I""·

IN THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO

TRANSACTIONS IN SECURITIES) AT BOMBAY.

SPECI""�L CASE NO 5 OF 1993

CENlRAL BUREAU OF

INVF.STIGA TION.

VERSUS 1. ANJL MOHANLAL NARICHANIA,

36 Pushpanjali,

Goshala Road, Mulund (West),

Bombay 400 080.

2. HITEN PRASAN .DALAL,

201, Shanti Towers,

Military Road, Marol,

Andheri (East),

Bombay 400 059.

3. ABHA Y DHARAMSEY NAROTIAM,

186, Walkeshwar Road,

1st Floor, Teen Bathi,

Malbar Hill,

Bombay 400 006

COMPLAINANT

j

CHANDRASHEKHAR SIT ARAiv1 RAJE.

'Shiv Gaurav, Plot No.16,

Shiv Ganga Nagar,

A1nbemath (East),

Dist Thane 421 501. ACCUSED

Mr.V.C.Gupte with Mr.RB.Thakare, Special Public Prosecutor for

CBI.

Ivtr.A.G.Pawar for Accused No.1.

Mr.R.D.Ovlekar with Mrs.M.N.Karandikar and Mr.Swill Kale i/by

M/s. Purnand & Co. for accused No.2.

Mr.Manoj Mohite with Mr.S.P.KotwaJ for accused No.3.

Mr.N.K.Thakore with Mr.P.D.Naik for accused No.4.

CORAM:A.B.PALKAR,J DA1ED:31st January, 2003

JUDG1v1E1'TT.

,,

L

1991-92.

SC.5/93-J

This case arise$ out of security scam of

The compl aint (FIR) was lodged by

K.R.Acharya, P .W.8, the then Chief E�ecutive of the

Canbank Mutual Fund ("C8MF"' for short).

2. Accused No.1- Anil Mohanlal Narichania

was at the r elevan t time the Asstt.General manager

of C8MF. He had joined some time in Augus t 1990

after resigning from Canara Bank and as Asstt.

General Manager. He was also a dealer for CBMF and

as such was looking after the money market

transactions specially transactions in sale and

purchase of Securities.

.3. Accused No.2-Hiten Prasan Dalal ("HPO"

for short) was stock broker and a member of the

Bombay Stock Exchange and at the relevant time he

was broker for CBMF as well as for Ci tibank ("Citi"

for short) and Standard Chartered Bank ("SCB" for

s hort).

4. Accused No.3-Abhay Dharamsingh Narottam

("AON" for short) was also a stock broker and a

member of the Bombay Stock Exchange. He had his

dealings in securities through Bank of Karad ("BOK"

3

l

SC.5/93-J

for short). He was also a constituent o f BOK and at

the relevant time was one o f the Di rectors of the

BOK. He had obtained membership of Bombay Stock

Exchange long back and was maintaining one

overdraft account i.e.O.D.No.201 and one cur rent

account with BOK.

5. Accused No.4-Chandrashekhar Sitaram Raje

("Raje" for short) was working as Agent of BOK

incharge o·f Securities Department. and was

authorized to deal in securities on behalf of BOK

for transactions of bank as well as for the

transactions of its constituents. one of whom was

accused No . 3-ADN. Accused No.4 was given power of

attorney by

transactions

constituents.

BOK for

on behalf

dealing in

of the bank

security

and its

6. The charge against the accused in brief

can be stated as below; The charge runs into 20

pages under 19 different heads . However. suffice

it to state in brief as to what the charges are

under the different heads:

(i.) Accused Nos.1 to 4 are charged unde r

section 1208 of IPC for having entered into a

criminal conspiracy in order· to secure pecuniary

4

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SC . 5/93-J

advantage to accused No . 3 -AON and ul timately to

accused No . 2-HPD by means o f ostensible

t ransactions in securities for cheating CBMF by

concealing from the said fund and from one Bipin

Divecha (PW-5) co-signatory to RBI cheque for a sum

of Rs . 103 ,82,47, 295.65 ps. issued on 27. 5 . 1991 the

fact that it was issued against two false

Subsidiary Ge11eral Ledger transfer forms (SGL T Fs)

issued on behal f o f BOK by accused No.4 and i n

pursuance o f the same accused No . l bei ng a public

servant by abuse o f his pos i t i o n as a publ ic

servant, by corr upt or i l legal means dishonestly

pu rchased secur i ties i n the a fo re$aid ostensible

transacti ons th rough accused H.2-HPD.

The Securities were (i) ll . 5% GOI 2008 face

value Rs . 58 . 39 crores, and ( i i ) 1 1 . 5% GOI 2009 face

v a l ue Rs.44. 5805 crores. Aforesaid two false and

forged SGLTFs were issued by accused No. 4-Raje on

27 . 5 . 1991 . These SGLTFs were purported to be

issued by BOK and were issued without authority and

without disclosing t liat they are being i ssued on

behalf of accused Na.3-AON . the constituent of BOK

and without there being secu r i ties sufficient to

cove r the said transactions purpo rted to have been

entered into. The SGLTFS were issued in SGL account

BYSL-0107 of BOK maintai ned wi th Reserve Bank o f

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SC.5/93-J

India ("RBI for short) for constituents of the bank

and for this accused No. 1, dealer· and A$stt. General

Manage r of CBMF issued the aforesaid cheque of

Rs . 103 and odd crores i.n favour of BOK. the

proceeds c>f which accused No. 4-Raje ultimately

credited to the account of accused No.3-ADH in

violation of the banking practice and implied

contract touching the mode of discharge of such

t rust which resulted in co rresponding gain to

accused No.3-ADN and ultimately to accused No.2-

HPD. These transactions were entered into by

Accused knowing fully well that these transactions

were ostensible. dishonest , and i l legal a11d i n

pursuance of the said ostensible and non-existent

t ransactions, accused No.3-ADN issued two delivery

o rde rs on 27.5.1991 to BOK directing the Bank to

del iver the aforesaid securities to CBMF although

there were no securities i n his account to satisfy

the claim under the said two SGLTFs and the reby all

the four accused committed offence under section

1208 r/w.section 420 of the IPC and also under

section 1 3 ( 1)(d) r/w. section 13(2) of the

Prevention of Corruption Act 1988 and sections 411,

467, 468. 471 and 477A of the IPC. There is also

a l ternative charge of c riminal breach of trust

punishable under section 409 r/w. 1208 !PC.

6

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S C . 5/93-J

However. the a l ternative charge of section 409

r/w . 1208 lPC as against a l l the four accused is not

pressed by the prosecution. The cha rge o f

o ffence under section 409 i s pressed only against

accused No. 4-Raje for having committed criminal

br-each of t ru$t by crediting the proceeds of sale

to the account of Accused N o . 3-ADN, although he had

issued SGLTFs creating l iabi l i ty against the BOK.

In vi ew of these a l l egations there is

i ndividual charge of offence under section !3(1)(d)

r/w. 13(2) of the Prevention of Corruption Act

against accu$ed No.l. There i s ind:ividual c:ha rge

against each of the accused o f offence under

section 420 IPC and similarly alternative charge

under section 409 IPC. There is also charge

against accused No . l for of fence under sections

467, 468, 471 of IPC for fraudulently and dishon-

estly using as genuine the two SGLTFs dated

27 . 5 . 1991 which he knew were false and forged.

There is i ndividual charge of o ffence under section

47 1 , 467 and 468 as against accused No. 2-HPD.

