores from Canfina to CBMF in respect of the
first transaction dated 10/10/1991.

57.

After the said amount was remitted to CBMF, it has been

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.

The Canara Bank, Tamarind Lane Branch, Mumbai received a

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

Mr. Ajay Kumar Nagendranath Kar. It is

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.

Initially, IBA numbers used to be conveyed on telephone by

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.

The details would then be

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.

P.W. 9 has then stated

that, normally, if the amount was

wrongly received, it would be sent back to the sender.

He has stated

that in this transaction there was deviation from this normal practice.
He

has

stated that ac:cused No. 1 1 - B.V. Srinivasan who was working

as Fund Manager, CBMF, instructed his Secretary P.W. 1

Ms virakthi

Hegde to prepare voucher. Accordingly, she prepared a voucher in


handwriting.

The voucher was in two parts.

het

The upper part was in

respect of debit entry and the lower part was in respect of credit entry.
This voucher

has

been produced at Exhibit-178 by P.W.19.

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

This amount was

debited to

others account. This was so done as the amount was

wrongly remitted to Canbank Mutual Fund, Bombay. This debit entry


made by P.W.1 as per instructions of Fund Manager Mr. B .V.

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

17.29 crores being

There is also reference to two

There is an endorsement

to CBMF.

"as amount

Bombay by Ganfina Bangalore. now

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

per the instructions of Mr. B.V.

Srinivasan - accused No.1 1 . (Emphasis supplied)

61.

Accused No.11 - B.V. Srinivasan, after giving instructions and

after preparation of voucher at

Exhibit- 178, prepared two cheques in

his own handwriting which are signed

by himself and another accused

is

dated

10/10/1991 for a sum of Rs 8,99,00,000/- bearing No.488905

issued

No.3

B.R.

Acharya,

Officer

of CBMF.

One

cheque

in favour of Mis S.K. Jhaveri and signed by accused No.11 - B.V.

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.

Both these cheques are on -record at Exhibits 14


The prosecution's case therefore, is

that on the

one hand accused No.11 had created false record to show

that the

amount was wrongly received from Canfina and credited to the


account of CBMF and, on the other hand, instead of remitting the
amount back to Canfina, the amount was given in two cheques to
accused Nos.6 and accused Nos. 9 & 10.

62.

Accused No.11 - B.V. Srinivasan

in his argument has submitted

that he had written those ch.euqes on the instructions of accused No.3B.R.. Acharya who was

his superior officer .and he was merely

implementing the directions given by accused No.3. Accused No.3, on


the other hand,

has taken different defence, which

will be considered

at the appropriate st.age.

63.

The prosecution

has exhibited a common attendance register

which was kept by CBMF at Exhibit-105


attendance of accused No.3

and entries

regarding

B.R. Acharya on 10th, 1 1 th and 12th

----

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.

has been brought on record by P.W.9.

This document

The entries in respect of

attendance of accused No.11 - B.V. Srinivasan would show that he was


present on 10th, 11th and 12th October, 1991 and these entries are
marked at Exhibit 105(3) collectively.

This was shown to establish

that accused No.11 was present on the said dates.

64.

In order to establish that this amount was, in fact, deposited in

the account of Mis Narbheram Harakchand, the prosecution examined


P.W. 18 Mr. Mukesh Joshi (Exhibit-144). P.W. 18 has stated that M/s
Narbheram Harakchand was having account with the Bank of India,
Stock Exchange Branch and, at that time, accused No.9 - Ketan Parekh
and accused No. 10 - Navinchandra Parekh were the partners. He has
stated that he used to prepare cheques as per instructions of accused
No. 9 - Ketan Parekh.

The details were also given by him for

preparation of the cheques and he also used to give narration of the


transactions.

In respect of cheques received from other parties, they

used to be deposited in the firm account in the Bank of India, Stock


Exchange Branch by P.W. 18 or other staff members. He has stated

-- -

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

B.V. Srinivasan and accused No.3 - B.Il Acharya of CBMF and

this cheque which is at Exhibit- 15 was deposited in the account of the


firm being account No. 14010.
slip for a sum

of

Rs

This was deposited by way of credit

8,56,06,450/- and, on the reverse side of the

credit slip, it is mentioned that Canara Bank Cheuqe at

Exhibit-15 for

an amount of Rs 8,30,00,000/- and second cheque No.488911 for Rs.


26,06,450.

The

The credit slip has been exhibited at Exhibit-1 1 1.

prosecution has, therefore, established that the cheque which was to


be remitted back to Canfina was, in fact, remitted to accused Nos. 9
and 10, the partners of Mis Narbheram Harakchand by the cheque
which

is

at Exhibit- 15 which was signed by accused No.11 - B.V.

Srinivasan and accused No.3 - B.R. Acharya. This credit slip has been

brciu ht on record by P.W. 10 - Dilip Jagmohandas Ummergaonwaia.


P.W. 10

has

hlc.h

also brought on record Exhibit-113 and 113 ( 1 ) w

refled:ed the credit entry in. respect


10/10/1991 for
of Mis

sum of Rs 8,56,06,450/- in the statement of accolitit

Narbheram

03/10/1 991

Branch.

of credit slip of Bank of India dated

Harakchand

bearing account No.14010

to 31/10/1991 with Bank of India,

from

Stock Exchange

96

65.

After

the

Navinchandra

said

amount was

received,

accused

No.

10

Parekh issued cheque of Bank of India bearing

No.577597 dated 10/10/1 991 for Rs 8,25,00,000/- in favour of S.I<.


Jhaveri - accused No.6. This cheque was signed by accused No.10 Navinchandra Parekh. This cheque is at Exhibit-1 12. The prosecution,
therefore has established that on the same day, : after having received
Rs

8,30,00,000/-,

accused

No.10

remitted

an

amount

of

Rs

8,25,00,000/- to accused No.6 - S.K. Jhaveri. Again, the statement of

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.

accused No.10 - Navinchandra Parekh utilized the amount of Rs


8,30,00,000/- which was illegally received from Canara Bank though
there was no deal or transaction in respect of any security, much less
purchase or sale of 14o/o NCO.
Harakchand

which

is

at

In the account of Mis Narbheram

Exhlbit-113,

opening

balance

as

on

10/10/1991 was Rs 45,46,482.86 and dosing balance on that date


was Rs 1,62,21,932.86. These entries are exhibited at Exhibits 113(3)
and 1 1 3 (4) respectively.

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.

Prosecution has brought on record the

statement of account of accused No.6 - S.K. Jhaveri bearing account


No.19186 with Bank of India, Stock Exchange Branch, Mumbai and
this statement is at Exhibit-115 and the relevat entry in respect of

sum. of Rs 8,99,00,000/- dated 10/10/1991 is marked at Exhibit115 (1).

Further, the prosecution has brought on record a cheque

bearing No.370306 issued by accused No.6 - S.K. Jhaveri dated


09/10/1991

for Rs 24,75,65,324/-

in favour of

Stock Exchange

Clearing House which is at Exhibit-1 16. Prosecution case is that the


opening balance of the said account was Rs 9,31,86,600.97 which is at
Exhibit- 1 15 and the cheque in favour of Stock Exchange Clearing

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

Accu sed No.6 - S.K. Jhaveri in his defence has

submitted that he had sufficient amount in the Bank and that he had
several transactions with CBMF and Canfina.

This argument will be

considered at length i'.'-t the later stage


The prosecution has, therefore, established the illegal movement
of funds in respect of the first transaction at the instance of accused
Nos. 1 and 8 from Canfina to the account of CBMF and, thereafter, to
the account of accused Nos. 6,7,9 and 10 by creting false & fictitious
record.

(ll) PbRCHASE OF 14% NCDs FOR RS 12 CRORES

fRoM CBMF ON 22/10/1991


67.

Prosecution case is that the accused No.8 - M.K. Ashok Kumar

and accused No.1 - S. Mohan were working as dealers in Funds

99
Department and they were the persons who were concluding the deal
on behalf of Canfina.

Accused No.2 - N. Balasubramaniam made an

entry dated 22/10/1 991 in the Dealers Pad of Canfina, Bangalore


regarding the purchase of 12 crores 14o/o NCD from Mutual Fund at Rs
100/- for Rs 12 crores and also mentioned IBA No.321 5 1 in the said
Deal Pad.

This was to indicate that an amount of Rs 12 crores was

remitted by IBA No.3215 1 on Canara Bank, Tamarind Lane Branch,


Mumbai. P.W. 6 - A.K. Kini proved the said document and it is marked
as Exhibit- 61. The Deal Pad is in the hand writing of accused No.2 - N.
Balasubramaniam.

Prosecution case

is that, after the deal was

concluded, entries would be made in the Sauda Book and in cases


where deals which were not concluded, no entries were made in the
Sauda Book.
colly.

P.W. 6 has stated that the Sauda Book at Exhibit 60

did not contain any entry in regard

to transaction dated

22/10/1 991 for Rs 12 crores.

68.

The payment for these

purchases would be made by giving

instructions on telephone to Canara Bank Branch, Mumbai who are


instructed to make payment on behalf of Canfina.

When such

instructions were given to Canara Bank Branch in Mumbai, the Chief


Dealer would give instructions on telephone and he used to convey on

100
telephone IBA number and, thereafter, mention IBA number in the IBA
Issue Register. P.W.2 in his evidence

has stated that accused No.1 -

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

particulart case in respect of transaction of 22/10/1991 the relevant


entry is at Exhibit-41 which

has been made

in IBA Issue Book with

regard to IBA No.32151. The entry is in the handwriting of accused


No.1 - S. Mohan.

69.

Though the money was transferred on instructions which were

conveyed on telephone by informing the IBA number, it was necessary


to issue a cheque which would be sent to Canara Bank, Tamarind Lane
Branch, Bombay.
prepared

P.W. 2 in his evidence has stated that he had

a cheque dated 22/10/1991 of Canara Bank, Bangalore

drawn in favour of ''Yourselves IBA on Tamarind Lane, Bombay" for a


sum of Rs 12,00,00,000/- .
Kini.

The

rubber stamp

This cheque was signed by P.W. 6 - A.K.


indicated that

the

amount

has been

transferred to Canara Bank, Tamarind Lane Branch, Bombay.

This

cheque is brought on record by the prosecution and it is at Exhibit-25.


P. W. 19

has brought on record the statement of Current Account

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

deposited with Canara Bank, Cunningham Road

Branch in Bangalore.

70.

P.W.2 in his evidence has stated th.at the credit slip would. be

prepared in the Back-up Department of Canfina Bangalore on the basis


of the cheque at Exhibit-25 and this was submitted to Canara Bank
Branch at Bangalore with IBA No.32151. The amount, therefore, of Rs
12 crores

was

officially remitted by Canfina to the credit of CBMF.

This credit slip filled-up by P.W.2 has been exhibited

as

Exhibit- 26.

Prosecution case is th.at, in fact, there was no deal by Canfina with


CBMF for transfer of Rs 12 crores.

71 .

P.W.4 in his evidence has stated that the transfer of money from

one Branch to another Branch was made by a telegraphic transfer or


by mail transfer.

He has stated that

on receiving the message on

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

at Exhibit 55(1). This Exhibit shows that an amount of Rs 12 crores


was credited to the account No.3 914 of CMF Cancigo. The statement
of

this account was marked for identification by the Investigating

Officer P.W.19 and was shown as X-18(1) to X-18(5).

72.

So. it has been established by the prosecution that the money

travelled from Canfina to Canbank Mutual Fund (CBMF). After the


amount

was

received by CBMF, in order to establish what happened

thereafter, the prosecution has examined P.W. 9


the CBMF, Mumbai.

Ravi Tirumalai of

He has stated in his evidence that the funds

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

which it was addressed, it would be forwarded to the said funds for


effecting credit in funds (Schemes) account. He has further stated that
there was extension counter of Canara Bank in CBMF itself. (Emphasis
supplied).

103

73.

P.W. 9 has brought on record Exhibit- 104 which is the office

copy of the letter dated

22/10/1991 of Canbank Mutual Fund

addressed to the Mger Canara Bank, Tamarind Lane, Bombay.


Similarly, Canbank Mutual Fund also has addressed a letter to the
Manager, Canara Bank, Fort Market dated 25/10/1991 enclosing IBA
No.32151 dated 22/10/1991 for a sum or Rs 12,00,00,000/-.
said letter is at Exhibit- 103.
that the amount of Rs

The

Prosecution has. therefore. established

12.00.00.00Q/- which was remitted from

Canfina was received by CBMF. He has further stated that the voucher
dated 22/10/1991

was

prepared in the handwriting of one Mr. Rajesh

Pawar and it contained

two

portions; the upper portion

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

giving his approval. This debit voucher

is at

has further stated that in the debit portion of the

voucher, it is mentioned that the amount of Rs 12 crores


received from Canfina's Account.

was wrongly

He has further stated that credit

portion of the document, however, showed that an amount of Rs 12


crores was paid to S.K. Jhaveri vide cheque No.587347
instructions of Canfina, Bangalore.

as

per the

He has further stated that, in

104

normal course if the amount was

wrongly

received by CBMF on

account of Cancigo's Current Account, it would have been remitted


back to Canfina. However, in the present case, instead of remitting the
amount to Canfina, the amount was paid to S.K. Jhaveri by cheque
No.587347.

He further stated that he did not personally know S.K.

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

Exhibit 102 was signed by accused No.4

74.

S.K. Jhaveri. This voucher at


P.J. Subbarao.

P.W. 9 - Mr Ravi Tirumali has further stated that one day before

the transaction i.e. on 21/10/1991 Mr. B.R. Acharya - accused No.3

had asked him to prepare a cheque for Rs


Jhaveri.

12 crores favouring S.K.

He has stated that before the cheque was prepared, he has

asked B.R. Acharya the reason why the cheque was to be prepared in
favour of Jhaveri.

He has stated that B.R. Acharya told him that he

should prepare the cheque and bring it to him and, thereafter, he


would inform him about the nature of transaction. He has stated that
the cheque was prepared by him and he signed it and since the cheque
had

to

be signed by one more signatory, he took the cheque to Anil

105
Narichania and when he did so he was asked by

him about the nature

of transaction involved. P.W. 9 has then stated that he informed


what

was

told to

him by Mr. Acharya and, thereafter,

him

Anil Narichania

also signed the cheque. He then took the cheque to B.R. Acharya. The
cheque

was

in the handwriting of Rajesh Pawar.

stated that though the cheque

was

P.W. 9 has further

prepared on 21st, the date on the

cheque was put as 22/10/1991. The cheque is at Exhibit- 78. P.W.9


has, therefore, established that the cheque

prepared at the

was

instance of accused No.3 - B.R. Acharya.

75.

P.W.9 has further stated that on 22/10/1991 accused No.4 - PJ.

Subbarao informed P.W.9 that an amount of Rs 12

crores

had been

received from Canfina, Bangalore through IBA and it was meant for
Cancigo Scheme.

P.W. 9

has further stated that the common

attendance Register was kept for officers and staff by CBMF.

The

Register for the month of October, 1991 is brought on record at


Exhibit-105 and in which it is mentioned that on 22/10/1991 all the
officers

viz Mr. B'.R. Acharya - Accused No.3, Mr. PJ. Subbarao -

accused No.4 and Mr. Anil Narichania were present.

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

working in the Accounts Department of Bank of America and that the


cheuqe dated 22/10/1991 of Canara Bank bearing No.587347 for a
sum of Rs 12 crores was issued in favour of S.K. Jhaveri at Exhibit-78
was deposited in the Joint Account No.047860111 of accused No. 6 S.K. Jhaveri and accused No.7 - Pallav Seth which account

was

maintained in the Bank of America, Mumbai. P.W.8 has stated that


the said cheque was deposited by way of pay-in-slip of Bank of
America dated 22/10/1991 for a sum of Rs 12 crores in respect of
cheque bearing No.58734 7 to the credit of the Joint Account of M/s.
S.K. Jhaveri and Pallav Seth. The pay-in-slip had been exhibited at his
instance and it is at Exhibit-79 and the cheque which was deposited
has been marked at Exhibit-78.

77.

P.W.8 has further stated in his evidence that the opening balance

in the said Account as on 22.10.1991

was Rs 1,57,89,472.23 and

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.

The said cheque is also at

Another cheque dated 22/10/1991 for Rs 2,42,95,000/

was issued by accused No.6 - S.K. Jh.averi in favour of Bank of India

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

in favour of Vikram Kedia is also brought on record. P.W. 8 has also


brought on record two more cheques at Exhibit-84 and Exhibit-85
issued by accused No. 6

- Shrenik Jhaveri of the same date i.e.

22/10/1991 for Rs S crores which was issued

in favour of FFSL drawn

on Bank of America and another cheque for Rs 50,40,000/- issued in


favour of G.N. Hegde drawn on BOA.

78.

From this evidence, in my view, prosecution has established that

the amount of Rs 12 crores was deposited in the Joint Account of


accused No. 6 - Shrenik Jhaveri and accused No.7 - Pallav Seth and
this cheque was issued on the instructions of accused No.3 - B.R.
Ach.arya. It has been urged by Mr. Pradhan, the learned Special Public
Prosecutor on behalf of CBI that, because this amount was deposited in

----------

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

evidence of P.W.8 and P.W. 9, the prosecution has tried to establish


that B. Acharya - accused No.3 got the cheque of IU 12 c:rores issued
in the name of accused No.6 - S.K. Jhaveri, though the debit voucher
dearly indicated that an amount of Rs 12 crores was wrongly remitted
from Canfina, Bangalore to CBMF and though B.R. Achacya - accused
No.3 was aware of it, yet, he directed that the amount should be paid
in the account of S.K. Jhav
eri. . The

accused No.6 and accused No.7

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,

6, 7 have committed the offences punishable

under sections 120-B read with sections 403, 409, 109 of the Indian
Penal Code read with

13(1)(c)

& 1 3 (2) of the Prevention of

Corruption Act with which they are charged.

PURCHASE

(IIO

OF 14%NCDS FORRS5CRQRF.S
FROM CBME ON 16/01/1992

79.

In this transaction,

accused

Nos. 2, 4, 5, 1 and 8 are alleged to

109
have been involved.

The beneficiary of the transaction is Hiten P.

Dalal. The relevant charges in respect of this transaction are 9, 10, 1 1,


To establish the charges pertaining to

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.

The documents which are brought on record by the

prosecution to establish these charges against the said accused are at


Exhibits 62,

63 colly., 64 colly., 42, 27, 162, 28,

107,

.106,

51,

X-18(2) , 52, 121, 120(1), 120(5) colly. and Exhibit 122.

80.

ln

this

case also, the prosecution

has

alleged that the accused

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.

A deal pad entry was

prepared by accused No.2 - N. Balasubramaniam.


cheque was issued in favour of CBMF.

The amount was

Thereafter, the

Though the amount was

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

Canara Bank, Tamarind Lane Branch, Bombay for Rs 5

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

opening balance of the Bank Account of accused No.5 with Andhra


Bank showed that after this amount was deposited

in his Account, he

returned it for issuing RBI cheue dated 16/01/1992 in favour of CBMF


and, therefore, on account of receipt of said cheque of Rs 5 crores from
CBMF, sufficient balance was made available to him to enable him to
issue

cheque dated 15/01/1992 in favour of Corporation Bank. The

deal pad entry is at Exhibit-62.

The IBA No.32686 is in the

handwriting of accused No.2 - N. Balasubramaniam and it is at


Exhibit-42. The Sauda Book which is at Exhibit 63 colly. and 64 colly.
discloses that no entry
this transaction.

has been made in the Sauda Book in respect of

The cheque bearing No. 999551 dated 16/1/1992

which was issued in favour of CBMF is at Exhibit-27. The Statement of


Account of Current Account No. 26645 maintained by Canfina with.
Canara Bank, Cunningham Road Branch, Bangalore is at Exhibit-162.

i- - -

111
The telegraphic transfer application is at Exhibit-28 which mentioned
IBA No.32686. The Canbank Mutual Fund rubber stamp indicates that

the

amount was transferred to CBMF.

receipt of

this

The telex confirmation about

amount is at Exhibit-50(1) wherein IBA No.32656 is

mentioned. Exhibit- 107 is a letter which shows that the remittance of


Rs 5

crores

had come from Canara Bank, Cunningham Road Branch,

Bangalore to CBMF.

The Statement of Account is at

X-18(2). The

debit voucher which was prepared is at Exhibit-106 and which is


signed by P.W.9.

The cheque bearing No.587664 dated 16/01/1992

of Canara Bank for a sum of Rs 5

crore.s

is at Exhibit-51.

On

16/01/1992, requisition form of Canara Bank for issuing bankers


cheque along

with cheque

dated 16/01/1992 bearing No.587664 for a

sum of Rs S crores was received by P.W. 4 - Ajay Kumar N. Kar, Officer


working

in Tamarind

Lane Branch. The requisition form is at Exhibit-

52.

81.

P.W.4 has stated that on the basis of cheque at Exhibit-5 1 and

requisition form at Exhibit-52, he issued banker cheque under his


signature dated 16/01/1992 for Rs 5 crores in favour of Andhra Bank
credit to H.P. Dalal for Rs 5 crores.

He also made an entry in the

Cheque Issue Register at serial No. 11/92 and made an endorsement

-----

- - -

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

letter No. 755/I/238 dated 26/08/1994

informed th.at they received Pay Order No.992040 dated 16/01/1992


from Canara bank with covering letter to credit the amount to H.P.
Dalal's Account. The letter dated 26/08/1994 is at Exhibit- 119.

82.

After the Pay Order No.992040 dated 16/01/1992

was

received

by Andhra Bank, the credit voucher was prepared for a sum of Rs


6,52,25,290/- covering two cheque,s; one for & 5 crores for pay Order
No.992040 and another for Rs 1,52,25,290/-. This voucher showed
that an amount of Rs 6,52,25,290/-

was

to be credited to the Account

of H.P. Dalal. P.W. 12 has brought on record the said voucher and it is
exhibited at Exhibit-121.

83.

In my view, from the evidence which is brought on record it has

been established by the prosecution that accused Nos. 1 and 8


remitted an amount of Rs 5 crores by creating false and fictitious
documents in respect of purchase of 14o/o NCDs for Rs 5 crores from
CBMF on 16/01/1 992 and it is further established that CBMF in its
own record prepared a voucher showing that the amount was wrongly

113

from Canfina and instead of remitting the amount back, this

received

amount was remitted by accused


instructions to accused

No. 11.

No.3 by giving directions and

The accused

No.11, being a junior

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

P. Dalal in Andhra Bank.

12 clearly indicates that this amount was

P. Dalal for making payment to

the Corporation

Bank.

84.

P.W. 12 - Vasanth Kumar Damara.ju was working with Andhra

Bank between May

1994 and July 1998. He has brought on record

entries in the Statement of Account of H.P. Dalal and they are marked
as Exhibit

120(5) colly. He has further stated that before credit of the

said cheque of Rs

5 crores as of 16/01/1992 in H.P. Dalal's Account

No.4819 with Andhra Bank, the balance was Rs 48,50,510.15. He has


stated that, thereafter, there was a credit of Rs

25,96,95,205.48 in his

on receipt of cheque from CBMF and the account was

account

simultaneously debited for issue of R.BJ cheque dated


favouring CBMF for Rs
entries

25,42,70,230.48 and after the credit and debit

the balance of Rs

Account.

16/01/1992

54,24,755/ remained m H.P. Dalal's

The Statement of Account is exhibited at Exhibit- 120.

_J

114

Prosecution case is that on receipt of the said cheque for Rs 5 crores,


sufficient balance

was

made available to H.P. Dalal, as a result of

which he could issue cheque No.985279 dated 15/01/1992 in favour


of Corporation Bank and the rubber stamp on the reverse of the
cheque indicates that the cheque was sent to Corporation Bank. This
cheque is brought on record at Exhibit-122. The entry showing the
amount which was debited in the account of H.P. Dalal is marked as
Exhibit-120(2).

In this evidence it has been established that the

accused No. 5 - H.P. Dalal paid an amount of Rs 5 crores to


Corporation Bank by sending cheque dated 15/01/1992.

85.

The prosecution has, therefore, established that

the amount of

Rs 5 crores was siphoned off from Canfina via CBMF and it was paid to

Hiten P. Dalal when there was no actual transaction of purchase of


14% NCD securities and bogus vouchers were prepared to create the

impression that there

was

actual purchase of these securities and, as

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

amount was paid as and by way of adjustment as

was directed by citiban.k.

This defence would be considered at a

subsequent stage.

86.

In respect of remaining two transactions, out of five transactions

dated 07/02/1992 and 11/02/1992 in respect of Rs 5 crores and Rs 7


crores respectively, Mr. V.G. Pradhan, the learned
Prosecutor appearing on behalf of
statement across the bar

that

the

Special Public

prosecution has made

since the concerned broker had died

during the pendency of the case, the prosecution did not wish to press
these

two

transactions

and,

therefore,

he

did

not

make

any

submissions regarding these two transactions. It will, therefore, be not


necessary to refer to the evidence which is brought on record by the
prosecution and in defence by the accused in respect of these two
transactions.

FURTHER DIVERSION AND REVERSAL:


8 7.

Prosecution case is that the amount which was siphoned off in

an illegal

manner from

Canfina

to

the

tune

of Rs

47 crores

approximately was again brought back, illegally, to the tune of Rs

--

--- -

--

--------

116

53,77,82,500/- and, therefore, there is a difference between what was

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.

P.W.6 in his evidence has mentioned how the sale transaction by

Canfina used to normally take place.

He has stated in his evidence

th.at the sale transaction normally originates because of two reasons

(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 physicals. In respect of other securities.

however. sometimes delivery used to be


SGL.

in physical or by BR or by

In case of sale transaction, payment used to be received at the

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.

Accordingly, the Canara Bank, on realisation of the

cheque, would send onward remittance

to

Canfina Bank Bangalore by

telephonic instructions to Canfina first then followed by IBA in favour


of Canara Bank Branch, Bangalore.

These instructions would be

received in the Funds Department, Canfina Bank, Bangalore and the


information would come to the Chief Dealer or the dealer and
sometimes in the Back-up Department. The IBAs would be received in
the Funds Department of Canfina at Bangalore and, thereafter, the
IBAs would be forwarded to the Canara Bank Branch

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.

On receipt of the original IBA in the Funds Department of

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

to the receipt of telephonic

instructions.

After the

conclusion of the sale transaction, it would be entered in the Sauda


Book maintained by the Chief Dealer.

In case of sale of other

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.

Prosecution case is that the Canara Bank's Funds Management

Department was managing the funds on behalf of Canfi.na and on

119

3 1/03/1 992, total sum of Rs 70,77,82,500/-

was

received on behalf of

Canfina through different remittances.

One of the remittances

included cheque dated 31/03/1992 for Rs 30 crores from Standard


Chartered Bank. In the records of Canfina, the cheque was treated as
consolidated receipt for

Can!ma's two sale deals viz (i) for sale of

securities of Rs 15 crores to Mis. Growmore Research and Assets


Management Ltd. and (ii) sale of securities for Rs 13 crores to M/s.
V.B. Desai. In view of this, an amount of Rs 2 crores

was

found "an

excess" receipt of Rs 2 crores and, therefore, this amount of Rs 2 crores


was paid by banker's cheque No.822329 dated 31/03/1992 favouring
Harshad S. Mehta and it was credited to his account in the State Bank
of Saurashtra.

This cheque

was

issued by R. Venugopal and it was

col!-ntersigned by K.D. Prabhu.

90.

P.W.13 has stated

in his evidence that after the amount was

appropriated on account of transaction with Harshad S. Mehta, the


balance of Rs 53,77,82,500/- was treated as receipt from Mis V.B.
Desai and entries were accordingly made into Canfina books.

M/s.

V.B. Desai had remitted the said amount to Canfina as per unwritten
instructions of Pallav

Seth -

accused No.7.

Against the said

remittances dated 31/03/1992, Mis V.B. Desai had received shares of

--------

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.

He has stated that, in this entry, there is no mention

regarding either any purchase or sale

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.

It is alleged by the prosecution that, therefore, there was no

transaction of purchase or sale and after the amount was received, it


was appropriated

towards

(i) sale of 17.29 crores RJL @ 100,

(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.

Similarly P.W. 6 - A.K. Kini has

stated that in the aforesaid three transactions of sale of securities there


was

a mention of "RFR" in Deal Pad at Exhibit-48 which means ready

forward reversal transaction. He

has stated that this showed that the

sale was by way of reversal of earlier ready forward transaction. P.W.


6 has referred to Exhibits 48, 59 and 61.

93.

P.W. 2 has again stated in

his evidence that on 02/04/1992,

accused No.2 - N. Balasubramaniam made an entry in the dealers pad


of Canfina regarding transfer of Rs 20,92,14,300/- to accused No. 7 Pallav

Seth by IBA

No.33242

and

the

following

details

were

mentioned in Canfina's deal pad viz (i) Amount excess received on


31/03/1 992 payable Rs 6,07,14,300/- ,

(ii) Payment towards 85,000

shares of Nahar Spinning @ 1500 i.e. Rs 12,75,00,000/- and

(iii)

15,000 shares of Castrol @ 1400 which comes to Rs 12,10,00,000/-,


thus total Rs 20,92,14,300/-. The said entries were brought on record
at Exhibits 46 and 47. He

has further stated that accused No.8 caused

to be issued IBA No.33262 dated 02/04/1992 for consolidated amount


of Rs 20,92,1 4,300/- which was inclusive of Rs 6,07,14,300/- plus an

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

accused No.2 - N. Balasubramaniam and, accordingly,

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.

This cheque at Exhibit-33 was deposited with

Canara Bank, Cunningham Road Branch, Bangalore which is reflected


in the Statement of Account No.26645 maintained by Canfina, which
is at Exhibit-162. Accordingly, a credit slip was prepared in the Back
up Department of Canfina, Bangalore and the credit was given for the
said sum in respect of cheque at Exhibit-33 and the credit slip is
.
brought

on

record

at Exhibit-34.

Accordingly,

cheque

bearing

No.082331 dated 02/04/1992 for Rs 20,92,14,300/- came to be issued


at CBMF end.

P.W. 8

has

brought it on record at Exhibit-76.

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.

Now in respect of purchase of 85000 shares of M/s Nahar

Spinning Mill, it is the case of prosecution that shares were purchased


@ 1500/- per share though the rate of share at the relevant point of

time

was

Rs 800/- to Rs 900/- per share and, therefore, accused No.8 -

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

143 and relevant entries were brought on

record at Exhibits 137A(l) to 143A(l).

Prosecution has examined

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

85000 shares of M/s. Nahar Spinning Mills

and thereby caused

payment of Rs 12,75,00,000/- to be made to Pallav Seth - accused


No. 7 without adequate safeguards and that the Canfina was able to
receive shares only after gap of one year. P.W. 7 has further stated in

his

cross-examination that he was aware of the terms "cum rights" and

11ex-righ.ts11

He has explained that the meaning of

the

term "cum

rights" was share purchased before the record date I no delivery


period fixed for issue of the right shares and the meaning of the term
"ex-rights11 was that

the

transposition was concluded after the record

date or no delivery period.

He

has

further stated that he does not

remember whether in 1992 any right shares were issued by Nahar


Spinning Mills Ltd.

The case of the prosecution is that, against the

payment of Rs 12,75,00,000/- made to Pallav Seth - accused No.7 for


purchase of 85000 shares of Mis Nahar Spinning Mills, no steps were
taken by Canfina for effecting delivery from Pallav Seth - accused No. 7

125
till mid July 1992 and after the scam was known to the public at large,

fax message from

Canfina bearing No.725/92 dated 18/07/1992 was

addressed to accused No.4 - P.J. Subbarao which read as under:-

"As of 25.03.1992, we bought Rs 85,000

shares of Mls. Nahar Spinning

Mills through

Pallav Sheth - accused No.7, we understand


that Pallav Sheth Accused No.7 inadvertently
delivered the shares to you and you had
lodged the shares for transfer in your name
and

also

applied

for

the

rights

issue

thereunder0

The shares "inadvertent1i' delivered to CBMF could be restored to


Canfina sometimes in April 1993. P.W. 7 - Mr. M. Pappa Rao, Officer
of CBMF has stated about the procedure with respect to registration of
Nahar Spinning Ltd. He

has explained the procedure in his evidence

through documents which are at Exhibits 73/1 to 73/26.

96.

The details of another transaction have been given by P.W. 8

Mr. Pronab Ray wherein he has mentioned that accused No.2 - N.