Accused Nos . 2 and 3 are also separately charged for

o ffence under section 4 1 1 IPC for receivi ng stolen

property i . e . the proceeds of the cheque. Accused

No.3 i5 separately charged for of fence under sec­

t i on 47 1 , 468 and 467 !PC for_ dishonestly using as

7

SC.S/93-J

genuine the two SGL.TFs mentioned above . There is

also charge for offence punishabl e under section

409 IPC against accused No . 4-Raje for having com­

mi tted c r iminal breach of trust against BOK by

issuing false and forged SGLTFs as s tated above on

27 . 5 . 1991 w i t hout there being backing of securities

i n the concerned accoun t . Simi l arly there i s

charge under section 467 and 468 against accused

No . 4 . There is also specific charge of falsifica­

tion of accounts punishable under section 477A

against accused No.4-Raje.

7. The charge was framed by Justice Variava.

Judge Special Court , (as he then was ) . I t was

amended by him by making charge o:r offence under

section 409 al ternative to of fence under section

420 IPC and later on during the course of trial,

after I took over, additional charge of offence

under section 41 1 IPC was framed against accused

Nos . 2 and 3 by refering speci fically to the five

transactions of PSU Bonds . Charge was amended on

27.10. 2002 after hearing accused and they were

given opportuni ty to recal l any of the wi tness

earlier examined by the prosec ution for

crossexamination. i f they so desired. The accused

did not reca l l any o f tha w i t nesses examined by the

8

SC. S/93-J

prosecution, probably because the charge was on the

basis of the allegations contained i n the charge

sheet and the documents pertaining to the various

transactions and the statemen� o f witnesses.

8 . The a l l egatic:rns o f the prosecution can

be stated in brief as below:

The starting point is 27 . 5 . 1991. On that day

accused No . 4-Raja entered into two transactions of

sale of secu riti es (i) 1 1 . 5% GOI 2008 face value

Rs . 58 . 39 crores , and ( i i ) 1 1 .5% GOI 2009 face value

Rs . 4� . 5805 crores. These transactions were

apparently of sale by BOK to CBMF but are in fact

transactions of accused No . 3-ADN. Se cur i t ies were

delivered by issuance of SGLTFs , Exh.33 and Exh . 37 .

BYSL-107 is the number of SGL account for const i tu­

ents maintained by the BOK. SGL account of BOK

ma i ntained with the RBI bears account No . 098. On

behalf of the CBMF the tran!>act ion was entered into

by accused No . 1 , dealer of CBMF through b roker

accused No. 2-HPD. It is not disputed at this stage

that on the date of issuance of the two SGLTFs by

accused No.4, there were no securities either in

the account of BOK in t he SGL Account maintai ned by

the Bank or i n the account maintai ned by it for its

9

SC . 5/93-J

consti tuents . It is also not disputed that RBI had

permitted BOK to maintain separate account for its

const i t uents and the same was maintained for all

the consti tuents of the bank and not for accused

No . 3-AD N .

9 . These transfer forms were presented on

29 . 5 . 1991 for the f i rst time and were returned a$

the account number was riot mentioned and on

31 . 5 . 1991 when presented again were returned for

want o f suf ficient balance i n the account. It

needs to be pointed out at this stage only that at

no time e i the r before or after the issuance of SGL

transfer forms. the said secur i t ies were in credit

with BOK ' s SGL account or wi th the consti tuent"s

SGL account maintained by BOK . Af'ter the SGL

transfer forms were ret urned or were dishonoured

for want of sufficien t balance i n the account no

att.empt was rnade on the part of BOK or on beha l f o f

accused No . 3-ADN by accused No . 4 to get the same

rectified by providing sufficient credit i n the

account_ By issuance of these two SGL t ransfer

fonos. liability was created agai nst BOK and i n

favour of CBMF to the extent o f Rs . 103,82,47,295 . 60

ps . According to the prosecution there was no

genuine sale transaction as such and the documents

1 0

SC. 5/93-J'

of sale i n favour o f CBMF were created w i t h a view

to s i phoning the amount of Rs . 1 03 and odd crores

stated above f rom CBMF and a l l the accused having

entered i nto conspi racy for the aforesaid purpose,

accused No . 1 issued ch eque which was immediatel y

credited to the account of BOK with RBI and the

proceeds thereof were credi ted by accused N o . 4 to

the O . D . Account No.201 of accused No. 3-ADN and i n

this transaction accused N o . 2 represented CBMF as

broker. As a resul t of this CBMF suffered wrongful

loss of the said amount and accused No.3 got

wrongful gain when the proceeds were credi ted to

h is O . D . Account. I n pursuance of this accused

No . 3-ADN issued delivery orders to BOK for delivery

of the aforesaid securities to CBMF but in fact he

was fully aware that there wer·e no secu rities i n

cred i t i n the aforesaid account .

issued cost

t ransact ions

memos for the said

i n favour of CBMF .

Accused No.4

ostensible

Balance o f

securi ties i n the concerned account BYSL-107 on

that day i n respect of 1 1 . 5% GOI 2008 was 1300 only

and i.n respect of 11 .5% GOI 2009 the balance was

ni l . Accused No . 1 issued deal s l i ps and the cheque

of Rs. 103 and odd c rores signed by himself and

Bi pi n Divecha1 P . W . 5 .

1 1

SC.5/93-J

10 . Accused No . 3-ADN used the aforesaid

amount for purchase of five different PSU Bonds on

the same day i . e . ?.7 . 5 . 1991 . On the aforesaid date

opening balance i n the . D . Account o·r accused No . 3-

AdN was Rs.3,17 , 9 5 , 216 . 76 ps. and this amount of

Rs . 103 , 82 , 47 , 295 . 60 ps. was credited by

fraudulently obtaining the cheque o f the said

amount f rom CBMF. The five PSU Bonds having total

face value of Rs . 100 croras were purchased in

similar ·fraudulent a.REI .a�tHZll'i ltt;;e t ransactions . The

details o f the PSU bonds are -

( i ) 13% Hind Z i nk Bonds face val ue Rs.SO crores;

( i i) 13% DVC Bonds face value Rs . 25 crores ;

( i i i ) 13% NTPC Bonds face val ue Rs . 5 croras;

( i v ) 9% NHPC 0onds face value Rs . 5 cro res:

(v) 9% NP CL Bonds face value Rs . 15 cro res;

and cheque was debited to the 0 . 0 . Account No . 201 of

accused No. 3-ADN for making payment to CSMF and

CBMF i n t u r n issued five d i f fe rent bank rece i pts

towards delivery of the secur i t i es to BO K . These

transact ions were reversed on 26/27 . 7 . 1991 and the

five BRs issued by CBMF were discha rged. The

amount of these transactions of sale ( reve rsal ) was

paid by CBMF to BOK by cheque.

11 . According to the prosecution on the same

12

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SC.5/93-J'

day i.e. 27 . 5 . 1991 accused No.l entered into two

transactions of sale o f the aforesaid GOI

sec u r i t ies w i t h Citibank and i ssued SGLTFs . These

securit ies were sold at slightly higher price

thereby to show

Rs.103 , 84 , 53 , 2 56 . 65

profit and a cheque

ps . was issued by Citi bank

of

i n

faVOUt' of CBMF . Citibank•s cheque was credi ted

but as the C i t i bank failed to get the securities as

the SGLTFs issued by accused for and on behalf o f

CBMF were dishonoured. Al though accused No.1 kept

quiet inspite o f dishonour of SGLTFs issued by

BOK, Citibank did not keep quiet and on beha l f of

C i t i bank V . N . Shenoy ( P . W.16) took up the matter

with accused No.1-Narichania. Accused No . 1 assured

him to give credit for clearance o f the SGLTFs, but

the said securities were never ar ranged for by

accused No.1 and as such SGLTFs were not cleared at

any time by RBI PDQ.