Balasubramaniam

made

an

entry

in

the

dealers

pad

dated

08/04/1992 regarding purchase of 40000 shares of Ace @ Rs 6,250/-

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,

the amount of Rs 25 crores was

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 said cheque for Rs 25 crores dated

08/04/1 992 is brought on record at Exhibit-99.

The pay-in-slip

through which the cheque was deposited is at Exhibit-100 and the


Statement of Account is at Exhibit-38. The relevant entry is at Exhibit38(2).

97.

P.W. 8 has further stated that after receipt of Rs 25 crores on

08/04/1 992 from Canfina, Pallav Seth

P.W.7 utilized the said

amount by issuing cheques to various parties

The said cheques are

on record at Exhibit- 87 to Exhibit-98.

98.

Thus, the prosecution has established that various amounts were

deposited in the joint account of accused No. 6 - S.K. Jhaveri and


accused No.7 - Pallav Seth and that after the said amounts were

127

deposited, various cheques were issued by accused No. 7 - Pallav Seth


to various parties. The counsel appearing on behalf of accused No.7,
inter alia, has argued that price of Rs 1500/- per share included in
share of right issue and, therefore, no loss was caused

to

Canfina and,

therefore, no offence is committed by accused Nos 6 to 8.

99.

Having seen the evidence which is brought on record by the

prosecution in respect of three transactions regarding purchase of


NCD securities and the reversal of the transactions by alleged sale of
securities, it will have

to

be seen what is the defence of the accused in

the context of each of those transactions and cross-examination of the


relevant witnesses examined by the prosecution in support of each
transaction. I have already stated in brief the defence of each of the
accused.

However, now submissions in detail with reference to

defence for each of the transactions will have to be examined.

100. In respect of the first transaction, the following accused have.


been alleged to be directly involved viz. accused Nos. 1, 3, 4, 6, 8, 9,
10 and 11. In respect of the second transaction the accused who have
been alleged to be involved directly

are

viz. accused Nos. 1, 2, 4, 6, 7

and 8 and in respect of third transaction accused Nos.2, 4, 5, 1 and 8

128

have been alleged to be directly involved.

101. In respect of the first transaction, prosecution

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 .

In respect of the second transaction prosecution has

examined P.W.2, P.W.6, P.W.19, P.W.8, P.W.9 and P.W.4. In respect


of the third transaction the prosecution has examined P.W. 1, P.W.6,
P.W.2, P.W. 19, P.W.4 & P.W.12. In respect of reversal &

further

transaction prosecution has examined P.W.13, P.W.6, P.W.2, P.W.19,


P.W.8, P.W.6, P.W. 1 7 & P.W.7

102. P.W.2

Nos. 3, 4,

has not been cross-examined by the Counsel for accused


6, 9, 10 and 1 1 .

P.W.2, in

his cross examination by

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

or by any one to whom the work is assigned by the dealer. He has


further admitted that during the relevant period, continuous audit of
funds department was going on and that a note was to be put up to

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

Bombay, Delhi and Calcutta. He has further stated that he

was

not

aware whether in a purchase transaction, the delivery of the purchase


was

taken by the executing branch. It was further suggested to him

that the entire amount


was denied by him

was

recovered by Canfina which suggestion

He has further admitted that the physicals

register I ledger was meant for showing the actual delivery.

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

the cross-examination, he has stated that it

was

his duty to prepare

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

adopted the cross-examination made on behalf of accused No.S. In the


cross-examination taken by the Counsel for accused No.8, P.W.2 has
stated that whenever he used to take the cheques to P. Narayan Rao
and Ashok Kini, they used to check and sign the cheque.
further admitted

He

has

that the amount of Rs 47,70,68,200/- as shown in

the document at Exhibit-48 was received by Canfina and that in this


document there is mention of words
the earlier transaction

"rft' in the margin, meaning that

was reversed. He has stated that the word "(p) 11

refers to purchase and the word "(m)11 refers to mutual fund. He

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

was declined by the Counsel appearing on

behalf of accused Nos. 9, 10 and 1 1 .

105. From the cross examination of P.W.2, it can be seen that none of

his testimony has been challenged by the accused and, therefore,


whatever has been stated by him in

his evidence has practically been

accepted by the accused. From the cross-examination of P.W.2 it

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.

In my view, merely because rough sheets

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.

If the deal pad entries were genuine, such

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.

Reference to the word "rfr" which is found in Exhibit-48 also

does not make the transaction genuine.

As stated hereinabove, the

vouchers which are prepared by CBMF Officials clearly falsify the


suggestions made by the Counsel for the accused.
P.W.2 has not been shaken in the cross-examination.

The evidence of

132

106.

P.W.6 has been cross-examined by accused Nos. 1, 2, 3, 4, 5

and 8. Rest of the accused declined

to

cross-examine him

He has

been extensively cross-examined by the Counsel for accused No.1. He


has admitted that there were number of Officers higher in rank than
accused No.1 - S. Mohan in Cafina at the relevant time. He, however,
denied the suggestion that these Officers were responsible for day-to
day affairs and management of Canfina. He has stated that each one
had their own role to play. He has further admitted that office note

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
,

signed the cheque. In his cross-examination, he has stated that the


Sauda Book pertains only to share transactions and other listed NCDs
purchased through the broker and that he had not stated in his
statement before CBI that the NCD transactions were also
recorded in the Sanda Book.

being

He has further admitted that NCD

transactions were never written in the Sauda Book and, therefore, did

133

not state that before the CBI.

He has further admitted that he

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 aware about it.

He

has further stated that he

was not

aware whether separate diary was maintained for ready forward


transactions.

No suggestion has been made in respect of statement

made by him in his examination-in-chief regarding the funds which


were transferred from

Canfma to CBMF. It was only suggested that

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

Further, it was suggested that

other securities were not mentioned in the Sauda Book and he has
accepted

this suggestion that NCO securities were not mentioned in

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

endorsement "P.E.P" indicated only the entry in the physical register.


It did not indicate actual receipt of the physicals. No other suggestion

has been put by the Counsel for accused No.2 to this witness.

108. P.W.6 in his cross-examination by the Counsel for accused No.3


was asked questions in respect of Exhibit-41 which was an entry made
in the IBA issue register. He has stated that this entry was made in
the JBA Register by accused No.1 - S. Mohan and that he used to
receive this register alongwith the cheque for his second signature on
the cheque.

He has stated that Bxhibit-41 was in respect of

transaction on account of port folio clients and that he was making

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.

his cross-examination by Counsel for accused No.4 has

admitted that there

was arbitration proceedings between Canfina and

CBMF. He has, however, stated in his cross-examination that he could


not recall the point of reference to the Arbitration with regard to these
transactions

and whether

in respect of the five transactions Canfina

received back money and whether that


before the Arbitrator.
falsely and

was the admitted position.

He denied the suggestion that he was deposing

he could not recollect that Canfina had admitted before

the Arbitrators that they had received the funds in all the five
transactions.

1 10. P.W.6 in

his cross-examination by the Counsel for accused No.5

has admitted that

he did not sign any other cheque of Rs 5 crores on

16/01/1992 and that he was saying so on the basis of IBA Issue


Register No.II of 16/01/1992. He

has further stated that the letter at

Exhibit-69 dated 15/04/1993 could not relate to any of the five


transactions involved in the case.

He, however, admitted that the

Deal Pad at Exhibit- 48 covers the transaction indicated at Exhibit-62.

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

stated that there were three Executive Vice Presidents. He

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.

He has further admitted that there used to be

three audits of Canfina viz (1) continuous audit, (2) statutory audit
This

and (3) the audit by inspection branch of the Canara Bank.

witness was further shown office note dated 08/01/1992 addressed


by the Chief Dealer to Funds Department.
signed
that of
A-8(1).

He admitted that he

had

this document on the right hand side and other signature was
P.N.
After

Narayanrao

which

is on the left hand side at Exhibit

this witness was cross-examined, he was re-examined

by the prosecution for seeking clarification of the statement wherein


he

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

NCD in the documents as

to

which

137
company they belong.

He has funher stated that NCD means non-

convertible debentures and listed NCO means those which

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.

112. In my view, considering the cross-examination of P.W.6, the


statement made by him in

his examination-in-chief has not been

shaken by the defence. In the cross-examination by learned Counsel


for accused No.1, number of suggestions have been put to P.W.6. The
first suggestion being th.ere were number of Officers higher in rank
than accused No.1 . The suggestion, therefore,

was

that the decisions

were taken by higher-ups and accused No.1 was merely following


instructions.

This suggestion has been denied by the wimess by

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

his cross-examination by the learned

__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

not possible to co-relate by mere reference to NCO in the documents


as to

which company they belonged to.

He further clarified that in

deal pad at Exhibits 62, 65, and 67 there


name of the Company, though there

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

all transactions of purchase and sale were entered

in. the Sauda Book.

This stray admission given by

him in the cross examination stands

nullified by clarification which

has been obtained by the prosecution.

in his re-examination.

This suggestion also does not help the case of

the accused No.1 in any manner.


No.3 had made a suggestion to

The learned Counsel for accused

this witness which was admitted by

him stating that normally IBA should contain the detajls

as

to whbm

the payment is to be made and that the dealers working in the Funds
Department

of Canfina

used

to take

decisions with regard to

__J

139

investments even on behalf of the clients.


does not help the case of accused No.3.

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

in the case of Portfolio Management Scheme

be entered into by dealers on behalf of such clients.

It is. nobody's case that in respect of these transactions, purchase or


sale was made on behalf of any of the clients. Similarly, a suggestion
was

put by the learned O>unsel for accused No.4 that there were

arbitration proceedings between Canfina and CBMF and that Canfina


had not made any claim against CB:MF in respect of five transactions.

This suggestion does not help the case of any of the accused. The
witness, however,

has denied this suggestion. The learned Counsel for

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

has established th.at

was remitted from Canfina to CB:MF by creating false and

fictitious deal pad entries which is further established by the voucher


which

was signed by accused No.4 wherein he has stated that the

amount

was wrongly remitted by Canfina

to

CBMF and from CBMF it

was credited in the account of Hiten P. Dalal in Andhra Bank.

_J

140

Similarly, crossexamination by the learned Counsel for accused No.8


also does

not establish the innocence of accused No.8, as the

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

Virakthi Hegde has been cross-examined by the Counsel

for accused Nos. 9 and 10, 4

and 11 only. The other accused have

declined to cross examine this witness.

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

in the document was under instructions and she had no

personal

knowledge

handwritten

about

the

contents

and

that

documents, entries in these documents

apart

from

were keyed in

the computer.

P.W.1 in her cross-examination by the Counsel for

accused No.4

has further stated that scoring part on the voucher

LS?er' is also done by her as per the insttUctions of accused

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.

She has further stated in her cross-examination by

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

initials were taken on the

vouchers for approval of the corrective measure.

This witness has

been cross-examined by the Counsel for accused Nos.9, 10, 4 and 11


only.

Most of her testimony has not been challenged in cross

examination.

In my view, the cross-examination by these accused

does not in any manner shake her testimony which has been given by
her in her examination-in-chief.

1 15. So far as P.W. 5 - Jarugumilli R. Nath

is concerned, accused

Nos. 1 and 2 and 4 to 1 1 declined to cross-examine him and only one

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

Ravi Tirumalai is concerned, his cross

examination on behalf of accused Nos. 1, 2, 7, 8, 9, 10 and 11 was


declined. Counsel for accused No.3 asked this witness about hierarchy
of CBMF and the accounts maintained by each Fund.

P.W. 9

has

further srated that CBMF did not have Articles of Association since it
was not independently registered Company.

He has also stated that

he was not aware as to what were the powers delegated to the


General Manager.

He has further stated that except his bare words,

there was no evidence to show that the cheque of Rs 12 crores was


issued on the instructions of accused No. 3

..

Mr. Acharya, the General

Manager and he has stated that there were no guidelines regarding


the manner in which wrong credits were to be dealt with.

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

looking after the administrative work of CBMF and he was not

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

asked a specific question in respect of voucher dated 22/10/1991 at


Exhibit-102 and whether he had any discussion with regard to th.is
voucher with

accused No.4 to which he has replied

that the cheque

came into their bankers in High Value Clearing and, at that time, their
account

did not have sufficient amount to honour the cheque.

However, accused No. 3 - B.R. Acharya was not in Office and,


therefore,

he discussed with accused No.4

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 that he should

him know and after a lapse of one hour,

him IBA number and that he told him that this IBA

number was given to

him by

Mr. Acharya - accused No.3.

This

witness was cross-examined by the Counsel for accused No.S and in


his cross-examination he was shown voucher at Exhibit- 106 and

he

has admitted that in the credit portion of this voucher, earlier, Canfina
Bangalore

was written. However, it was scored and Bankers Account

Tl.. was written.

"IBA No."

was

also written and scored.

writing, however, was not visible and it

was

Earlier

also scored out. He was

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

credit portion of voucher at Exhibit-106. He also admitted that while


signing the voucher, he did not ask any details regarding

this

transaction.

118. P.W. 18 - Mukesh K. Joshi has not been cross-examined by


accused No.1, 2,

3, 4, 5, 7, 8 and 11.

P.W. 18 in his cross

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

for accused No.6.

has

been put to

him

by the Counsel

P.W. 18 in his cross examination by Counsel for

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.

He has stated that the handwriting

on the carbon copy was of Nitin Patel and that there

was

narration as

115,00,000 REL 2,00,000 NH and 3,00,000 AS.KNP" and, after

this

endorsement, there are initials of Navinchandra Parekh - accused

145

No.10.

He has stated that this endorsement means that the cheque

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 unable to state the long

was aware of one person by name

Kirti.kumar Narbheram Parekh. On being shown Exhibit-111 - pay-in


slip, he has stated that he used to write the narration of transaction on
the reverse of the counter-foil.
th.is was in his handwriting

The writing on front and reverse of

and on the reverse of the counter-foil

there was narration of '1500000 Reliance" besides the figures of two


cheques and also there was writing as "CB-4211 He has stated that it

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

which he has given in his examination-in-chief. Though in

his crossexami.nation he
maintained

has stated that accused Nos. 9 and 10

carbon copy of the cheque issued on behalf of

and that there

the firm

was a narration of "500,000 REL, 2,00,000 NH and

3,00,000 AS.KNP" this statement of P.W.18 m his cross-examination


does not establish or even create a doubt that the transaction dated
10/10/1 991

119.

was a genuine transaction.

So far as P.W. 10

is concerned, the learned Counsel appearing

146
on behalf of accused Nos. 1 to 8 and 11 have not cross-examined
The only cross-examination

was

him.

by the learned Counsel appearing on

behalf of accused Nos. 9 and 10.

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

has stated that it was

his duty to verify the signatures appearing on the cheque

received by their bank for clearance and he could identify the


signature of accused No.10 on Cheque
that he
when

was

not aware whether

his statement

was

Exhibit 112.

He

has stated

he was shown statement of account

recorded by CBI.

The cross examination,

therefore, does not in, any way, further the case of the accused Nos. 9
and 10.

120. P.W. 1 1 - Kishore Ajgaonkar


Branch of Bank of India.

was

working in Stock Exchange

The cross-examination of

this witness is

declined by accused Nos.1, 2, 3, 4, 5, 7, 8, 9 & 10 and 1 1 . He was


cross-examined only by the Counsel for accused No.6.

In

his cross

examination, he has stated after perusing the Statement of Account at


Exhlbit-115 of S.K. Jhaverl th.at the entry dated 10/10/1991 for
3,30,000,00/credited to

was

Rs,

the credit entry showing that the amount was.

his account on that day. He has admitted that on the sam

..

147
day the amount of Rs 4.19 crores was credited to S.I<. Jhaveri's
account.

He has also admitted that on 11/10/1991, th.ere were two

entries; one for Rs 30,35,00,900/- and another for Rs 5 crores.

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

Accountant with Shrenikbhai Jhaveri - accused No. 6.

Accused No.7

has examined one witness Surendran Nair - DW A- 7(1) who was


working

in the Administrative Department of Nahar Group

Companies.

Accused No. 9 also has examined one witness

of

Manish

Mahendra Thakkar - DW A-9(1).