12 . I t is further case o f prosecution that

i n order to cover up the dishonour o f SGLTf's issued

i n favour of Citibank accused No. 1 entered i nto

further transactions. On 26 . 7 . 1991 he purchased

1 1 . 5% GO! 2008 o f face value o f Rs . 60 crores from

SCB through accused No.2-HPD. This purchase was i n

CBHF scheme CAN aocc 90 and delivery of the

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SC . 5/93-J

securi ties was given by see by issuing BR No . 0970

(Exh.198). On 27 . 7 . 1991 i . e . o n the very next day

he again purchased 1 1 . 5% GOI 2008 from C i t i i n

CANSTAR Scheme and Citi issued i ts 8R No.474

(Exh . 1 92 ) . Both these transactions were through

HPD-accused No . 2 . Accused No. 1 then i nter n a l l y

exchanged BR 0970 Exh.198 dated 26 . 7 . 1991 o f sea

with BR 474 o f Citi between two Schemes CAN 80CC 90

and CANSTAR. BR of sea Exh. 188 was re-sold to scs

on 2 7 . 7 . 1991 .

1 3 . I n the ear l i er transaction o n 2 7 . 5 . 1991

C i t i bank was holding bounced SGL (Exh.183) o f CSMF',

face value o f which was Rs. 58.39 crores and for

getting the SGL discharged and C i t i bank gave the

dishonoured SGL of CBMF for GOI 2008 Exh . 183 and

issued i ts own SGL for Rs. 1 . 61 crores aga i nst the

return of BR Exh . 1 92 on 20 . 8 or 21 . 8 . 1991 . I n these

transactions accused No . 2-HPD was the broke r for

SCB as wel l as for Citi.. So far as SGL issued by

C i t i for Rs . 1 . 61 c1·ore i s concerned , it was

honoured when presented. There was no other

independent transaction o f Rs . 1 . 6 1 crore with C i ti,

still this SGL was given i n order to make up the

amount o f face value Rs . 60 crores.

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SC . S/93-J

14 . As the bounced SGL of Rs . 58 . 39 c rores of

BOK and one val i d SGL of Rs . 1 . 6 1 crores o f C i t i

came to CBMF, accused No. 1 had to show some

transactions and to see that bounced SGL goes out

of CBMF . Therefore, accused No . l sold securities

1 1 . 5% GOI 2008 on three different dates i.e. on

23 . 8 . 1991 Rs . 1 0 crores, 26- 8 . 1991 Rs . 7 crores and

4 . 9 . 1991 Rs. 4·3 crores and issued fresh SGL t ransfe r

forms backed by the bounced SGL of 27 . 5 . 1991 and in

addition gave one fresh SGL transfer form for

Rs.1.61 crores by bifurcating one o f the SGLs of

seven crores . Since the SGL t ransfe r forms which

were issued by CBMF were not backed by the securi­

ties i n the account , they were di s honou red although

repeatedly presented .

.15 . The re was a n arrangement of 15% between

see a nd acc1Jsed No . 2-HPD, whereby SCB was commi tted

a retur·n of 15% on a l l the deals of sale and

purchase entered into through accused No . 2-HPD. I n

November 1991 interest became due. However, SCB had

not received valid delivery o f secur i ties . Accused

No.2-HPD was the common broker. SCB could not get

the due interest . Therefore. accused No . 2 paid

i n terest t o sea amounti ng to Rs . 3,45 , 000 . 00 I t is

further the case o f the prosecution that accused

1 5

SC . 5/93-J

No.1 gave the SGL t ransfer forms of GO! 2008 and

GOI 2009 back to ac cused No.2 for 3ettling the

issue and accused N o . 2 handed over the same to

accused No. 3-ADN wh o i n turn handed over the same

t o BOK or accused No . 4-Raj e and the dishonoured SGL

transfer forms were ultirnately found i n t he custody

of BOK duri ng searc h . The said SGLTFs were be a r ing

endorsements of80K that the same have been d is-

charged.

16. As regards the second security GOI 2009

Rs . 44 . 5805 o f which SGL was also

dishonoured, accused No . 1 did not take any ·Follow

lup action. At the instance of accused No . 2-HPD,

SCB t hrough accused No.2 , purchased GOI 1 1 . 5% 2009

face value Rs . 42 c rores a n 19. 9 . 1991 from Citi and

GOI 2009 11.5% face value Rs . 8 crores on 1 8 . 9 . 1991

and C i t i issued two 8Rs to SC B . One Jaideep

Patha k who was i n-charge of the back up department

of SCB asked Investment O f f icer o f SCB Santosh

Mulgaonkar to w r i te a letter· to C i t i bank cal l ing

for the SGL transfer forms of CBMF i n exchange o f

Cit i bank BRs a nd ret u r n�the bounced SGL o f 1 1 . 5%

GOI 2009 (Exh.188) dated 27.5 . 1991 face value

Rs.44.5805 c rores and issued i ts own SGL for the

balance o f Rs . 5 . 4195 crores.

16

SC . 5/93-J

1 7 . I n the case o f GOI 2009 also interest

became due as interest date of both the sec u r i ties

were i n November but SCB did not get interest from

RBI . Accused No . 2-HPD paid i nterest to see

amounting to Rs . 2,56 , 33 , 787 . 50 ps . Howeve r , SCB --\ ,...,.�"(

had a l ready sold securities o f 11 . 5% GOI 2009 to ,/.

Bank of America and State Bank of India. see then

passed on the i nterest paid by accused N o . 2-HPD to

these banks .

1 8 . It i s also prosecution case that on

27 . 5 . 1991 when the amount o f Rs . 103 and odd crores

was credi ted to the O . D. account No. 201 of accused

N . 3-ADN, accused No.4-Raje at the instance o f

accused N o . 3-ADN had called cal l money o f Rs . 1 0

crores from Federal Bank and that amount was also

credi ted to the account o f accused N o . 3 -ADN namely

0 . 0 . Account No. 201 by accused N o . 4 . I n addition

ear l i e r on 23 . 5 . 1991 accused No . 4 had given credi t

o f about Rs . 5 crores o f simi l a r c a l l money received

f rom Karur Vyasa Bank to the account of accused

No.3-ADN . Accused No . 3-ADN purchased five d i fferent

PSU Bonds with t hese funds from CBMF. These trans-

actions were also done similarly i n BoK•s name.

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SC . 5/93-J

For five PSU Bonds transactions. there

were five BRs iss ued by CBMF in favour of BOK on

27 . 5 . 1991 . There was reveral on 26/7 and 27/7 and

the bonds ( i n fact 8Rs) were sold by BOK to CBMF.

These transactions were also of accused No. 3-ADN

only. 'The BRs issued by CBMF were retunrned i . e.

exchanged and delivay wae completed by such e�-

change . The cost memos were issued by accused

N o . 2-HPD. He cl ai ms to have issued the cost memos

as broker (agen t ) of CBMF. In respect o f one of

the Bonds vi z . 13% OVC Bonds, accused No . 2-HPD

asked for issuance of cheque i n favour of Andhra

Bank whereas in respect o·f other 4 PSU Bonds. he

asked the cheque ta be issued i n the name of SOK.