123. Thus, this is the entire evidence which is brought on record in


respect of the
accused.

first

transaction, both, by the prosecution and by the

Perusal of this evidence discloses that the prosecution has

established beyond the reasonable doubt by producing necessary


documents that the amount of Rs 17.29 crores was remitted from
Canfina to CBMF and from CBMF to the Account of accused Nos. 9 -

------

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

to CBMF and from CBMF to the brokers viz

accused No.6, accused No.7 and accused Nos. 9 and 10.

has

Prosecution

also established that Canfina did not receive physical securities at

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

transaction had taken place, there is no evidence to show that on the


date on which the amount was remitted, security in physical form or
Bank Receipt was obtained as security by the Officers of Canfina.
Merely

because

the

amount

which

was

remitted

in

the

five

transactions was received back at subsequent stage, does not absolve


the accused who have taken part in the remittance of the amount. A
refund of this amount, therefore, does not absolve the Officials of the
Canfina or brokers who received the said amount and utilized the

149

same for their own purpose.

It has been established from the

Statement of Account of accused Nos.

and

and accused Nos. 9 &

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

documentary evidence which is brought on record clearly establishes


the commission of the said offence by the accused. There is virtually
no cross-examination in respect of the actual remittance of the
amount and in respect of correctness of the entries which have been
made

as

Statements

also documents in respect of cheques, pay-in-slips,


of Account of Canfina

of accused Nos.

6 and 7

and CBMF

and individual Accounts

and accused Nos. 9 and 10. This evidence

establishes involvement of accused Nos. 1 and


accused No.3 from CBMF, accused Nos.
and 10 who were stock brokers.

and

from Canfina,

and accused Nos. 9

In my view, prosecution

has

established charge of criminal misappropriation under section 403,


criminal breach of trust under section 409 and criminal conspiracy
under section 120-B against the accused Nos. 1 and
accused Nos.

6, 7,

8,

3 and 1 1 and

9 and 10. Though an attempt has been made to

show that, in fact, there

was

actual

transaction of purchase

150
and sale of securities by showing certain endorsements, the defence of

accused Nos. 6 and 7 and 9 and 10 cannot be accepted. It is no doubt


true that witness of

Canfina has stated that Canfina earned profit of

about Rs 1 crores but the fact remains that a huge amount of Rs 17.29
crores

was debited without there being any physical security or

collateral security and thus the offence of temporary misappropriation


has been committed by accused Nos. 1 and 8, 3 and accused Nos. 6,
7, 9 and 10.
prosecution

So far as accused No.2 is concerned, in my view, the

has not been in a position to establish that he was a part

of the criminal conspiracy or that he had committed an

overt

act in

respect of the actual remittance of the said amount from Canfina.


Accused No.2 was working in the Back-up Department and;

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.

DEFENCE OF INDIVIDUAL ACCUSED

AND THEIR SUBMISSONS:

124. Now the defence of individual accused and their submissions

will be taken into consideration.

151

First transaction dated 10.10.1991 in respect


of purchase of RD.. for Rs. 17.29 crores
fromCBMF:
125.

The learned Counsel for accused No.1

S. Mohan

has

submitted that there was no conclusive proof to show that accused


No.1 had entered into such transaction.

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.

The allegation of prosecution against

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

to be treated as ministerial acts, cannot be accepted. It was the

duty of accused No.1 to have ascertained whether the amount which


was being remitted

was

authorized by higher Officials of Canfina and

or there was proper security obtained before remitting the said


amount and, therefore, merely stating that he had done the ministerial
act will not absolve him from the commission of this offence, though
there may not be any evidence to show that, in fact, accused No.1 had
entered into any of the subject transactions of this case. Prosecution,
having established the overt act committed by accused No. l, has
proved that there was enough material to show that accused No.1 is a

-----

--------

152

part of the consprracy of siphoning of the funds from Canfina by


creating fictitious record. The accused No.1 was
creating this record.

responsible

for

The involvement of accused No.1 is more

serious, particularly because he, admittedly, had no power to enter


into these transactions.

That being the position, it

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.

The first submission, therefore, of the

learned Counsel appearing on behalf of accused no.1 cannot be


accepted.

There is virtually no cross-examination of this witness by

the Counsel appearing on behalf of accused No. 1 .

The only attempt

has been made to establish that higher-ups were aware of the


transaction

as the notes were being put up before the Board of

Directors and Vice President. An

attempt has been made by the

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

has not filed any charges against the other

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

in his evidence has stated

that entries in the Deal Pad were made on the basis of rough sheets
and

that the

rough sheets

are not brought

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

of the prosecution has not been established.

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

the person who concluded the deal.


submitted that no witness

The learned Counsel

has

has stated that the person who made entries

154
in the

records/registers is the person who concluded the deal. He has

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.

P.W. 6 has also

stated that the Back-up Department would note all these deals in the
Deal Pad.

He further submitted that P.W. 2 has stated that he was

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.

The fact remains that the relevant entry in the

Deal Pad concerned with the remittance of Rs 17.29 crores was made
by accused No.1 and

his

handwriting has been recognized by P.W.2

and P.W.6.

This fact has not been denied by accused No.1 either by

putting

suggestion

in

the

cross-examination

or

otherwise

establishing that the entry was not made by accused N o.1.

It is

further submitted by the learned Counse l appearing on behalf of

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

100% subsidiary of Canara Bank which is a nationalized bank and,

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

nothing on record to show that

any such security was obtained before remitting the said amount. The
fact th.at the amount
factors

which

will

was

returned back may be one of the mitigating

have

to

be

taken

into

consideration

while

considering the seriousness of the offence and while awarding the


sentence.

126.

The learned Counsel appearing on behalf of accused No.1

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.

He further submitted that P.W.

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

from dealing department, the vouchers in respect of these transactions


from

the Back-up

Department of Canfina

and

that though the

prosecution own witnesses have stated about these documents, the


Investigating Officer did not recollect having seized these documents.
He

submitted that the Investigating Officer did not record

statement of Mr. K.B. Shenoi and Mr. Sati.sh Shetty of Canfina.


support of

this

the
In

submission, he invited my attention to the evidence of

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.

He submitted that, therefore, adverse inference was liable

to be drawn against the prosecution.

It is submitted that the

prosecution has produced the evidence which

has

suited to it and 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.

It is lastly submitted that there was no direct or

circumstantial evidence

to establish the criminal conspiracy.

In

support of this submission, he relied upon number of judgments of the


High Courts and Apex Court.

None of these submissions can be

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

chain of circumstances right from 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

this pattern which clearly

establishes that accused Nos. 1 and 8, 3 and accused Nos. 6, 7, 9 and


10 were aware that the said amount was likely to be received on the
same day i.e. 10/10/1991 and, therefore, though there

was

no

amount in the CBMF, remittances were made in favour of accused


Nos. 6, 7, 9 and 10. The

chain of circumstances, therefore, has been

completely established by the prosecution,

clearly pointing out

towards the guilt of the accused viz. accused Nos. 1 and 8, 3 and
and 7 and 9 and 10 so far as

127.

this particular transaction is concerned.

So far as accused No.2 - N. Balasubramaniam is concerned,

submissions made by his Counsel will have to be accepted and, in my


view, it cannot be held that the accused No.2 is involved in any of the
offences with which he is charged in the instant case.

The admitted

position is that he was working in the Back-up Department to record


the transactions put through by the dealers. He was reporting to the
Vice President Mr. K.B. Shenoi who is not made an accused in this case

158
by the prosecution.

The prosecution witness has stated that his job

was to write down the transaction put through by the Dealing


Department in the Deal Pad based on the instructions given by the
dealers in the rough sheets. He did not have any power to buy or sell
or deal in shares or securities. It has come on record in evidence that
he has not concluded or entered into any deal at any time.

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.

Funds are transferred by conveying IBAs.

Then, the IBAs are

mentioned in JBA Register. Thereafter, cheques are issued to the Bank


for debiting the account and actual IBAs. The rough sheets are then
given to Back-up Department for noting the transactions in the Deal
Pad, copy of the Deal Pad is take n by the Back-up Department for
further accounting and Deal Pad is given back to the dealers. Thus, in
no

way,

the

Department

accused

was

No.2

concerned

purchase or sale of shares.

who
with

was
the

working
actual

in the

decisions

Back-up
regarding

159

128.

So far as the cheques are concerned, initially, the cheques

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

already been carried

out and

the

funds

were

transferred by the dealers by conveying IBA numbers. In view of this


evidence which is on record, accused No.2 cannot be said to be a
member of the criminal conspiracy as he was acting under the Vice
President Mr. K.B. Shenoi who also has not been made as an accused.
Similarly, other persons, who have signed the cheques also are not
made as accused.

On the same analogy, therefore, it cannot be said

that accused No.2 was a co-conspirator who had taken part m


remitting the money illegally from Canfina.

The accused No.2 is,

therefore acquitted of all the allegations and charges which are


levelled against him.

129.

It is submitted that accused No.3 - B.R. Acharya was not

having mens rea and was not involved in conspiracy with any of the
accused as alleged by the CBI.

Secondly, it is submitted th.at the

160

ingredient "dishonestly misappropriates" as is found in section 403


and 405, has not been established by the prosecution particularly in
view of the definitions under section 23, 24 and 25 of the Indian Penal
Code.

He has submitted that the amount which was allegedly

remitted from CBMF to th.e brokers was returned to Canfina with a


profit of more than Rs 1 crore. It is submitted that the contents of the
vouchers and other documents have not been proved and, therefore,
no case was made out by CBI since only signatures have been proved
and not the contents.

It is submitted that the offence under section

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.

his own use any movable

It is submitted that after the amount WB.$

received by CBMF, it was immediately

transferred

to Mr. S.I{. Jhaveri

and M/s Narbheram Harakhchand and it was not retained by th

accused No.3 in the account of CBMF and, therefore, there was no


intention or Mens rea in respect of offence under section 403 and,
therefore, there was no question of abetment as contemplated under
section 109.

It is then submitted that the money was transferred to

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.

It is also submitted that the offence under the

sections 409, 467, 463, 471, 477-A

provisions of

have also not been established.

All these submissions cannot be accepted. The accused No.3 was the

co-conspirator and without his connivance and assistance, money


could not have been siphoned off to the brokers.
accused No.1 1 to transfer the money

He instructed

in favour of the brokers which

was done by accused No.11 at his instance.

Merely because the said

amount was returned back to Canfin.a, does not absolve the accused
No.3 of his responsibility and liability on account of temporary
misappropriation.

In my view, it is very much established by the

prosecution that the accused No.3 was a co-conspirator and, therefore,


once that is established for the actions of his other co-conspirators he
is also equally liable. The offence with which he is charged, therefore,
has been dearly established beyond the reasonable doubt.

130.

So far as accused No.4 - P.J. Subbarao is concerned, the

submissions made by the learned Counsel appearing on his behalf will


have to be accepted.

From the evidence of P.W.16 and P.W.9 it is

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

Further, from the evidence of

his initials were taken on the vouchers

for approval of corrective measures.

In respect of transaction dated

16/1/1992, voucher at Exhibit- 106 has not been signed by accused


No.4. Then, the cheque at E:xhibit-51
No.4.

is also not signed by accused

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

has been established from

the statements of witnesses that he was not concerned with the actual
deals/transactions and he was only looking after the administrative
work.

Prosecution, therefore, has not established the case against

accused No.4 in respect of any other transactions.

163
131 .

So far as accused No. 6 - S.K. Jhaveri is concerned, the

learned Counsel appearing on his behalf has submitted that there is no


evidence regarding conspiracy and that the statements of witnesses
prove innocence of accused No.6.
P.W.9 -

Ravi

He has relied on the statement of

Tirumalai, who has stated that he personally did not

know the accused No.6 and the said witness had prepared a cheque
for Rs 12 crores in favour of accused No.6.

lt is submitted that the

offence of conspiracy and criminal breach of trust cannot be sustained


against accused No.6.

He has further submitted that the said witness

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

Investigating Officer, who confirmed that the

cheque dated 10/10/1991 for Rs 8.99 crores was handed over to


Pall.av Seth - accused No. 7 being the representative of S.K. Jhaveri

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.

examination of P.W.19 wherein he

has

admitted that he did not make

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.

It is then submitted that the motive attributed by the

prosecution to accused No.6 was that the amount was siphoned off in
order to utilize the
learned

said

money. In support of the said submission, the

Counsel appearing on behalf of accused No.6 relied on the

statement of account of Bank of India of accused No.6 for the relevant


period.

He submitted

on the basis of the said opening and closing

balance of the said account th.at though pay-in-day of Stock Exchange


was

10th October,

1991, Stock Exchange never used to deposit

cheques of brokers on the same day and they would be deposited

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.

Further, the learned Counsel pointed

out that the amount allegedly received by accused No.6

was not

utilized for the purpose of making payment to the creditors of accused


No.6. It is further submitted that there was no evidence to show that
the

cheque

which

was

issued

by

accused

No.6

was

without

consideration. It was therefore submitted in short that there was no


oral and documentary evidence adduced by the prosecution to prove
th.at

(a)

conspiracy;

the accused No.6 had any role to play in the alleged

(b) the accused No.6 had any knowledge that the moneys

received from Canara Ban.k/CBMF were not against any consideration;

(c) the accused No.6 induced Canara Bank/Canfina to issue the said
cheques;

(d) the cheques were without consideration; (e) there was

any deficiency in accused No.61s account on 1 1/10/1991 when the


cheque

was

deposited by Stock Exchange

(f) the accused No.6 was in

any way involved in diversion of moneys from Canfina to CBMF, {g)


the accused No.6 had misappropriated the amount.

IL_

166
132. The said submissions made by the learned Counsel appearing on
behalf of accused No.6 cannot be accepted.

It

has

already been held

that the charge of criminal conspiracy has been proved against


accused Nos. 1, 3, 6, 7, 8, 9 and 10.
conspiracy having been proved,

The alleged charge of criminal

the accused No.6 not having any

.knowledge in respect of other transactions is immaterial. Prosecution


having established that the accused No.6 was a part of the general
conspiracy and the prosecution having established the flow of money
from Canfina to CBMF and from CBMF to Bank Account of accused
No.6 and utilization of the said amount by accused No.6, it is clear
that the accused No.6 had misappropriated the amount and this was
done by virtue of the fictitious entries which were made by accused
Nos. 1, B &

3.

Though accused No.6 may have other transactions

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.

Cross-examination of DW A-6(1) - Nishit Rasiklal Joshi:


133. The accused No.6 has examined his witness DW A-6(1) - Nishit
Rasiklal Doshi.

He

has

stated that in 1991 he was working as an

Accountant with Shrenikbhai Jhaveri - accused No.6. He has stated in

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

stated th.at Pallav Sheth was the sub-broker

He has further stated that Pallav Sheth used to

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.

maintained in the account of Canara Bank and that there were


hundreds of transactions with Canara Bank and/or Canbank Mutual
Fund

in

the year 1991- 92.

1991-92 around

He further stated that during the period

170 cheques were

received

from

Canara Bank

aggregating to Rs 200 to 210 crores and around 120 cheques were


issued during this year aggregating to Rs. 110 to 115 crores. He has
further st.ated that the ledger book was maintained
transaction of Pallav Sheth with his clients.
No.1,

and

were

brought

on

record

in

respect of the

Various entries in Book


through

this

witness.

Essentially, the defence of accused No.6, apart from denial, is that


accused No. 7 was his sub-broker and he was directly dealing

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

accountant does not help accused No.6. It


be

number

of transactions

and

of his

evidence

is possible

that there may

during the relevant period

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.

It is possible that accused No.6 might have

received hundreds of crores from Canara Bank, CBMF in respect of


other transactions during the course of the year and that the said
transactions may be valid transactions.
present case, the prosecution
siphoned off and
transactions

has

particularly

The fact remains that,

in

the

established that huge amounts were


those

mentioned

in

the

aforesaid

dated 10/10/1991 etc. which were fictitious transactions

and the deal pad entries were created only

to

give an impression that

those securities were purchased, when, in fact, the record indicates

169

that no such transactions had ever taken place.

Secondly, once it is

held that there was a conspiracy to siphon off the funds, it is


immaterial whether accused No.7 was sub-broker of accused No.6 or
that accused No.6 did not have any direct dealings with Bank Officers
or

that the amount was deposited in the Joint Account of accused Nos.

6 and 7.

The fact remains that the amount was deposited in his

it

was utilized by him, though the said amount did not

belong to him.

Therefore, this witness does not take the case of

account and

accused No.6 any further and does not establish his innocence.

135.

So far

as

accused No.7 - Pallav Seth. is concerned, he was

the representative of accused No.6 and, therefore charge against


accused

No.7

also

has

been

established

from

the

oral

documentary evidence which has been brought on record.

Cross-examination of DW A-7(1)

136.

Surendran Nair :

Accused No.7 - Pallav Seth has examined

DW A-7(1)

and

170

Surendran Nair.

This witness was working in the Administrative

Department of Nahar Group of Companies. He has stated that he was


working in Mumbai Office

and that the Share

Department was

situated at Ludhiana. He has produced Share Transfer Register for the


month of March, 1992.

He has stated that as per this Register, the

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

and the total number of shares transferred to Canara Bank on


25/03/1992 were 85000. In the cross-examination, he has stated that
he was seeing the register for the first time and that he had no
personal knowledge about this register.

Hence, it appears that this

witness is of no assistance to accused No.7.

137.

So far as accused No.8 - M.K.. Ashok Kumar is concerned,

he was the Chief Dealer of Canfina and he had instructed accused


No.1 to make deal pad entries.

Therefore, merely because accused

No.8 may not have put his signatures on certain documents could not

171
absolve

him

from

the

comm1ss10n

of

the

said

offence.

The

submissions made by the learned Counsel appearing on behalf of


accused No.8, therefore, cannot be accepted.

138.

It

has

been established by the prosecution that the part of

the money, initially, had gone to accused No. 9


accused No. 10

Ketan V. Parekh

&

Navinchandra N. Parekh who had, in turn, retained

the amount of Rs 5 la.khs and remitted the amount of Rs 8.25 crores to


accused No.6.

Prosecution has established that the amount was

deposited in their account and , on the very same day, that amount
was remitted to accused No.6.

The submission made by the learned

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

The question of drawing

for not examining D'souza

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

evidence is brought on record it may drop examination of certain


witnesses and, in the present case, rnerely

because

some witnesses

whose statements have been recorded, have not been examined


cannot be held against the prosecution.

Cross-examination of D.W.A-9( 1)

139.

Accused No.9 has

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

shown two contract notes dated 27/09/1991 issued in favour of


Canara Bank.

He

has

stated that original contract notes were with

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

acknowledgment on both these contract

notes and they were signed by accused No.9 - Ketan V. Parekh.

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

Reliance Jndustries to Canbank and delivery of those shares was made


on 13/10/1991.

He

has

stated

that the delivery was made to Mr.

D'Souza, the Custodial Manager of Canbank Mutual Fund and he


asked

him

these

shares.

to meet Mr. B.R. Acharya since he did not know about


He has stated that Mr. B.R. Acharya accepted the

delivery of the shares as also the first and second copy of the delivery
challan. He has stated that the

the

acknowledgment.

firm

Further,

did not receive the second copy of

he has stated

that the register

indicated that there was delivery of 2,00,000 shares of Reliance


Industries to Nerbheram Harakchand and delivery of shares was made
by

him

to Mr. D'Souza of Canbank Mutual Fund on 13/10/1991.

the cross-examination, he

has

In

stated that Mr. D'Souza was working as

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

instructed the firm to buy or sell shares in their name.

has

admitted that

in the documents at Exhibits-A-9

and

He

10 the name of

I
I
I

174
Canban.k Mutual Fund was

not mentioned.

However,

he

has

volunteered to say th.at whenever they had transactions with CBMF,


they used to

be shown in their record in the name of Canara Bank.

Much emphasis was laid on the suggestion made by the prosecution to

this

witness to the effect that the person by name Mr. D'Souza was

never working with Canbank Mutual Fund.

140.

It is vehemently submitted that it was the duty of the

prosecution to bring out the correct facts before the Court.

It is

submitted that it was brought on record by the prosecution witnesses


themselves that Mr. D'Souza was a Custodial Manager and he was the
head of their Department.
suggestion

which was put

suggests that the prosecution

It is submitted that, therefore, the


to

has

this witness

in cross-examination

tried to suppress the material facts

from the Court and has purposely not examined Mr. D'Souza and,
therefore, adverse inference was liable to be drawn against the
prosecution.

141.

In my view, the evidence of

this

witness does not assist

either accused No.9 or 10. As stated by me earlier that it is possible


that there might be number of genuine transactions which were

_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

legal and valid.

It

has been

established by the prosecution that these transactions were fictitious


transactions

after it

was

and that the money was utilized illegally by the brokers


siphoned off from Canfina to CBMF. This defence witness

[DW-A-9(1)] therefore does not help the accused No.9.

142.

So far as accused No.11 - B.V. Srinivasan is concerned, he

was

merely a junior ranking officer who was acting on the instructions

of accused No.3 - B.R. Acharya.

From the evidence which has come

on record, it is clear that he had no other alternative but to accept the


directions which were given

by accused No.3. In my view, therefore,

the charge against accused No.11 has not been established.

Second transaction dated 22/10/1991


in re
spectofpptthasof14%NCDsfor
Rs 12gores {romcsMF:

143.

So far as

this

transaction is concerned, already the

evidence which has come on record


oral and

the

has been discussed at length. The

documentary evidence on record has

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,

an account with Canbank in Bangalore. The cheque at

Exhibit-25 vide

cheque No.013453

was

issued

in the

name

of

"Yourselves IBA on Tamarind Lane, Bombay" and the amount was


transferred to Bombay. The Statement of Current Account at Exhibit162 discloses that the amount was passed from Canfina to CBMF.
Exhibit-26 is a credit slip of Canban.k, Bangalore Branch.
done by IBA from Bangalore. The actual IBA
days.

was

This was

received after 3 to 4

Since the amount was deposited in Canbank, Tamarind Lane,

the cheque at Exhibit-78 was issued in favour of accused No.6 - S.K.


Jhaveri and the cheque number was mentioned in voucher at Exhibit102.

The amount was deposited in joint account of accused No.6 -

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

dearly established the conspiracy as against accused Nos. 1, 8, 3, 6, 7,


9 and 10. I have already discussed at length the reason why I feel that
there is sufficient material to disclose the criminal conspiracy for
siphoning off funds.

For the same reasons,

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.

144. In respect of the second transaction dated 22/10/1991, the


prosecution has examined P.W.2, 6, 19, 4, 9 and 8

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

cross-examination of these witness has already been discussed, it is no


longer necessary again to separately deal with the cross examination
of these witnesses.

So far as remaining witnesses viz. P.W.4 & P.W.8

are concerned, P.W.4 has not been cross-examined by any of the


accused and P.W. 8 also has not been cross-examined by accused Nos.
1 to 6 & 8 to 1 1 . P.W. 8 has been cross-examined only by the learned
Counsel for accused No.7.

In cross examination, P.W. 8 was shown

Exhibit-76 which was a cheque issued

in

favour of BOA.

He

has

178

further stated in cross-exmination that whenever a cheque was issued


in favour of a person, it is credited to the account of that person only.
He has further stated that the statement of account entry at Exhibit38/1 does not indicate the cheque number.
witness

is

The evidence of

this

not shattered, in any way, by the learned Counsel for

accused No. 7

Third transaction dated 16/01/1992


in resoect of 14
%NCDs(romCBMF
for Rs 5 crores:

145.

In respect of this transaction also the amount involved is

Rs S crores. The Deal Pad is at Exhibit-62. The Sauda Book is at


Exhibits-63 and 64. Exhibit-42 is the IBA Issue Register. Exhibit-2 7 is
a cheque for Rs 5 crores.

Exhibit- 162 is the Statement of Current

Account. Exlubit-28 is the Telegraphic Transfer Form. Exhibit- 107 is


the letter disclosing IBA number. Exhibit- 106 is the voucher. Exhibit51 is the cheque. Exhibit 52 is the requisition letter of a Canara Bank
to issue banker's cheque in favour of Hiten P. Dalal. Exhibit- 121 is the
credit voucher of Andhra Bank. Exhibit 120(1) is the credit entry in
respect of cheque at Exhibit-51.

Exhibit 120(5) is the balance of

credit entries in respect of opening and closing balance.

Exhibit-122

.....-----

179

is the cheque issued by Andhra Bank in favour of Corporation Bank


which is signed by Hiten P. Dalal The accused who were involved in
this are accused Nos. 2, 4 and 5.

In

this case also, in my view, the

prosecution has established the actual siphoning off funds from


Canfina to CBMF and from CBMF to Hiten P. Dalal - accused No.S.
The Statement of Account of Hiten P. Dalal discloses that the amount

has been utilized by him . The oral and documentary evidence on


record clearly establishes the siphoning off of funds by preparing false
entries in the Deal Pad.

The submission of Mr. Kale, the learned

Counsel appearing on behalf of accused No.5 that the amount of Rs 5


crores which was paid by Hiten P. Dalal to Corporation Bank, was in
respect of adjustment of the account cannot be accepted. What is to
be seen is whether the amount was siphoned off from Canfina to
CBMF and from CBMF to the account of Hiten P. Dalal This

has been

established by the documentary and oral evidence which is adduced


by the prosecution. Once that is established, it clearly indicates that
the funds were diverted ostensibly for purchase of securities, when, in
fact, no such securities were purchased.

It is possible that accused

No.5 - Hiten P. Dalal might have given an explanation to the


Investigation

Officer

but

that

by

itself does

not

absolve

the

involvement of accused No.5 in the commission of the said offence

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.

Thus, therefore, the case of conspiracy has been

established. Charge No.1 has been established against accused No.5.


Similarly, the charge of temporary misappropriation also has been
established as also the charge of abetment of criminal breach of trust
by accused No.5 has been established.

146. In respect of the third transaction dated 16/01/1992, the


prosecution has examined P.W.1, 6, 2, 19, 4 and 12. I have discussed
the cross-examination of P.W.1, P.W.2, P.W.6, P.W.19 and P.W.4 while
considering the first transaction and, therefore, it is not necessary to

again restate their cross-examination while considering the third


transaction.

So far

as

P.W.12 is concerned, he has been cross-

examined by the learned Counsel for accused No.5. This witness was
shown

cheque

dated

16/01/1992

Exhibit-51

being

cheque

No.58/664. He was also shown a Credit Voucher - Exhibit-121. He

has stated that in this voucher although there

is a mention of Rs

--

IL

181

crores and Rs 1,52,55,290/- the cheque Numbers are different i.e.


992040 and 202837 which do not tally with cheque at Exhibit-51. He
has stated as under:-

"This means that the voucher Ex. 121

does not relate to the cheuqe Ex. 51."

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

He has stated that the closing

Rs 2,24,70,386.12. He was also shown

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).

this cross-examination, what is suggested and argued by

By

Mr. Kale, the

learned Counsel appearing on behalf of accused No.5 that the cheque


at Exhibit-51

was

issued in favour of yourself and that the cheque

number of Exhibit-51 and cheque number in the Credit Voucher at


Exh.ibit-121 are different and, therefore, there was no evidence to
show that the amount which was remitted by Canfina to CBMF was
further remitted to accused No.5.

It is no doubt true th.at the cheque

number which is shown at Credit Voucher - Exhibit-121 is 992040

..

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,

in fact, issued in the

name

of yourself, the fact remains

that the amount of Rs 5 crores was remitted from CBMF to the account
of accused No. 5 - Hiten P. Dalal.

In my view, variation of cheque

number of Canara Bank at Exhibit-51 and Pay Order by which the


amount was credited to the Andhra Bank in Hiten P. Dalal's account
does not assist the accused.

The relevant voucher at Exhibit-121

clearly shows that CBMF deposited the money through their cheque
with Canara Bank, who, in tum, issued a cheque of different number
as

per instructions of CBMF favouring accused No.S's account in

Andhra Bank which is at Exhibit-119 and Exhibit-52. Exhibit- 119 is a


letter written by the Chief Officer, Andhra Bank to the Superintendent
of Police. In the said letter it is mentioned that the cheque No. 587664
which is a cheque at Exhibit-51 for Rs 5 crores was issued by Canbank
Mutual Fund on their CD a/c.3914 with Canara Bank and this was not
a bankers' pay order.

He has further stated that Andhra Bank has

received pay order No.992040 dated 16/01/1992 from Canara Bank


with a covering letter to credit the amount to H.P. Dalal's account and
the xerox copy of the relevant letter

was

also enclosed. The emphasis

__J

183
laid by Mr. Kale, the learned Counsel appearing on behalf of accused

No.5 on the variation in the cheque number at Exhibit-5 1 and at


Exhibit-121, therefore, does not change the complexion of the case.
The fact remains that it has been established by the prosecution that
the amount of Rs 5 crores was deposited in the account of Hiten P.
Dalal.

What accused No.5 has done in this case is immaterial.

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.

In my view, once it is established that all the accused

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

transaction dated 07/02/1992 in


resped:.of 17% NCDslrom CBMF for Rs.5 crores:

beneficiary

of

this

147.

The

transaction

was

Manubhai

Maniklal.

Prosecution has not pressed the charges in respect of this

transaction since the beneficiary in this transaction has expired and


the case against him has abated. Hence, it is not necessary to discuss
the evidence in respect of this transaction.

184
Fifth transaction dated 11/02/1992 in

resoect of 14% NCDs from C8MF for


Rs. 7 crores;
148.

Though the prosecution has led oral and documentary

evidence in respect of this transaction, at the time of oral arguments


Mr. V.G. Pradhan, the learned Special Public Prosecutor appearing on
behalf of CBI did not press the charges in respect of this transaction
since the beneficiary of this transaction viz. Manubhai Maniklal has
expired. Hence, it is not necessary to discuss the evidence in respect
of this transaction.

Further

149.

Diversion & Reversal:

I have already discussed at length the evidence which has

been led by the prosecution.

I have already noted that the

prosecution has established that the amount which

was

siphoned off

from Canfina was reverted back to it in an illegal manner.

This

evidence clearly discloses that there was no regular transaction in


respect of purchase of so-called NCO securities nor sale of these
securities and that the money had been illegally siphoned off and it
was temporary misappropriation by the brokers who utilized the
money for their own purposes and latter on remitted the money back

185
through accused Nos. 6 and 7.

Prosecution has established the

rversal of the transaction by bringing on record documentary


evidence in the form of Deal Pad Entry at Exhibit-48, IBA at Exhibit70, the relevant entry at Exhibit-45, Deal Pad at Exhibits-46 & 47, the
cheque at Exhibit-33, Statement of Current Account at Exhibit-162,
credit slip at Exhibit-34, the cheque at Exh.toit-76 issued favoring Bank
of America, Pay-in-slip at Exhibit-77, Statement of Account at Exhibit38, Sauda Book at Exhibit-60. The amount which was brought back
through V.B. Desai - broker on behalf of accused No.7 is at Exhibit124.

Exhibit-70 discloses that sale of securities was false and there

was, in fact, no transaction. It is no doubt true that the prosecution


witness has admitted in the cross-examination that Canfina earned
profit of more than Rs 1 crore in respect of the said transaction.
However, merely because the amount

was

returned back, does not

establish the innocence of the accused. That may be a factor which


may be taken into consideration at the time of awarding sentence.

150.
was

It is strenuously urged on behalf of the accused that there


no dishonest intention and that the refund of the amount clearly

discloses that the accused never wanted to misappropriate the said


amount and that the said transaction was a regular transaction in

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

prosecution for non-examination of the important

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

why these accused were not being

prosecuted.

All these submissions have already been considered in

respect of

other transactions and for the same reasons, the said

submissions cannot be accepted. The important factor which has to


be considered is that in respect of these transactions the material on

__

187

record dearly discloses that (a) there was no real or genuine


transaction

of either purchase or sale of securities,

(b) entries were

made in the Deal Pad and other vouchers to create an impression th.at,
in fact, there

was

a purchase of sale of securities, when, in fact, there

was no such transaction, (c) CBMF was used as a conduit to siphon off
the amount.

On the one hand it

was

shown as if the amount was

wrongly received from Canfina to CBl'AF and that amount which

was

wrongly received was to be repaid back & at the same time,

this

amount was siphoned off to


purposes.

the brokers who utilized it for their own

The accused Nos. 6 and 7 received almost about Rs 24

crores and these

two

accused received the maximum benefit.

accused Nos. 9 and 10 also were used as conduit to

transfer

The

the funds

from CBMF to accused Nos. 6 & 7 and they retained the amount of Rs

5 lakhs and remitted Rs 8.25 crores to the account of accused Nos. 6


& 7.

The accused No.S received Rs S crores.

remitted back by accused No.7.

This amount was

Though an attempt was made to

show that, in fact, the amount was received

from purchase of

securities such as 11RJL'1 by showing the counter-foil and the notings on


the counter-foil, that does not establish that, in fact, these securities
were either purchased or sold. Canfina itself is a Company which was
authorized to buy and sale securities and, therefore, there was no

__

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

securities on behalf of Canfi.na. If at all Canfina wanted to buy or sell


securities, it could have done so directly through brokers.