The cheque for that amount of R s . 25 and odd cro res

was issued in favour of Andhra Bank and not i n

favour o f 80K a l though BOK was the counter party on

record . Accused No . 1 did not stop at this. He

gave a letter in favour of Andhra Bank c a l l ing upon

Andhra Bank to c redi t the proceeds of the cheque t o

the join t account of accused N o . 2-HPD and his wi fe

and thus accused No . 2 took away Rs . 25 crores and

In orde r to make up the face value of Rs . 100

crores of the S PSU Bonds , accused No. 3-ADN asked

BOK to deliver " f ree" four other PSU Bonds of the

face value of Rs . 25 crores and thus the amount of

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SC. 5/93-J

Rs.101 , 75 , 1 7 , 808 . 18 ps. for which cheque was issued

by CBMF i n favour o f BOK was credi ted to the ac­

count o f BOK with RBI and proceeds thereof were

then credited to the 0.0.Account No . 201 of Accused

No.3-AON . The entire amount credi ted to the ac-

count o f accused No. 3-ADN was used by him for

making payme nt to d i f ferent banks like Uni ted

Western Bank, Corporation Bank, Punjab National

Bank, Indian Overseas Bank etc. towards the dues of

his ear l i e r t ransactions. Therefore, i t appears

that transaction of PSU Bonds on 27 . 5 . 1991 between

CBMF and BOK or AO N were i n the nature o f ready

forward although on record they are not shown as

ready forward. but a l l the transactions were re­

versed and BRs were taken back on 26th and

27 . 7.1991 out of which i n respect of one BR i . e .

13% DVC Bond, the amount was taken away by

No . 2-HPD by get t i ng the same credi ted

accused

to

personal account with the active assis tance

his

o f

accused No . 1 by iss uance of cheque and issuance of

l e t ter to Andhra Bank.

20 . In respect of B R o f 13% DVC Bond.

amount of Rs . 25 crores having taken by accused

No . 2-HPD and got transferred to his account w i t h

Andhra Bank, the! same was substi tuted by four

19

SC .5/93-J

earlier BRs issued by CBMF for 14% REC Bonds of

Rs . 2 . 50 crores. 14% MTNL Bonds of R s . l crores and

14% MTNL Bonds of Rs. 1 1 . 5 crores and another BR

for 13% OVC Bonds face value Rs. 10 cro res dated

24.7.1991 total of Rs.25 crores face value.

21. The ent i re transactions reveal that

accused Nos.1 to 4 conspired togethe r and siphoned

of an amount of Rs.103 and odd crores from CBMF and

commi tted various of fences

lodging

as detailed

complaint by

i n the

P.W.8 charge. Before

K.R.Acharya, there was an i n-house inquiry conduct­

ed by P.W.13 K.V.Hegde i n which certain facts came

to l i gh t . P.W.8 had visited the Bombay Office on

22.5.1992 and also on 28.5.1992. Accused No.1 was

called upon to explain and he told that he wou l d

contact. accused No. 2-HPD and get the SGLs recti-

fied . He cou ld not. P . W.8 visi ted the of fice of

BOK i n company of Mr. Gopalkri shnan and in�uired

from accused No. 4-Raje as to what had happened.

Raje showed them the SGLs Exh.33 and Exh . 37 and

also told that the transaction was settled and SGLs

were discha rged by BOK and cross mark was shown and

photo copies were also given. They met accused

No . 2-HPD i n his office and sough t his explanation as

CBMF had suf fered huge loss. On 23.5.1992 accused

20

SC . 5 /93-J

No . 2 HPD submitted explanation i n the form o f

affidavi t Exh. 250 sworn before a Notary Public and

one Subbarao. P.W.ll. Accused No . l also gave

explanation i n w r i ting Exh. 244 to P.W.8 K.R.Acharya

and Gopalk rishnan . Action was taken forthwith

against accused No . 1 o n 22 . 5 . 1992 by cal l i ng upon

him to hand over charge t o 8 . R . Acharya, General

Manage r . On 28 . 5 . 1992 his explanation was taken.

P . W . 13 . K . V . Hegde submitted repor t o f i nquiry.

Accused No . 1 was suspended and was lat�r on dis­

missed. Complaint was lodged by K . R . Acharya after

about a month on 1 9 . 6 . 1991 w i t h C . 8. I . D u r i ng

investigation various documents. bank acocunt

books, as wel l as account books of accused No . 3-ADN

and diary o f accused N o . l and various other doc u­

ments i nc l uding cor respondence were seized and

statements o f number o f w i tnesses were recorded.

Disputed documents regarding handw r i t i ng and s igna­

ture part were sent to the Gover nment Expe rt for

exam i nation and his opinion was sought. At the

t r i a l none o f the accused disputed the signature o r

handwri t i ng and that evidence has not been adduced.

Sanction was obtai ned for prosecution of accused

No . 1 for o ffences under section 13(1 ) (d ) r/w. 1 3 (2)

o f the Prevention of Corruption Act , 1988. P . W . 46

A. M. Prabhu i s the sanctioning autho r i ty . ·

2 1

SC. 5/93-J

22. In order to appreciate the evidence on

record i t i s necessary to point out the defence of

the accused . Although all the four accused have

denied existence o·f any criminal cons pi racy. each

of the accused raised i ndepende n t pleas i n his own

defence and even contradictory stands have been

taken i n respect o f particular t ransaction o r

documents by the accused. I n view o f this i t i s

necessary to refer to the defence o f each of the

accused.

2 3 . Accu�.ed No . 1 has i n addition to the

detailed replies given to various questions put to

him while examining under section 3 1 3 C r . P . C .

filed a brief written statement i n reply to the

general question whether he has to say anything

mo r e . Admitting that he was working as dealer i n

CBMF for money market transac t i ons , he stated that

CBMF is a Trust registe red under the Indian T rusts

Act and i s not a subsidiary of Canara Bank. He was

given powe r o f attorney to deal i n money market

operations i . e . sel l i ng and purchasing of Govern­

ment securities, PSU Bonds , call money deposits

etc . I t is wel l known that every mutual fund has

d i fferent schemes which are declared a t a

22

SC. 5/93-J

particular p0i nt of time and subscription is open

for a par ticul ar per i od . Accord i ng accused No . 1-

Na richa nia each scheme had a Funds Manager and each

Fund Manage r was required to submit daily statement

o f cas h flow to the dealer showing the surplus of

funds by the scheme or requirement of funds by the

schEJme and o n that basis accused No . l used to take

decision regarding the sa le or purchase o f securi­

ties. The head office was at Bangalore and brokers

were being appointed by the head office. Accused

No.l was holding power of at torney . His powers

were restricted up to the l i m i t o f Rs . 10 crores and

i f the transaction was of hig hsr amount then Gener­

al Manager was requi red to ratify and in case i t

exceeded Rs . 25 crores, ratification by the Board

was required . Statements of the transactions were

being sent to Bangalore dai l y . He has fo l lowed

l.ns t ructions o·r the General Manage r and the Board

meticulously . There was also a system of dai ly

audit by i nterna l auditors M/$.C.S.Choksi & Co. I t

i s his specific case that as a dealer his duty wa$

to deal i n money market operations meaning thereby

that his duty was to deploy funds i n purchase or to

generate funds by sale o r call money etc. Howeve r ,

once the deal is struck, he used to prepare a deal

s l i p i n duplicate and pass it to the Funds Manager

23

SC . 5 /93-J

o f the Scheme and after processi ng work by the

sec retarial staff, the respons i bi l i ty of follow up

is of the Funds Manager.