For

all

these reasons, therefore, the submissions made on behalf of the


accused cannot be accepted.

151. In respect of the reversal of the transaction, prosecution has


examined P.W.13, P.W.6, P.W.2, P.W. 19, P.W.8, P.W.6, P.W.17 and

P.W.7.

1 have already considered the cross-examination of P.W.6,

P.W.2,

P.W.1 9,

transaction.

P.W.8

and

P.W.6

while

considering

the

first

So far as the remaining three witnesses viz. P.W. 13,

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

examined for the purpose of proving reversal of the transaction and he


has stated that he used to maintain Register No.VJ and that the entries
were made in the Register on the basis of the documents like purchase
or sale memo and that he had made an entry of Rs 53,77,82,500/
which was in his handwriting and this was in respect of the cheque
received from V.B. Desai.
was

He has also stated that in this entry there

no reference to the nature of transaction i.e. whether it was a

189
purchase or sale transaction. The entry
124.

has

been exhibited at Exhibit-

He has stated that the amount mentioned in the entry was

transferred to

Bangalore under the IBA No.F/214/92.

Thus th.is

evidence has not been challenged which indicates that the reversal

has

been made though there was no purchase or sale transaction entered


into by any of the brokers or by the dealers of Canfina. P.W. 1 7 also
has been cross-examined by the learned Counsel for accused No. 7.
P.W.1 7 - Yogesh Bhambardekar was working with Bombay Stock
Exchange and he has stated that he maintained the quotation for the
month of March, 1992 & April 1992. The learned Counsel for accused
No. 7 has cross-examined this witness and in cross-examination he has
stated that

if the

and

if the

quotation

quotation

is

is received ''X

Right" then it is so recorded

with "X Right" then

the quotation is inclusive of

right.

"XR" is

written, otherwise

He has denied the suggestion that

the quotations recorded on 25/03/1992 are X Right.

He was shown

quotation dated 21/02/1992. He has stated that the quotation was

in

respect of Nahar Spinning and on that day the quotations were 800850.

The quotation has been exhibited at Exhibit A- 7(1).

He has

further stated that on the earlier day i.e. on 20/02/1992 the quotation
of
on

Nahar Spinning was 1400-1600.


record at

----- - - -

The said page was also brought

Exhibit A-7(2) and the relevant

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.

Now, I would like to consider whether accused Nos.I, 2, 3,

152.

4, 8 and 11 are public servants within the meaning of section 21 of


the Indian Penal code and whether the provisions of Prevention of
Corruption Act are attracted in their case and, secondly, whether the
sanction

to prosecute

was properly granted

by the

sanctioning

authority in respect of the accused who were in service at the time


when the charge- sheet was filed.

Whetberthe sanctionaccordedtoprosecute accused Nos. 2 & 4 is


os.I.2.3.4.s&11 are
PIO.P
eran
d validandwhetheraccusedN
the provisions of the
of
public seryants within the meaning
Prevention ofCorryptionAct. 1988?
153.

Jn the present case, Canfina is a Company incorporated

under the Companies Act

and

is lOOo/o subsidiary of the Canara Bank

which is, admittedly, a Nationalized Bank. CBMF is a trust registered


under the Indian Trusts Act and the Ca nara Bank is the settler of the
Trust.

Accused No.l - S. Mohan and Accused No. 8 - M.K. Ashok

Kumar who were working with Canfina were removed from service

----I-'

191

during investigation.
accused No.1 1

of investigation.

Similarly, accused No. 3 - B. Acharya and

B.V. Srinivasan also had left service during the course


So far as accused No.2

- N. Balasubramaniam is

concerned, Mr. K. N. Karnath, Chairman and Managing Director,


Canbank Financial Services Ltd, has accorded sanction under section
19(1 ) (c) of the Prevention of Corruption Act, 1988 dated 23/2/1996
for prosecution of the said accused. Similarly, Mr. G.A. Shenai, Chief
Executive Officer of Canbanl< Mutual Fund also has accorded sanction
under section 19(1) (c) of the Prevention of Corruption Act, 1988 by
letter dated 04/03/1996 for prosecution of

accused No. 4 - P.J.

Subbararo.

154.

It has been urged by the learned Counsel appearing on

behalf of accused No. 4 - PJ. Subbarao that he


the CBMF which is a registered Trust.

was

an employee of

He is not a public servant

within the meaning of section 2(c) of the Prevention of Corruption


Act, 1988.

He submitted that, therefore, the charges under section

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

Canara Bank and Others Vs. National Thermal Power

Corporation and another reported in (2001) 1 sec 43. The learned

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.

Similar submissions have been made by the learned Counsel

appearing on behalf of accused No.2 in respect of the sanction


accorded by Mr. K. N. Karnath

155.

P.W.14.

On the other hand, Mr. V.G. Pradhan, the learned Special

Public Prosecutor appearing on be.half of CBI relied on the provisions


of section 2(c)(viii) of the Prevention of Corruption Act.

He also

invited my attention to dictionary meaning of the term community at


large in Prem's Judicial Dictionary as also in P. Ramanatha Aiyar's the
Law Lexicon.

156.

In the present case, it is an admitted position that the

Canara Bank is a Nationalized Bank and, therefore, the employees of


Canara Bank and Canfina who is the 1 OOo/o subsidiary of the Canara
bank are, therefore, public servants falling withih the definition of
section 2 (c) of the Prevention of Corruption Act, 1988.

So far as

employees of CBMF are concerned, in my view, it will have to be held


that they are public servants within the meaning of provisions of
section 2(b)(c) of the Prevention of Corruption Act, 1988.

It will be

193
relevant to refer to the provisions of section 2(c) (viii) of the said Act
which reads as under:-

112. Definitions.- In this Act, unless the


context other wise requires:(a) ............ .
(b) ............
(c) ..public servant" means , (i) ............ .
.

(ii)
(ill) ............ .
.........

(iv) ............ .
(v)

.......

(vi) ............
(vii)
(viii) any person who holds an office
.

by virtue of which he is authorized


or required to perform any public

duty;"

The requirement, therefore, under sub-clause (viii) of clause (c) of


section 2 is that the person who is authorized or required to perform
any public duty by virtue of his office is, therefore, deemed to be a
public servant. In this context, therefore, the definition of public duty
is important. In the present case, CBMF undertook purchase and sale
of public securities on behalf of small and large investors in ordet to
ensure that they receive handsome profit in respect of the funds which

are invested by the community at large. The word "community", as

_J

194
has been defined in the Law Lexicon, reads as under:-

"Community. Joint ownership or common


position in regard
to something (as)
community

of goods

or

of interests;

society or body of people living in the same


place, under the same law and regulations,
and
who have
common
rights
and
privileges; a corporation or body politic.

11The community11 means the public generally.


A body of people organised into a political,
municipal or social unity [S.12, I.P.C.]

COMMUNITY ; MUTUALITY ; UNITY. A

species of partnership interest arising upon


marriage

in

property

acquired

during

coverture,- legal when it arises by operation


of

law,

conventional

when

created

by

express contract; a society having common


political interests.

Community,

Society.

Community

anything

constitutes a community ; a
common interest, a common language, a
common government, is the basis of that

community which is formed by any number


of individuals ; the coming together of my
and keeping together under given law aftd
fot given purposes constitutes a society ;
satieties are either public or priv::lte
accbrding
to the purpose : friends form
'
I

societies for pleasure, persons form societies

for business.

The

term

community is

appropriately applied to indefinite numbers,


and society in cases where the number is
restricted by the nature of the union."

Similarly, the word "community" has been defined in the World Book

195

Dictionary, which reads as under:-

"community (ke myu1na te), n. pl. -ties, adj.


-n. 1. all the people living in the same place
and subject to the same laws; the people of
any district or town:
This lake provides

water for six communities. Before civilization


the size of communities was very smal.1; large
numbers of great cities are phenomena of the
last hundred years (Ogburn and Nim.koff).
2 a group of people living together or
sharing something in common, such as
interests or vocations: a community of

the scientific community. SYN :


fellowship, society, association. 3 ownership
together; a sharing together : community of
food supplies, community of ideas. SYN:
partnership. 4 Figurative. a group of animals
monks,

or plants living together; any group of


related
mutually
organisms.
SYN:
colony. 5 like-ness, similarity; identity:

community of interests causes people to work


together. SYN: affinity adj. 1 of or having
to do with a community: community
development. 2 for or shared by a
community:
a
community house,
a
community playground.. 3 owned jointly or
-

in common, especially by a husband and


..:.&

wue.
-

The

conjoint

community,

II

reading

therefore,

of

section

clearly

implies

registered by the Nationalized Bank


undertakes

activities

2(b)(c) (viii)

as

that

with

the Trust

the

word

which

is

its principal settler, therefore,

on behalf of the Nationalized

therefore, employees of such a Trust perform public duty.

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

Central, Provincial, or State Act, or an authority or a body

owned or controlled

or aided by the Government or a Government

company as defined in section 617 of the Companies Act, 1956 (1 of

1956). CBMF, therefore, controlled or aided by the Nationalized Bank


would squarely fall within the definition of "State" as defined in the
said explanation and, therefore, the employees of such a Trust would
be

public

servants

within the definition of section 2 (c) of the

Prevention of Corruption Act, 1988.

15 7.

The learned Counsel appearing on behalf of accused No.4

has relied on the judgment in the case of Canara Bank & Others
(supra).

Jn my view,

ratio of the said judgment would not apply to the

facts of the present case. Jn the first place, the issue which was before
the Apex Court in the said case was

not

under the Prevention of

(: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:-

"The Trustees of the Trust constituted by


Canara Bank as Settlor for the benefit of
numerous unit holders cannot be termed
and

styled

as

government company or

198
public sector undertak ing.

This observation

has

11

to be read in the context in which it was made.

The Apex Court was considering the dispute between the two public
sector undertakings and whether the dispute was frivolous and

imaginary and, in the light of the ratio in ONGC's case, it observed


that the trustees of the Trust constituted by the Canara Bank as settlor
could not be

termed

as government company

or public sector

undertaking. In my view ratio of the said judgment will not apply to


the

facts

of the

present

case.

The

question

which

falls

for

consideration before this Court is whether the employees of such. a


Trust are public servants within the meaning of section 2(c)(viii) oI
the Prevention of Corruption Act. The said observations of the Apex
Court in the said case, therefore, will not apply to the facts of the
present case. It is a settled position in law that the judgment of the
Apex Court should not be read as statute and the ratio of the
judgments

has

to be interpreted in the facts and circumstances of the

said case. It has also been held that

if the

facts

said ratio will not apply to any other case.

are

different then the

The apex Court in Zee

Telefilnis Ltd. and another vs. Union of India and others reported in
(2005) 4 sec 649

has

observed in paras 254, 255 & 256 as under:-

199

"Precedent

254.

Are we bound hands and feet by

Pradeep Kumar Biswas (2002) 5 SCC 111? The


answer to the question must be found in the
law of precedent. A decision, it is trite, should
not be read as a statute.

A decision is an

authority for the questions of law determined


by it. Such a question is determined having
regard to the fact situation obtaining therein.
While applying the ratio, the court may not pick
out a word or a sentence from the judgment
divorced from the context in which the said
question arose for consideration.

A judgment,

as is well known, must be read in its entirety


and

the

receive

observations
consideration

made
in

the

therein
light

should
of

the

questions raised before it. (See Punjab National

Bank v. R.L. Vaid (2004) 7 sec 698).

255.

Although decisions are galore on

this point, we may refer to a recent one in State

of Gujarat v. Akh.il Gujarat Pravasi V.S.


Mahamandal (2004) 5 SCC 155 wherein this
Court held : (SCC p. 172, para 19)
"It is trite that any observation made
during the course of reasoning in a judgment
should not be read divorced from the context in
which it was used."

256.

It is further well settled that a

decision is not an authority for a proposition


which did not fall for its consideration.

It is

also a trite law th.at a point not raised before a


court would not be an authority on the said
question.

In A-One Granites v. State of U.P.

(2001) 3 SCC 537 it is stated as follows : (SCC


p. 543, para 11)

_J

200

1111. This question was considered by the


Court of Appeal in Lancaster Motor Co.
(London) Ltd. v. Bremith Ltd. (1941) 1 KB 675
and it was laid down that when non
consideration was given to the question, the
decision cannot be said to be binding and
precedents sub silentio and without arguments
are of no moment"
[See also State of U.P. v. Synthetics and
Chemicals Ltd. (1991) 4 SCC 139, Amit Das v.
State of Bihar (2000) 5 SCC 488 (SCC para 20),

Bhavnagar University v. Palitana Sugar Mills (P)


Ltd. (2003) 2 SCC 111, Cement Corpn. of India
Ltd. v. Purya (2004) 8 SCC 270, Bharat Forge
Co. Ltd. v. Uttam Manohar Naknte (2005) 2 SCC
489 and Kalyan Chandra Sarkar v. Rajesh
Ranjan (2005) 2 SCC 42, See para 42.]"

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.

I am, therefore, of the opinion that the employees of CBMF

would squarely fall within the meaning of definition of "public


servant" as defined in section (2) (c)(viii) of the Prevention of
Corrupti.on Act.

159.

So far as submission of the learned Counsel appearing on

_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

made by CBI seeking sanction, he used to go through

the records concerning the person working in the Department of


Canfina and get clarifications whenever he had doubt and, after
getting convinced that prima facie case of commission and omission
had been made out, he would accord sanction. He further stated that
with regard to the particulars mentioned in sanction order at Exhibit127,

he

has

documents

verified

the

original books

of

Canfina

and

other

and that he had followed the same procedure

for

according sanction against accused No.2 - N. Balasubramaniam.


has further stated that after having gone through the record
was placed before
he

accorded

him,

he decided that prosecution

sanction to prosecute

was

accused No.2.

He

which

required and

In the cross

examination of this witness, much emphasis was led on the draft


sanction and this witness has stated in

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

given under the transactions involved in this

_J

202
case were received back on 31/03/1992. Further, suggestion was put
that the sanction

was

given by

him to take revenge against accused

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

Nothing turns on the said

this witness. The fact remains that

P.W.14 had applied his mind to the papers which were produced
before

him and he has arrived at a conclusion that it was necessary to

grant sanction to prosecute.

I, therefore, hold that there is no

infirmity in the sanction which is granted by P.W.14 to prosecute


accused No.2

160.

So far as submission of accused No.4 is concerned on the

point of grant of sanction by P.W. 15 - G.A. Shenai, in my view,


submission that there was non-application of mind on the part of
sanctioning authority and therefore the sanction order was improper,
cannot be accepted.

P.W. 15 in

his evidence has stated that the

particulars mentioned in the sanction order were provided to

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.

He was shown letter dated 15/4/1993 - Exhibit-A-1 (1) and he

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

admitted that he was not in the

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 witness has answered that whatever material

that was relevant for sanction was placed before him.


therefore, from the evidence of

this

In my view,

witness, it cannot be said that

204
there was non-application of mind on the part of P.W.15 for granting
sanction to prosecute accused No.4.

The submi ssion of the learned

Counsel appearing on behalf of accused No.4 in respect of sanction


being

invalid.

cannot be

accepted.

For

the

same reasons

the

submissions made by the learned Counsel appearing on behalf of


accused No. 3 - B.R. Acharya

that

the employees of CB'MF are not

public servants cannot be accepted.

161.

It is necessary to consider the

relevant sections

in order

to examine whether the prosecution has proved the charges vis-a-vis


the aforesaid sections against the accused. The accused have been
charged in the following manner:-

Accused Nos.1, 2, 3, 4, 8 and 1 1 are employees of


Canfina & CBMF and they have been charged under
sections, 120-B, 403, 405, 409, 467, 471, and

477A

of the IPC and section 13(1)(c) read with section 13(2) of


the Prevention of Corruption Act, 1988

Accused Nos. 5, 6, 7, 9 and 10 are the brokers who


are charged under sections 120-B, 403, 409 of the IPC
and for abetment under section 109 read with sections
403, 405, 409, 471, 477A, 467, and section 13(1)(c) read

205

with section 13 (2) of the Prevention of Corruption Act,

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,

therefore, definition of the word

"dishonestly" becomes relevant.

This is defined under sections 24 of

the Indian Penal Code. It is, therefore, necessary to examine the


individual section and see whether the prosecution

has proved, beyond

reasonable doubt, that the accused have committed the said offences
with which they are charged.

Section 24

of the Indian Penal Code,

reads as under:-

024.

"Dishonestly".-

Whoever

does

anything with the intention of causing


wrongful gain to one person or WTongful
loss to another person, is said to do th.at
thing "dishonestly".

206

The definition of the said provision becomes relevant in view of the


fact that this word is used in section 403 and section 405. Section
403 reads

as

under:-

"403.

Dishonest misappropriation

property.-

Whoever

of

dishonestly

misappropriates or converts to his own use


any movable property, shall be punished with
imprisonment of either description for a term
which may extend to two years, or with fine,
or with both.

Explanation-I - A dishonest misappropriation


for a time only is a misappropriation with the

meaning of this section.

Explanation- 2 - A person who finds property


not iii the possession of any other person, and
takes such property for

the purpose of

protecting it for, or of restoring it to, the


owner does not take or misappropriate it
dishonestly, and is not guilty of an offence;
but he is guilty of the offence above defined,
if he appropriates it to his own use, when he

knows or has the means of discovering the

207

owner, or before

he has used reasonable

means to discover and give notice to the


owner and has kept the property a reasonable
time to enable the owner to

claim it.

What are reasonable means or what is a


reasonable time in such a case, i.s a question
of fact.

It is not necessary that the finder should


know who is the owner of the property, or

that any particular person is the owner of it;


it is sufficient if, at the time of appropriating
it, he does not believe it to be

his own

property, or in good faith believe that the real


owner cannot be found."

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

has dishonestly misappropriated the property. Section 403 talks about


movable property, whereas section 405

merely talks

about

t.lie

property. From the perusal of section 403 including the explanation,

it

can be seen that the misappropriation even for temporary period


constitutes an offence under the said provision, whereas under section

405, it has to be established that the accused


property.

was

entrusted with the

The section, however, qualifies the entrustment by stating

_J

L__

208
that it should be entrusted in any manner with the property or with
the dominion over the property.

Section 409 is an aggravated form of

offence which is committed by a public servant or by banker, merchant


or agent.

In the present case, it has been urged on behalf of the

163.
accused

Nos.

to

4,

B and

11

that

there

was

no

dishonest

misappropriation and, at the highest, it is an irregularity as submitted


by

the

learned

Counsel

appearing on

behalf of accused No.3.

Secondly, it is urged that these accused were not benefited in any


manner and, therefore, it was not a conversion for their own use. It is
then argued that since the element of mens rea was not proved,
offence of criminal breach of trust

has

not been established. It is also

urged by the learned Counsel appearing on behalf of accused No.l, 3

& 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.

It is also urged that since

money had been returned back with profit, it is established that


was

th

there

no dishonest intention and, therefore, offence under sections 403,

409 was not established.

In support of the

said

submissions, the

learned Counsel appearing on behalf of the accused

has

relied on

209

number of judgments.

164.

The learned Counsel appearing on behalf of brokers, on the

other hand, have submitted that

this was a transaction of purchase and

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.

made by Canfina against CBMF in the

Complaint was also not filed by Canfina or

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

mutually exclusive and the person cannot be charged

simultaneously under sections 403, 405 of the IPC.

It is urged that,

therefore, the charge of abetment to commit offence under section


13(l)(c) read with section 13(2) and the offence of forgery and
falsification of accounts also are not established.

165. I am afraid that submissions made by the learned Counsel


appearing on behalf of the accused cannot be accepted.

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

with the dishonest intention, whereas,

so

far as section 405

is

concerned, the provision indicates that the property comes into


possession of the accused either by express entrustment or by some
process, placing the accused in the position of trust. I am of the view
that all the ingredients of sections 403 and 405 have been established
by the prosecution against accused Nos. 1, 3, 8. The prosecution has
brought

on

record

Exhibits-17

and

18

which

Resolutions, which dearly establish entrustment.

are

the

Board

Exhibit- 57 is an

Articles of Association which also authorizes the entrustment in favour


of Board of Directors who have, in tum, entrusted the property to
accused Nos. 1 and 8. The entrustment is an indisputable fact which

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

established. It is quite well settled position in law that intention being


a state of mind, there cannot be direct evidence to show that the state
of mind existed. However, the conduct and overt act of the accused
can establish the dishonest intention and it is a strong circumstance
which establishes that there existed dishonest intention on the part of
the accused on the basis of conduct and over act of the accused. In the
present case, as I have already discussed, it has been established that

211
though the accused did not have power to enter into any transaction
beyond Rs 50

lakhs,

accused Nos. 1 and 8 transferred huge amounts of

Rs 17.29 crores, 12 crores and 5 crores, even if the remaining


transactions of Rs 5 crores and Rs 7 crores are excluded, by creating
false documents and making false entries showing as

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

circumstance which shows dishonesty on their part is that the accused


Nos. 1 & 8, without waiting to get collateral security either in the form
of physical share certificates or B.R., on the very same day transferred
the said amount of Rs 1 7.29 crores on 10/10/1991, Rs 12 crores on
22/10/1991 and Rs S crores on 16/01/1992 on the basis of telephonic
instructions and conveying IBA number which was later on put in the
register of IBAs. After having remitted the said amount, there was no

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

false record is prepared by accused Nos. 3 at the end of CBMF. The

vouchers at Exhibits-178 and 106 further indicates their dishonest


intention and collusion and connivance between accused Nos. 1 and 8
on the one hand and accused Nos. 3 on the other hand of the CBMF.
Accused Nos. 3 & 8 have made entries to show that as if this amount
was

wrongly remitted by Canfina to CBMF.

The honest intention

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.

The attendance register which is produced by the

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

misappropriation and criminal breach of trust by accused Nos. 1 and 8


and accused Nos. 3 also have abetted offence under section 13(1) (c)
read with section 13(2) of the Prevention of Corruption Act, 1988.
Merely because the said amount was remitted does not absolve the
accused from the offence of temporary misappropriation which is an
offence under section 403 of the Indian Penal Code.

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

dealing with the purchase and sale securities on behalf of Canfina


v-

_..

_
....
..__

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

amount to CBMF for ma.king payment to 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,

therefore, has clearly established defalcation of money by


accused.

Though an attempt

has

all

the

been made to raise a defence that

these were the regular transactions and that the brokers

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

not been in a position to establish that

there was no dishonest intention

and, on the

other hand, the

v--

_J

215

prosecution by bringing on record circumstantial evidence in the form


of documents and oral evidence established dishonest and fraudulent
intention on the part of the accused who have acted in conspiracy and
there was collusion and connivance on their part and, therefore, they
acted in furtherance of the said conspiracy which fact is established
from the chronology of events and the false documents which are
prepared. The conduct of accused No.l, 3, 5, 6, 7, 8, 9 & 10 clearly
established th.at there was a consensus and common knowledge
amongst them about the transfer of money from Canfina to CBMF and
from CBMF to brokers i.e. accused Nos.5, 6, 7, 9 & 10 and all this had
happened in clock work precision manner which could not have taken
place unless there was a collusion and connivance of the accused. An
attempt has been made by the learned Counsel appearing on behalf of
brokers viz. accused No.5, 6, 8, 9 & 10 to show that when a notice was
issued under section 91 of the Cr.P.C., they had, in advance, given this
information about the transaction to the Investigating Officer and th.at
the Investigating Officer had not verified this fact from the Canara
Bank.

An attempt also has been made to show

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

already decided to create an impression that there was regular


transaction, when, in fact, such transaction did not exist which is
evident from the evidence which is discussed by me hereinabove. This
submission made by the learned Counsel appearing on behalf of the
accused, therefore, also cannot be accepted.

166.

It would be relevant also to consider the provisions of

section 13(1)(c) and 13(2) of the Prevention of Corruption Act, 1988


which reads

as

under:-

13. Criminal misconduct by


servant.-(1)
commit

public

a public servant is said to

the

offence

of

criminal

misconduct,(a) ...............

(b)
(c)

.............

if

he

dishonestly

or

fraudulently

misappropriates or otherwise converts for


his own use any property entrusted to him
or under his control as a public servant or
allows any other person so to do; or"
(d) ..... . . . . . . . . . . . .

217
(i) ........... . .............

..

(ii) ...................... .
(m) ..................... .
(e) ............................ .

lClF1.Cll.itJ11.(2)

...

Any public servant who commits

criminal misconduct shall be punishable

with imprisonment for a term which shall


be not less than one year but which may
extend to seven years and shall also be
liable to fine.''

In the present case, I have already held that accused Nos.1, 3, 8

are

public servants within the meaning of section 2(c) of the Prevention of


Corruption Act, 1988.

I have given detailed reasons to indicate that

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

employee of CBMF has dishonestly and fraudulently

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

has, therefore, committed an offence punishable under section


13(1)(c) read with section 13(2) of the Prevention of Corruption Act
and the accused Nos. 5, 6, 7, 8, 9 & 10 have abetted these public
servants in the commission of the said offence and, therefore, they are
also liable for abetment for the offence punishable under section
13(1) (c) read with section 13(2) of the Prevention of Corruption Act.

_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.

They have, therefore, committed an offence punishable under

section 477A of the Indian Penal Code.

168.

The learned Counsel appearing on behalf of the accused have

relied upon number of judgments on various points.

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

against the points

for

determination framed in para 1 7 above as under:-

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

(2 7), (28), (29),


(31) to
(34), (3 7), (39), (41), (42),
(43)' & (46), (47)
Point Nos.(7), (9), (10), (1 2)
to
(21), (26), (30), (35),

No

(36), (44), (45)


Point No. (38) & (40)

Yes, except
No.11

Point No.(48)

As per final order.

accused

___J

iJ. ,.

219
I, therefore, hold that ;

1 70.

(i)

The prosecution has established beyond the

reasonable doubt that accused Nos. 1 and 8 and


accused No.3 and accused Nos. 5, 6, 7, 9 and 10
entered into criminal conspiracy to dishonestly
siphon off the funds of Canfina and executed
three

bogus,

fictitious

and

non-existent

transactions dated 10/10/1991, 22/10/1991 and


16/01/1992

involving

funds

the

said

transactions and diverted funds from Canfina to


CB:MF and, thereafter, criminally misappropriated
the proceeds to the respective accounts of accused
Nos. 5, 6, 7, 9 and
manipulated

and

10 and for that purpose

created

false

and

fictitious

documents and, thereby committed an offence


punishable under section 120-B read with section
403, 409, 477A of the Indian Penal Code read

with section 13(1) (c) and 1 3 (2) of the Prevention


of Corruption Act, 1988 and they are accordingly
convicted

for having

committed

the

aforesaid

offences.

(ii)

The prosecution has established beyond the

reasonable doubt

the charges against accused

Nos. 5, 6, 7, 9 and 10 and they are convicted


under section 120-B read with section 403, 409
and for abetment under section 109 of the Indian

220

Penal Code, of the offences committed by accused


Nos.1, 3 & 8 punishable under section 477A of the
Indian Penal Code and

section 13(1)(c) and

13 (2) of the Prevention of Corruption Act, 1 988.


Their bail bonds to continue till 28th March,
2008.

(iii) The prosecution has established its case


beyond reasonable doubt against accused Nos. 1,
3 and 8 and they are convicted for the offences
punishable under section 120-B, 403, 409, 477A
read with section 13(1)(c) and 13(2) of the
Prevention of Corruption Act, 1988 and also for
abetment under section 109 of the Indian Penal
Code, of the offences committed by accused Nos.
5, 6, 7, 9 and 10 under section 403 of the Indian

Penal Code. Their bail bonds

to

continue till 28th

March, 2008.

(iv) The prosecution has not established the


charges as framed again.st accused Nos. 2, 4 and
1 1 and they

are,

therefore, acquitted of the

offences with which they are charged. Their bail


bonds stand cancelled.

(v)

The prosecution has not established the

charge as framed against all the accused for the


offences punishable under sections 467 and 471

_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

punishable under sections

409, 477A read with section 13(1)(c) and 1 3 (2)


of the Prevention of Corruption Act and he is
accordingly convicted for having committed the
aforesaid offences.

(vii)

Prosecution

has

established

beyond

reasonable doubt that the accused No.3 has


committed an offence punishable under section
1 3 (1)(c)

read

with

section

1 3 (2)

of

the

Prevention of Corruption Act, 1988 and section


109 read with section 403 of the Indian Penal
Code and he is accordingly convicted for having
committed the aforesaid offences.

(viii)

Prosecution

has

established

beyond

reasonable doubt that the accused No.S has


committed an offence punishable under section
403 and also under section 109 read with section
403

of the

Indian

Penal

Code

and

he

is

accordingly convicted for having committed the


aforesaid offences.

222
Prosecution

(ix)
reasonable

doubt

has

established

that the

accused

beyond

No. 6

has

committed an offence punishable under section


403

of

the

Indian

Penal

Code

and

he

is

accordingly convicted for . having committed the


aforesaid offence.

(x)

Prosecution

reasonable

doubt

established

has

that the

beyond

No. 7 has

accused

committed an offence punishable under section


403

of

the

Indian

Penal

Code

and

he

is

accordingly convicted for having committed the


aforesaid offence.

(xi)

Prosecution has

established beyond

reasonable doubt that the accused Nos.6 and 7


have

committed

an offence

punishable

under

section 109 read with section 403 of the Indian


Penal Code and they are accordingly convicted for
having committed the aforesaid offence.

(xii)

Prosecution has established beyond

reasonable

doubt

that

accused

No.8

has

committed an offence punishable under section


13(1) (c)

and

Corruption Act,

13(2)
1988

of

the

and he is

convicted for having committed


offence.

Prevention

of

accordingly

the

aforesaid

223
Prosecution has also established beyond

(xiii)

reasonable

doubt

that

accused

No.8

has

committed an offence punishable under section


409

of

the

Indian

Penal

Code

and

he

is

accordingly convicted for having committed the


aforesaid offence.

(xiv)

has

Prosecution

established

beyond

reasonable doubt that accused Nos. 9 and 1 0 have


committed an offence punishable under section
403

of the Indian Penal code

and

they

are

accordingly convicted for having committed the


said offence.

(xv)

Prosecution

has

established

beyond

reasonable doubt that accused Nos. 9 and 10 have


committed an offence punishable under section
109 read with section 403 of the Indian Penal
Code

and

they are

accordingly

convicted

for

having committed the said offence.

[Note:-

When

the

order of conviction was

pronounced on 7th March, 2008 sub-clauses


to

(xv)

(vi)

were not typed inadvertently though in

the reasoned judgment I have held that these


accused have committed offences as mentioned in
the sub-clauses

(vi)

to

(xv)

in para 170.

is a typographical error sub-clauses

(vi)

Since it
to

(xv)

224
are incorporated in

the

2008 after sub-clause

(v)]

order dated 7th March,

The learned Counsel appearing on behalf of the accused Nos.1,


3, 5, 6, 7, 8, 9 and 10 are, therefore, called upon to argue on the
sentence. Stand over to 28th March, 2008.

On 28th March, 2008,

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

sentence is concerned since the accused Nos. 1, 3, 5, 6, 7, 8, 9

10 had been held guilty of the offences punishable under section

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

calls for a very strict sentence.

Special Public Prosecutor,

relied upon the

225
judgment of the Apex Court in
reported in

State

2003 SCC (Cri) 1935.

of M.P.

Vs. Ghanshyam Singh

He invited my attention to the

observations made by the Apex Court in the said judgment in respect


of various aspects which have to be taken into consideration while
awarding the sentence.

He invited my attention to paras 10, 11, 12,

13, 14 and 17 of the said judgment. He relied upon the judgment in


the case of Ram Narayan Popli Vs. Central Bureau of
reported in

Investigation

(2003) 3 sec 641.

172. Mr. Amit Desai, the learned Counsel appearing on behalf of


accused No.8 submitted that so far as accused No.8 is concerned,

no

independent charges were framed in respect of substantive offences


against him, since the charges were restricted to three transactions viz

10/10/1991, 22/10/1991 and 16/01/1992. He submitted that since


other charges were not pressed and since accused No.8 was primarily
alleged to have been involved in the said two transactions, the lesser
sentence may be awarded to accused No.8. He submitted that no loss
was caused to Canfina and the entire amount was returned with
interest. He submitted that already 1 5 years have elapsed after the FIR
was lodged and that the trial was pending

for a very long time and

this is an additional factor which has to be taken into consideration .