24 . On 27 . 5.1991 BOK sold to CBMF 11.5% GOI

2008 and 1 1 . 5 % GOI 2009 and same secu ri ties were

sold on the same day to C i tibank whereby CBMF

secured pro f i t of more than Rs . 2 lakhs . Two SGLs

were given by SOK which were deposited with PDO RBI

on 29 . 5 . 1991 by the Funds Manager Bipin O i vecha ,

P .W . 5 . SGL transfer forms were resubmi t ted on

31. 5 .1991 . The letter sent to RBI (Ex h . 1 1 1 ) i s

s igned by Bipin Oivecha . Thereafter neither RBI

sent SGLTFs to CBMF nor Mr . Bipin Di vecha i n formed

him about the fate of t he two SGL tr·ansf e r forms

and he had no occasion to see these documents after

27.5.1991. The question o f his handing over o f the

SGL transfer forms to accused No . 2-HPD does not

arise and he has not handed ove r the same.

Evidence i n this regard is not supported by any

documents and is contradicted by Exh . 45 which

clearly shows that SGL transfer forms were returned

back direc tly to BOK by RBI on 3 1 . 5 . 1991 .

25 . 26. 7 . 1991 was a repo r t i ng F r i day and

transactions on such raPo rti ng Friday are to be

24

SC . 5/93-.J

completed i n order to give report o n the next day.

The t ransaction of buying o f PSU Bonds worth

Rs.100 crores was therefore s upposed to be

completed on 26 . 7 .1.991 and report thereof was to be

given o n the next day i . e . Saturday 27 . 7 . 1991 .

Howeve r , on that day due to heavy rain the local

trains were not running and he could not attend the

office . I n his absence General Manager

M r . 8 .R. Acharya and Funds Manager Bipin Di vecha

{P.W.5) accepted delivery from accused No. 2-HPD

contrary to the deal settled by him.

26. As regards information note Exh. 244, i t

i s his specifi c contention that this note was

prepared by CBMF people {of ficers) themselves and

they obt ai ned his signature on i t under threat and

by "force . The said i nformation note is a computer

ger1erated document and he does not know how to

handle computer. He was called by Mr . B . R . Acharya,

General Manager on the 2nd floor of Orient House

Bui lding and at that time three other higher

o f ficers, name ly

Mr . C . S . Gopalak rishna n ,

Mr . K . R . Acharya

General

(P.W�8).

Manager,

M r . S . V . Kamath, Deputy General Manager of Canara

Bank were present. Typed i n formation note was ready

wi th them and under threat of dismissal from

25

SC . 5 /93-J

service, they obtained his signature by force.

Contents therefore are not true . I n the said state­

ment there is reference to 19. 5 . 1992 and acco rding

to him on 1 9 . 5 . 1992 Ci ti bank never communicated to

him about SGL because and on that date also he was

on leave as he was sick (he was suffering f rom

Herpes ) . He used t o deal in money market operations

of high value and i n a period of about one year the

transactions were o f about R s . 50 , 000 crores. As

regards BOK ' s c redence same was examined by

C . S.Gopalakrishnan i n his v i s i t during the year

1990 and BOK was recommended for dea l i ng with and

he had fol lowed inst ructions of supe r io r s . Cheque

is requi red to be signed not only by the dea ler but

also by the Funds Manager and he ( funds Manager) is

expected to check every thing before signing t he

cheq u e . Accused No . 1 in fact generated profit for

CBMF . He has however bee11 falsely i nvolved.

Further transactions are not connected or conce r ned

with the transactions of 27 . 5 . 1991 regarding GOI

sec u r i ties .

27 . Accused No . 2-HPD spec i f ical ly contended

i n his defence

sec u r i ties dated

that the t ransactions

27 . 5 . 1991 and the

t ransactions are totally u nconnected.

26

of GO!

further

Al l the

SC . 5/93-J

further t ransactions are i ndependent transactions

which are done i n usual course of business.

Accused No . 2 is ne>t at a l l connected w i th accused

No . 3 and he is no t aware about the dealings of

accused No . 3 . He was merely a broker of CBMF as

wel l as SCB and C i t i bank. Accused No.2 admitted

the existence o f 15% a r rangement with SCB i n re

spect o f sale and purchase of sec u r i t i es through

him. On 27. S.1991 t here was also t ransac tions

between CBMF and BOK i n respect o f sale of PSU

Bonds by CBMF to BOK and co11sideration was paid by

cheque by BOK . At that time there was market

practice o f deali ng in third party BRs and such

t ransactions used to take place regu l a r l y . On

26 . 6 . 1991 he received Rs.25 crores in re�pec t o f

t ransaction of 13% DVC Bonds f rom accused No. 3-AD N .

This was by way o f a BR issued by CBMF i n favour o f

BOK. It was a payment made to him by accused No . 3

i n lieu of or as conside ration o f transacti on of

Rs.28 crores pertai ning to 9 . 25% 1992 securi ties.

28 . On 27 . 7 . 1 991 pursuant to a purchase

transac tion by C BMF of PSU Bonds from BOK he issued

cost memos to fac i l i tate CBMF and as the transaction

was w i t h BOK he made a speci fie note in tt1e cost

memo i ns truc ting CBMF to issue RBI cheque i n favour

27

SC. 5/93-J

of BOK and t he refore � cheques Exh . 83 and 88 were

issued i n favour of BOK . There was abso l u tely no

i n tention on his part to dive r t the funds or to

defraud anybody and the cost memos were issued to

fac i l i tate CBMF to give delivery. In the documents

of accused No. 3-AON i ncluding recei v i ng orders ,

delivery orders and the account books sei zed by the

CBI the mention o f HPD i s not a t his i n$ tance and

at the most i t would suggest that s i nce he was a

broker h i g name a ppears. There was no other reason

for mentioning his name and they ware not his

transactions. He never received money from accused

No . 3 and w henever he received, it was by way o f

lawful consideration under genuine transactions .

He was never i n formed of di shonour o f SGL transfer

forms o f BOK and he never received any dishonoured

SGL from anybody. He has not denied the signature

on the affidav i t but according to him the contents

thereof are fals e . Simila r l y the contents o f

information note o f accused No . l are also false.

The signature on the said affidavi t was obtained by

o f f icers of the CBMF by pract i c i ng coercion. He

was not even aware that BOK was en te r i ng into

transaction� on beha l f o f ADN o r on account o f AON.

Therefore. there was no question of supp ressi o n o f

facts by him o r even by accused No . l . A l l the

28

SC . 5/93-J

t ransactions were genuine and have been ente red

i nto i n the normal course o f business w i thout any

i ntention o f practicing fraud on CBMF. The 6GLs

issued by BOK were not false and forged and he was

not routing transactions through somebody else • s

account but he was routing his transactions through

his own account with Andhra Bank , Fort Branch.

There were t ransactions of about Rs . 27 , 000 crores

i n his account with Andhra Bank during the relevant

pe riod and he has paid more than Rs . 1 c r o re as

banking charges. The funds generated by accused

No . 3 i n these t ransactions have been u t i U. zed by

him and i n fact he (accused No . 3 ) gave evidence i n

Special Case No . 7 o f 1993 for having u t i l i zed the

funds on 27: 7 . 1 99 1 . Al though he stated that he

would be f i l ing wri tten statement , he has f i l ed

only a note of missing l i nks after the arguments

were ove r .

29 . Accused No . 3-ADN has taken a

contradictory stand to that o f accused No . 2-HPO i n

reply to · d i f fe rent questions put to h i m under

section 313 C r . P . C . and has also f i led w r i t ten

s tatement as supplement to oral repl ies to question

put to him under section 313 C r . P . C . . I n the

w r i t ten statement f i led on 27 . 8 . 2002 he has s ta ted

29

SC. 5/93-J

that he i s aged 70 years. He joined the f i rm o f

Champaklal Devidas i n 1961 as a C l e r k . Champaklal

Devidas and J . P . Gandhi were partners o f the f i rm

and the f i rm was dea l i ng i n Government sec u r i t i es

with various banks and financial i ns t i tutions .

Champaklal Devidas and J . P . Gandhi were members o f

the Bombay Stock Exchange . He was wor k i ng as an

Assistant to J . P . Gandhi and was attending to the

bank work regarding deali ngs i n secur i ties. I n

1995 Champaklal arranged for membership card o f

Bombay Stock Exchange fo r h i m . I t was however

dormant si nce he was only working wi t h the f i rm and

was not doing i ndependent busi ness o f his own .

A$te-rlft na rrat� detailed history of the f i rm and

haw he was made di rec to r by Bhupen Da lal . when

Bhupen could no more corlti nue as di rec tor due to

RBI regulations.

30 . Regardi ng the t ransactions of 27 . 5 . 1 99 1

in GOI securi t ies of 2ooa and 2009 . he has

speci fically stated that i t was HPO who di rected

him to deliver through BOK the said SGL transfer

forms and even the detai ls of the transactions were

not given to him and he was led t<' believe that i t

was a simul taneous transac ti ons entered into as i n

t� pas t therefore . amount of

30

SC . 5/93-J

Rs . 103.82 , 47 , 295 .60 was credi ted to his account . On

the same day H i ten Dalal di rected him to purchase

PSU Bonds o f Rs . 1 00 c rores face value and be l i ev i ng

him (HPD) he entered into these t ransacti ons . As

even i n the past simi l a r simul taneous t ransactions

were done, some of which are quoted by him (about

1 0 ) . Thus he di rected SOK to i�sue SGL t rans fe r

forms on the i nstructi ons of Accused No . 2-HPD on

understanding that the secu r i t ies of the same value

would be procured i n simultaneous traneactions by

accused No . 2 and as secu r i t i es were not brought, he

was constantly reminding accused No . 2 and was after

him to comple te the t ransactions . Accused N . 2 on

his part kept on promising to b r i ng the said

secu ri t i es and went on givirig one excuse or the

othe r . Accused No . 2 even promised that SGL transfer

forms dated 2 7 . 5 . 1 99 1 w i l l not be lodged by CBMF

with RBI and when repeatedly remi nded by him.

accused No . 2 i n formed him that CBMF would return

the SGL t ransfer forms dated 2 7 . 5 . 1991 and the BRs

purchased out of the said amount would be returned

f ree of cost to CBMF and the transactions would be

squared o f .

31 . Thereafter on 26 . 6 . 1991 accused No . 2-HPD

took away one BR of Rs . 25 crores regarding 13% DVC

3 1

SC . 5/93-J

Bonds free and without informing accused No . 3 he

sold the said BR under his cost memo to C8MF and

diverted the proceeds to his account i n Andhra

Bank. Accused No. 2-HPO returned two SGLs o·r BOK

and took away remai ning BRs o f PSU Bonds of C8MF on

27 . 5 . 1991 i nforming accused No . 4-Raje that the

transactions of two SGL transfer forms dated

27 . 5 . 1991 i n favour of C8MF had been $quared o f .

He has mai ntained regula r account books and his

statement i n defence i s supported by those account

books. He was never informed by the officers of

BOK that the SGLs were lodged with RBI and were

sent back with objections, nor had the CBMF taken

up the mater with BOK a t any time . Thus he was not

aware rega rding the i l legal sale o f BRs to CBMF by

H i ten Dalal i nstead of returning them free as

promised. Large amounts were brought by Hiten

Dalal and credi ted to his account and he has routed

certain transactions through the account of <�ccused

No . 3 and these amounts were used on di rections o f

accused No . 2-HPD for ostensible purchases on behal f

of Dhanraj Mi l l s for about Rs . 1 12 crores and

balance of Rs . 9 crores was taken away by HPO and

deposited i n his own account w i t h Andhra Bank and

this is also shown by him in hi s account books . He

is not aware about Rs . 101 . 75 crores brought i nto

SC . 5/93-J

his account on 27 . 7 . 1991 by HPO from CBMF by i l le­

gal sale of BRs o·r CBMF unde r his own cost memo.

Looking to the past conduct o f HPO-accused No . 2 i n

bringing large amounts t o h i s account ha had no

reason to suspect any i l l ega l i t y . The amount o f

Rs . 101 . 75 crores received from C B M F and Rs . 20

crores received f r om Andhra Bank were brought by

accused No. 2-HPD and were used for purchase on

account of Dhanraj M i l l s by HPD. When he was i n

Police Custody . he came to know about i l l egality i n

these transactions . HPD-accused No . 2 had no busi­

ness to sel l the aforesaid BRs. under his own cost

memos and CBMf should not have purchased these BRs

under the cost memo HPD and should have i nsisted on

the cost memo of BOK. Thus HPD has i n fact cheated

him (accused No . 3 ) (broken his fai th) for ul te rior

motive. He did not deliver the SGLs on 27 . 5 . 1991

a l t hough he ( HPD ) was claiming that he was holding

the same and this is stated by him i n his affidavit

Exh . 250 . After squa ring of the transactions .

accused No . 2 had no right to sell the BRs or PSU

Bonds under his own cost memo to CBMF having ob­

tained the same free of cost from accused No . 3 for

the purpose of squa ring o f the transactions of

27 . 5 . 1991 . While depos i t i ng Rs . 1 0 1 . 75 crores on

27 . 7 . 1991 neither accused No . 2-HPD nor did the

33

..

SC . 5/93-J

o f f i cers of BOK i n form him that the amount was

obtained by HPD i l lega l l y and dishonestly by sel l ­

ing the BRs o f CBMF i nstead o f delive r i ng the same

free o f cost. HPD was involved i n further transac-

t i ons pertaining to sale of two SGLs to C i t i and to

SCB as he was common broker i n a l l these transac­

tions . Accused No . 3 had however no role to play i n

a l l these t ransact ions . The real bene f i c i a r ies o f

t ransactions are not made accused by the CBI for

reasons be$t kno�n to them. He neve r had any

dishonest intent i o n . He is a victim of c i rcum-

stances .

32 . Defence of accused No . 4 i s that he

started his career as a small employee and was at

the relevant time Agent o f BOK . He was holding

power o f attorney to deal i n secur i ties

transactions on behalf o f BOK. Accused N o . 3 was

di rector o f the bank and he was bound to obey

i nstructions given by accused No . 3 and the refore,

o n the instructions o f accused No. 3 , he issued the

SGL transfer forms a l t hough there was no secu r i ty

i n the account o f accused No . 3 . Accused No . 3

promised him that securi ties of the same value

would be simul taneously purchased by evening o f

2 7 . 5 . l 991 f r o m SCB and he be l i eved i n that

34

SC . S/93-J

sta tement and assurance of accused N o . 3 and even

otherwise accused No . 3 being Di recto r . he had no

cho ice than to obey accused No . 3 . Rega rd i ng

t ransactions o f GOI securi ties dated 27 . 5 . 1991

postings a r e no t made in the accounts of BOK as

accused N . 3 had promised to bring in the secur i ties

and there was no provision for any suspense

accoun t . He has no connection w i t h accused No . 2 or

accused No . 1 and there was no question o f his being

a conspi rator al ong with them . The material

account books wa re always at SOK ' s head o f f ice ,

Fort Branch. He had credited call money to the

account of accused No . 3 on the inst ruc t ions of

Chairman of BOK and he credited the cheque on

2 7 . 5 . 1991 to the account o f accu$ed No . 3 as the

transactions were of accused No . 3 and not of BOK .