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

judgments of the Supreme Court in which it had been held that if no


loss

was

caused

to the complainant,

sentence

which

should be

awarded should be lesser sentence. He submitted that the parameters


of the said judgment of the Apex Court would also apply to the present
case.

He submitted th.at the accused No.8 has already served 28 days

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

He submitted that taking into consideration

these circumstances, lesser sentence may be awarded to accused

No.6.

1 74.

Accused No.1

submitted

S. Mohan who has appeared in person has

that he was

a junior

officer and was

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.

The learned Counsel for accused No.3

adopted the

submissions made by the learned Counsel appearing for accused No.8


and submitted that lenient sentence may be given to accused No.3.

176.

Mr. Kale, the learned Counsel appearing on behalf of accused

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

transaction. He submitted that so far as other two transactions are


concerned, the prosecution had not pressed the charges in respect of
these two transactions against accused No.5 and, therefore, he was
concerned only with a single transaction. He submitted that, therefore,
lesser sentence may be awarded to accused No.5.

1 77. The learned Counsel appeanng on behalf of accused No.7


adopted the arguments made by the learned Counsel appearing on
behalf of accused No.8 and submitted that the lesser sentence may be
awarded to accused No.7.

178. Mr. Jethmalani, the learned Senior Counsel appearing on behalf


of accused Nos. 9 and 10 submitted that, at the highest, accused Nos.
9 and 10 had acted as a conduit to transfer the money which was
received from CBMF to accused Nos. 6 and 7. He submitted th.at since
the Court has accepted the case of accused No. 9 and 10 that the
transaction in question was in respect of purchase of 5 lacs shares of
RIL, at the highest, it could be said that they had acted as conduit. He
submitted that it was a case of these accused that an amount of Rs 5

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

submitted that, admittedly, the entire amount had been returned to


Canfina and, at the highest, it could be said that the . amount was
illegally obtained by the brokers. He submitted that so far as accused
No.10 is concerned, he is 73 years old and is a a heart patient and he
has already suffered an heart attack.

He submitted that the case 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.

I have given my anxious consideration to the submissions

made by the learned Public Prosecutors appearing on behalf of the CBI


and the learned Counsel appearing on behalf of the accused.

180.

In the present case, it is

an.

admitted position th.at the amount

- - --

230
which was siphoned off from Canfina through CBMF to brokers was
returned back with interest.

The fact remains, however, that the

amount was illegally siphoned off by creating false and


entries.

fictitious

I have already taken into consideration various facts and

circumstances while coming to the conclusion th.at the charge of


criminal conspiracy and abetment has been established.
charge having been established, the accused, even

if

directly involved or have not committed an overt act

The said

they are not


or had no

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.

The Apex Court also in the case of Ram Narayan

Popli (supra) in para 384 has observed as under:-

"384. The convictions of Accused 1 , 3 and 5


are in order and are maintained.

A question

about the sentence was raised. Normally, cases

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.

It is no doubt true that the Apex Court has in various judgments

has laid down guidelines for the purpose of awarding sentence.

- --

_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

therefore depen.d on the facts and circumstances of each case.

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:-

The crucial question which needs to be


1110.
decided is the proper sentence and merely because
of lapse of time, whether the accused is to be
waived from undergoing it. It is to be noted that
the sentences prescribed for offences relatable to
section 304 Part I are imprisonment for life or up
to a period of 10 years. It is true that no minimum
sentence has been prescribed. The sentences can
be compared with prescription of similar sentences
and other provisions like Section 326 IPC and
Section 307 IPC when hurt is caused. Section 304
Part J is a species of homicidal death.
It is
statutorily described as culpable homicide though
not amounting to murder as defined under IPC.
Taking note of the purpose for which a sentence is
imposed, it cannot be laid down as a rule of
universal application that a long passage of time in
all cases would justify minimal sentence. Long
pendency of a matter by itself could not justify
lesser sentence
11

"11. The law regulates social interests, arbitrates


conflicting claims and demands Security of persons
and property of the people is an essential function
of the State.
It could be achieved through
instrumentality of criminal Jaw.
Undoubtedly,

233

there is a cross-cultural conflict where living law


must find an answer to the new challenges and the
courts are required to mould the sentencing system
to meet the challenges.
The contagion of
lawlessness would undermine social order and lay
it in ruins. Protection of society and stamping out
criminal proclivity must be the object of law which
must be achieved by imposing appropriate
sentence. Therefore, law as a cornerstone of the
edifice of "order" should meet the challenges
confronting the society. Friedman in his Law in
Changing Society stated that, "State of criminal law
continues to be - as it should be - a decisive
reflection of social consciousness of society."
Therefore, in operating the sentencing system, law
should adopt the corrective machinery or the
By deft
deterrence based on factual matrix.
modulation sentencing process has to be stern
where it should be, and tempered with mercy
where it warrants to be. The facts and given
circumstances in each case, the nature of the crime,
the manner in which it was planned and
committed, the motive for commission of the
crime, the conduct of the accused, the nature of
weapons
used
and
all
other
attending
circumstances are relevant facts which would enter
into the area of consideration. For instance, a
murder committed due to deep-seated mutual and
personal rivalry may not call for penalty of death.
But an organized crime or mass murder of innocent
people would call for imposition of death sentence
as deterrence. Jn Mahesh v. State of M.P. [(1987)
3 sec 80] this court while refusing to reduce the
death sentence observed thus: (SCC p.82, para 6)
lt will be a mockery of justice to permit the
accused to escape the extreme penalty of law when
faced with such evidence and such crue l acts. To
give the lesser punishment for the accused would
be to render the justicing system of the country
suspect. The common man will lose faith in courts.
In such cases, he understands and appreciates the

language of deterrence more than the reformative


jargon."

..12.

Therefore,

undue

sympathy

to

impose

inadequate sentence would do more harm to the


justice system to undermine the public confidence
in the efficacy of law and society could not long
endure under such serious threats.

It is, therefore,

the duty of every court to award proper sentence


having regard to the nature of the offence and the
manner in which it was executed or committed etc.
This

position was

illuminatingly

Court in Sevak.a Perumal v. State

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

prescribing liability according to the culpability of


each kind of criminal conduct. It ordinarily allows
some significant discretion to the Judge in arriving
at a sentence in each case, presumably to perm.it
sentences that reflect more subtle considerations
culpability that are raised by the special facts of
each

case.

Judges,

in

essence,

affirm

that

punishment ought always to fit the crime; yet in


practice sentences are determined largely by other
Sometimes, it is the correctional

considerations.

needs of the perpetrator that are offered to justify a


sentence,

sometimes the desirability of keeping

him out of circulation, and sometimes even the


tragic

results

of his

crime.

Inevitably,

these

considerations cause a departure from just deserts


as the basis of punishment and create cases of
apparent

injustice

that

are

senous

and

widespread."
"14.

Proportion between crime and punishment is

a goal respected in principle, and in spite of errant


notions,

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

disappeared from the law only


Even now for a single grave

infraction drastic sentences are imposed. Anything


less than a penalty of greatest severity for any
serious crime is thought then to be a measure of
toleration that is unwarranted and unwise.

But in

fact, quite apart from those considerations that

make punishment unjustifiable when it is out of


proportion to the crime, uniformly disproportionate
punishment has some very undesirable practical
con.sequences."
17.

Imposition of sentence without considering its

effect on the social order in many cases may be in


reality a futile exercise.
crime

The

e.g. where it relates

social

impact of the

to offences against

women, dacoity, kidnapping, misappropriation of


public money, treason and other offences involving
moral turpitude or moral delinquency which have
great impact on social order and public interest
cannot

be lost

sight

exemplary

treatment.

imposing

meagre

of and

per

Any liberal

sentences

or

se

require

attitude
taking

by
too

sympathetic a view merely on account of lapse of


time in respect of such offences will be resultwise
counterproductive

in the long run and against

societal interest which needs to be cared for and


strengthened by a string of deterrence inbuilt in the
sentencing system."

There cannot be any doubt or two opinions about the observations


made by the Apex court in the said judgment.

Keeping in view the

observations made by the Supreme Court in the case of Maruti Udyog

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.

182. Under these circumstances, in my view, it


accused

No.1

S.

Mohan

is

sentenced

will

to

be appropriate

undergo

if

rigorous

imprisonment for a period of six months.

183. So far as accused No.3 - B.R. Acharya is concerned, in my view


taking into consideration the various facts and circumstances of the
case

and more particularly the fact that he was responsible for

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

imprisonment for a period of one year.

184. So far as accused No.8 is concerned, he was a Vice President,


working with Canfina. On his directions, accused No.1 sent money to

237

CBMF. Though accused No.8 has been separately charged in respect


of the other two transactions for the substantial offences, the fact
remains that he has been convicted for the offences of conspiracy and
abetment

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

"'--'

key witne and the main conspirator in respect of the scheme of


siphoning off the funds from Uinfina to CBMF and to the said brokers.
In my view, it would be appropriate

if

he

is

sentenced to undergo

rigorous imprisonment for one year.

185.

So far as accused No.5 is concerned, it is no doubt true that he

is involved only in one transaction viz transaction dated 16/01/1992.


However, taking into consideration the facts and circumstances of the
case, it would be appropriate to sentence

him

to undergo rigorous

imprisonment for one year.

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

imprisonment for one year.

to

sentence

them

to

suffer

rigorous

238
187. So far as accused Nos. 9 and 10 are concerned, in my view, it

would be appropriate to sentence accused No.9 to undergo rigorous


imprisonment for one year.

However, so far as accused No.10 is

concerned, as was rightly pointed out by Mr. Jethmalani, the learned


Counsel appearing on his behalf that he has merely signed 'the cheque
on behalf of the firm and there is no evidence on record to indicate
that he has received anything in return personally. He is also 73 years
of age and is a heart patient who has already suffered an heart attack.
Considering these factors, in my view, it would be appropriate to
sentence him to undergo simple imprisonment for six months.

188. It is clarified that under section 428 sentence which is already

undergone shall be set off against the sentence which is already


awarded.

The learned Counsel appearing on accused No.5 submits

that accused No.5 has already undergone two and half years sentence
in respect of conviction in other cases and the period undergone by

him in the said cases may be set off so

far as sentence in this case is

concerned. In support of his submission he relied upon the judgment


in the case of State of Maharashtra and another Vs. Najajsat alias
Mubarak Ali. reported in AIR 200 1 SC 2255. ln my view, it would be
appropriate if the liberty is granted to accused No.5 to file a separate

- ----

L.

239
application on this aspect.

Accordingly the liberty is granted to

accused No.5 to file separate application on

this aspect.

Accordingly, the following order is passed:-

189.

O R D ER

(i)

Accused No.1 - Saranathan Mohan is sentenced to .

suffer rigorous imprisonment for six months


offence

punishable

for an

under section 120-B read

with

section 403, 409, 477A of lndian Penal Code read with


section

13(1)(c)

and

1 3 (2)

of

the

Prevention

of

Corruption Act 1988.

(ii)

Accused No.1 - Saranathan Mohan is sentenced to

suffer rigorous imprisonment for six months

for an

offence punishable under section 120-B, 403, 409, 477A


read with section 13(1)(c) and 1 3 (2) of the Prevention
of Corrup tion Act, 1988 and under section 109 of Indian
Penal Code.

240

(iii) Accused No.1 - Saranathan Mohan

is sentenced to

suffer rigorous imprisonment for six months for an


offence punishable under section , 409, 477A of Indian
Penal Code read with section 13(1)(c) and 13 (2) of the
Prevention of Corruption Act 1 988.

(iv)

Accused No.3 - B.R. Acharya and accused No.8 -

M.K Ashok Kumar are sentenced to suffer rigorous


imprisonment for one year for an offence

punishable

under section 120-B read with section 403, 409, 477A of


Indian Penal Code read with section 13(l)(c) and 13(2)
of the Prevention of Corruption Act, 1988.

(v) Accused No.3 - B.R.. Acharya and accused No.8 - M.K.


Ashok

Kumar

are

sentenced

to

suffer

ngorous

imprisonment for one year for an offence punishable


under section 120-B, 403, 409, 477A of Indian Penal
Code read with section 13(1) (c) and 13(2) of the
Prevention of Corruption Act, 1988 and under section
109 of the Indian Penal Code.

r
I
241

(vi)

Accused No.3 - B.R. Acharya and accused No.8 -

M.K. Ashok Kumar are sentenced to suffer rigorous


imprisonment for one year for an offence punishable
under section 13(1)(c) read with section 13(2) of the
Prevention of Corruption Act, 1988 and section 109 read
with section 403 of the Indian Penal Code.

(vii)

Accused Nos. 5 - Hiten P. Dalal, accused No. 6 -

S.K. Jhaveri, accused No. 7 - Pallav Seth and accused


No.9 - Ketan V. Parekh are sentenced to suffer rigorous
imprisonment for one year for an offence punishable
under section 120-B read with section 403, 409, 477A of
Indian Penal Code read with section 13(l) (c) and 13(2)
of the Prevention of Corruption Act 1988.

(viii)

Accused Nos. 5 - Hiten P. Dalal, accused No. 6 -

S.K. Jhaveri, accused No. 7 - Pallav Seth and accused


No.9 - Ketan V. Parekh are sentenced to suffer rigorous
imprisonment for one year for an offence punishable
under section 120-B read with

403, 409,

and section

109 of the Indian Penal Code.

242

(ix)

Accused No.S - Hiten P. Dalal is sentenced to

suffer rigorous imprisonment for one year for an offence


under section 403 and under section 109 read with
section 403 of Indian Penal Code.

(x)

Accused No.6 - S.K. Jh.averi is sentenced to suffer

rigorous imprisonment for one year for an offence under


section 403 of the Indian Penal Code.

(xi) Accu sed No. 7 - Pall.av Seth is sentenced to suffer

rigorous imprisonment for one year for an offence under


section 403 of the Indian Penal Code .

(xii) Accused No.8 - M.K. Ashok Kumar is sentenced to


suffer rigorous imprisonment for one year for an offence
under section 13(l)(c) and 13 (2) of the Prevention of
Corruption Act, 1988.

(xiii) Accused No.8 - M.K. Ashok Kumar is sentenced to


suffer rigorous imprisonment for one year for an offence

243
under section 409 of lndian Penal Code.

(xiv) Accused No.9 - Ketan V. Parekh

is sentenced to

suffer rigorous imprisonment for one year for an offence


under section 403 of Indian Penal Code.

(xv)

Accused No.9 - Ketan V. Parekh

is sentenced to

suffer rigorous imprisonment for one year for an offence


under section 109 read with 403 of Indian Penal Code.

(xvi)

Accused No.10

- Navinchandra N. Parekh

is

sentenced to suffer simple imprisonment for six months


for an offence under section 403 of Indian Penal Code.

(xvii)

Accused No.10 - Navinchandra N. Parekh

is

sentenced to suffer simple imprisonment for six months


for an offence under section 109 read with 403 of Indian
Penal Code.

(xviii)

Accused No.6 - S.K. Jhaveri & accused No. 7

Pallav

Seth

are

sentenced

to

suffer

rigorous

l
244
i.mprisonment for one year for

an

offence under section

109 read with section 403 of Indian Penal Code.

(xix)

Accused

sentenced

to

suffer

10 - Navinchandra N. Parekh is
simple imprisonment for

six

months

for an offence punishable under section 120-B read with


section 403, 409, 477A

of the Indian Penal Code read

with section 13(1)(c) and 13(2) of the Prevention of


Corruption Act 1988.

(xx)

Accused

10

- Navinchandra

N.

Parekh is

sentenced to suffer simple imprisonment for six months


for an offence punishable under section 120-B read with
section 403, 409

and

section 109 of the Indian Penal

Code.

All the

aforesaid sentences to run concurrently.

Set off to be given to all the accused for the period


already undergone if any.

At this

stage,

the learned

Counsel for

accused Nos. 1 , 3,5, 6, 7, 8, 9 and 10 submitted

245
that

the

conviction

and

sentence

may

be

suspended in order to enable the accused to prefer


appeal before

the Apex Court.

It is submitted that

since the vacation of the Apex Court will begin in


the month of May, 2008 and the Apex Court
reopen

in

will

July, sufficient period may be given to

the accused . This submission is accepted. In view


of the provisions of section 389 sub-clause (3),
sentence

is

suspended

Accused are released on

till

31st
bail.

July,

2008.

They should

execute fresh bonds within one week.

'

V\T " -

(V.M. KANADE, J.)


Judge,
Special Court.