He has not himse l f received any advantage and he

has been impl icated only because certai n documents

are signed by him at the ins tance of accused No . 3 .

He has mentioned the cor rect account number of

consti tuents i n the SGL t ransfer forms when they

were returned for want of account numbe r . He also

admi. ts that SGL transfer forms were brought back by

accused No . 3 th rough accused No . 2 from CBMF and the

SGL transfer fo rms were discharged as the

transactions were squared of and when P . W . 8

35

SC . S/93-J

K . R . Acharya and M r . Gopalakrishnan visited his

office on 22 . 5 . 1992 he had shown them discharged

SGL transfer forms and also gave them photostat

copies thereo f . He is not aware of the further

transactions . He i s not even concerned w i t h those

transactions at a l l .

33. I n view of the controversy the point�

that arise for determination are along w i th the

findings thereon are as below and reasons for the

fi ndings are stated in the paragraphs that follow:

( 1 ) Does the prosecution prove that accused

Nos . 1 to 4 o r any o f them entered into

criminal conspiracy dur i ng the period May

1991 to December 1991 w i t h the object of

obtaining pecuniary advantage to accused

No . 3-ADN and ultimately to accused No . 2-

HPD t o cheat CBMF and for that purpose

suppressed from CBMF and/or from Bipin

Divecha ( P . W . 5 ) certain material facts,

v i z . that SGL transfer forms were issued

on account of accused No . 3-ADN and that

there was no backing of secu r i t ies for

36

SC . 5 /93-J

issuance o f SGL transfer form$ i n the

concerned account o f ADN and that cheque

o f Rs . 103 , 82 , 4 7 , 295 . 60 ps. was be i ng

issued against two false and forged SGLs

issued by accused No . 4 C . S . Raje ?

F i nd i ng : Yes . The conspi racy was to s i phon the money by ostensible make beli eve sale f rom CBMF and cause wrongful loss to i t and w rong f ul gain to accused No . 2-HPD and accused No . 3-ADN.

( 2 ) Does the prosecution prove that accused

No . 1 -Narichania being a public :servant by

abuse of his p0si tion and/or by corrupt

or i l legal means dishonestly purchased

through accused No. 2-HPD securities 1 1 . 5%

GOI 2008 and 1 1 . 5% GOI 2009 face value

Rs . 58 . 39 crores and Rs . 44. 5806 c rores

respectively against the above desc ribed

two SGL t ra nsfe r forms ?

Finding: Yes.

(3) Does the prosecution prove that accused

No . 4 -Raje having dominion over o r being

ent rusted with the f unds of BOK comm i t ted

c r i mi nal breach o f trust by dishones t l y

credi t i ng the proceeds o f the account

37

SC. S/93-J

payee cheque dated 27 . 5 . 199.l bea r i ng

No . 160319 payable to BOK i n the

O . D . Account No . 201 of aCCU$9d No . 3-ADN

maintai ned by BOK i n violation of the

banking r·ules and practice and/or express

or implied t rust touching the mode o f

discharge of such trust causing thereby

i l legal loss to CBMF and cor respondi ng

i l legal gain to accused No . 3 and

ul timately to accused No . 2 knowing f u l l y

w e l l that the t ransactions were only

ostensible t ransactions i n securi t ies ?

F i nding: Yes. I llegal gain to accused Nos . 2 and 3 .

( 4 ) Does the prosecution prove that accused

No . 1 concealed from CBMF that the

aforesaid cheque was being issued against

two false and forges SGl$ thereby causing

cor responding wrongful loss to CBMF and

wrongful gain to accused Nos . 2 a�d 3 ?

Finding : Yes. However the SGLs though false are not forged documents .

( 5 ) Against which af the accused individually

the offence of cheating punishable under

38

SC . 5/93-J

section 420 !PC is proved . ?

Findi ng ; Against a l l the accused Nos . 1 to 4 .

(6) Does the prosecution prove that accused

No . 4 issued the aforesaid two false and

forged SGL transfer forms knowing f u l l y

wel l that they were not backed by

securities and neither BOK nor ADN were

i n a position to deliver the said

secur i ties at any time ?

F i nding: SGLs are false but not forged docume n t s .

(7) Does the prosecution prove that accused

Nos . 1 , 2 , 3 and 4 used the aforesaid two

false and forged SGL transfer forms as

genuin� knowing them to be false and

forged '?

Finding: SGLs are not forged document$ a l though they <�re false.

( 8 ) Does the prosec ution prove that i n

pursuance o f the aforesaid conspi racy

accused No . 4-C . S . Raje · falsi fied the

accounts of BOK ?

F i nding: Yes.

39

•

SC . 5/93-J

(9) Does the prosecution prove that accused

Nos . 2 and 3 rece i ved stolen property

knowing or having reason to believe that

tha same to be stolen by �ecei v i ng the

proceeds of the aforesaid RBI cheque

issued by accused No . 4 i n the name o f

CBMF ?

Fi.riding: No.

( 1 0 ) Does the prosecution prove that accused

Nos . 2 , 3 and 4 abetted the commission o f

offence o f criminal misconduct comm i t ted

by acct1sed No . 1 i n pursuance o f the

aforesaid c r i minal conspiracy ?

F i nding: Yes.

( 1 1 ) What offences are co m�i t ted and by which

of the accused and what sentence ?

F i nding: As stated i n the concluding paras. Sentence to be passed after hea r i ng the accused .

40

SC. 5/93-J

.34 . Before I proceed to discuss . scan, and

appr·eci.ate the evidence. i t is 11ecessary to point

out the nature and type of evidence adduced by the

prosecu tion. The oral evidence consi!it o f 47

witnesses including the investigating officer and

the compl ainant . There are volumi nous documents

mos tly consisting o f records of the transactions

be tween di fferent banks, concerned account books ,

and records of the Reserve Bank o f India. certa i n

correspondence exchanged between banks, reports

submitted by the accused and by some others to the

head o f f i ce o r to their suped.ors. In addi tion

there is a separate huge record of the account

books maintai ned by accused No . 3 regarding which

one o f his employee has given evidence and p roved

the concerned entr ies . Apart f rom the above , the

personal diary o f accused No . 1 is also produced by

the prosecution i n which details regarding the

t ransactions are recorded mostly by accused No. 1 .

These records were sei zed during i nvestiga t i o n .

Simi l a r l y certain part o f the account books or

computer records of the accounts maintai ned by

accused No . 2 is also seized and is relied upon by

the prosecution. Apart from this, there is a w r i t­

ten note dated 2"J-. 5 . 199l_si9ned by accused No . l and

given to hi s superiors as his explanation and there

4 1

SC. 5/93-J

i s an a f f i davit of accused No . 2 sworn before Notary

Public coupled with the evidence of notary. These

two documents al though they are statement of ac-

cused, they a re given long back when even lodging

of F I R was not i n contemplation and there is no

challenge to t he i r admissibi l i ty i n evidence i n

view o f this s i tuation.

35 . The oral evidence can be gro uped

insti tution wise and it would help i n referring to

the evidence and thei r appreciation al�o. List of

w i t nesses insti tution wise are as below:

� i!D.d Designation Qi Witness.

� Q.E. KARAP LIMITED

l . Shri Vilas Damodar Rajadnya , Vo l - I . 1 -44 Reti red officer working w i t h BOK i n 1991 in Advance Department and he was also General Manager .

2 . Shri Mukund K rishnaj i Khe r . Agent o f BOK , Fort Branch. Vo l - I . 45-173

i4 . Mrs. Meena Mohan Arbune, Worki ng i n 1991 i n Karur Vaishya Bank , . Mumbai as Manage r , Head Office. Vol-IV. 629-661

CANBAMK MUTUAL �

5. Sl1ri Bipin Pushpasen Oivecha, Vol - 1 1 . 1 89-322 Funds Manager wit h Can Bank Mutual Fund at the relevant time.

42

6 . Shri Rajesh Pitambardas Bhatija, working with Can Bank Mutual Fund under M r . An i l Narichania-

SC . 5/93-J

Accused No . l i n Secretarial Staf f . Vol - I l l . 383-41 1

7 . Ms . Nandi ta Nitin Rao . ( Nayak . ) , working with Can Bank Mutual Fund i n Secreta rial staff (Canstar Scheme) at the rel evant t i m e . Vol-I I I . 412-471

8. Shri Kundapur Rarnkrishna Acharya. workin9 with Canara Bank, Bangalore Office and thereafter promoted and posted in Bombay . He was Chief Executive Officer of Can Bank Mutual Fund, Bangalore . Vol• I I I . 472-537

9. Shri S . N . Satish, working with Can Bank Mutual Fund as Manager upto 1994 and also working as Manager i n Canstar Scheme Ni t h Bipin Divecha. Vol-IV. 538-561

1 1 . Shri P . 3 . Subbarao, working with Can Bank Mutual Fund during relevant period as Astt. General Manager and t ransferred to Mumbai and was working under B . R. Achar·ya . Vol - I V . 580-590

1 2 . Shri Ramesh Suryakant Parab. working as Peon with Can Bank Mutual Fund at the relevant time . Vol -IV . 591 -614

13. Shri K . V . Hegde, working as As t t . General Manage r . Canara Bank Regional office was asked to come to Bombay to look into the transactions o f the Can Bank Mutual Fund. Vol -IV. 615-628

20. Shri Jyotimani Nallaiah, working with Can Bank Mutual Fund and looking after misce l laneous work l i ke , reconc i l i a tion of bank account and i n Novembe r , 1990 as Manager of Ca nstock scheme . Vol-V. 751 -804

2 1 . Mrs. Jyoti Ashok Bhatt, working with Can Bank Mutual Fund i n Secre tarial s t a f f and was working i n Can 80 CC 90 Scheme .

43

Vol-V. 805-834

46 . Shri A . M . Prabhu, working as General Manager , Canara Bank and Chief Executive of Can Bank Mutual Fund. He g ranted sanction o f prosecution .

SC . 5/�3-J

Vol - I X . 1402-1406

RESERVE .etlliK QE �

22 . Shri Vardhanapu V i l l iam Raj u , working with Reserve Bank o f India as S t a f f Of ficer maintaining accounts of the Banks and f i nancial institutions. Vol-V I . 835-848

23. Mrs. Snehal Suhar Muley, working w i t h RBI as Clerk in RBI PDO office Mumbai at the relevant time and was in correspondence secti o n . Vol-VI . 849-854

26 . Shri Abdus Samad U . Khan, working w i t h RBI PDO as Staff Officer. Vol-V I . 906-913

31 . Shr i Shri ram Khadilkar. working w i th RBI PDO Department as Clerk. Vol-V I I ! . 1 1 72-1 1 75

32 . Shri J . R . P . Ratnarao, working w i t h RBI PDO in cor respondence section.

3 3 .

34.

3 5 .

Shri Dahyabhai S . Patel , wo r k i ng with RBI PDQ i n lndustr-ial and Export Credit Department.

Shri N . D . Parme�.>hwaran , working w i th RBI , Bombay i n Banking Operations.

Shri A . L . Verma , working w i t h R . B . I . as Di rector and monito ri ng of money marke t .

36 . Shri Peter W . D " souza, working w i t h RBI as Staff O f ficer i n ·

the Accounts Department .

44

Vol-VII I . 1 1 76-1185

Vol-V I I I . 1 186-1187

Vol-VI I I . 1 188-1 192 Vol-VI I I . 1207-1214

Vol-VIII . 1 1 93-1 197

Vol-VI I I . 1 198-1201

3 7 . S h r i wi. t h

' .

A . Mastan Reddy, working RBI a t the relevant time

i.n Deposit Account Department .

38 . Shri A . V . Raghuraman, working wi t h RBI Staff O f f i ce r .

39 . Shri Ravindra Raghunath Jos h i . working w i t h RBI as Clerk .

40. Shri L . M . Fonsaca, working w i t h RBI as Chief General Manager in charge of Non-banking operation.

4 1 . Shri Nayan Vi nayak Samant , working as C l e r k Grade- I , RBI .

43 . Shri Manohar Pandurang P i tka r ,

SC . 5/93-J

Vol-VI I I . 1202-1206

Vol-V I I I . 1215-1218

Vol-VII I . 1219-1234

Vol-V I I I . 1235-·1240

Vol-VI I I . 1 24 1 - 1 257

working w i t h RBI as Staff Office r . Vol-VI I I . 1 262-1271

STANDARD � BANK.

24 . Shri Manoj Rane , working with Standard Chartered Bank in the front office and was hand l i ng cal l money t ransactions under Mohanlal and Jaideep Pathak and was also dea l e r . Vol-VI . 855-872

27 . Shri Sri kant Hanumant Sheth. working with Standard Chartered Bank as Clerk. Vol-VI . 91 4-1011

28 . S h r i Sanjay Natwa r la l Shah.working wi. th Standard Charte red Bank as C l e r k i n the Money Market Department under Jaideep Pathak and Santosh Mulgaonkar. Vol-VI I . 10 1 2-1051

29. Shri Ganesh Atmaram Hatka r , working with Standard Chartered Bank as Clerk i n the Money Market Department as Clerk under Jaideep Pathak, Santosh Mulgaonkar and Benu Chaterjee. Vol-VI I . 1052-1062

30. Shri Santosh S i taram Mulgaonkar , working i n Standard Chartered Bank i n Investment Department at the relevant time under Jaideep Pathak. Vol -V I l . 1063- 1 1 7 1

45

1 5 . M r s . Annapurna Narayanmoorthy. working with C i ti bank as

S C . 5 /93-J

Receptionist-cum-Clark i n 1991 . Vol - IV . 662-687

1 6 . Shri Vishwanath N . Shenoy. working with C i t i bank as Asstt . Vice President i n T reasury Department . Vol-V. 688-725

1 7 . Sh ri Prashant Madhusudan Purkar·, working as Peon in the o f fice of M r . Hiten P . Dala l-Accused No . 2 . Vol -V. 726·�732

19. M rs . Sa r i ta Desai , working w i t h Ci tibank a s Special Assistant and at the rel evan t time was i n Sec u r i t i e s Department. Vol-V. 742-750

2 5 .

ANDHRA lA.lilS.

Shri Ramesh Gangadhar Ramteka. working with Andhra Sank, Bombay Branch. Fort i n cur rent account department .

� QE, AMERICA

45 . Sh ri Mohan D�t tat raya Kokane , working i n Bank of Ame rica, Treasury Operation Department looking after sec u r i ties department.

KeRUR VAISHYA BA�K.

3 . Shri Achis Sunderrajan Vasudevan . working i n 1991 i n Kar u r Vaishya Bank, Mumbai , as Manage r .

Vol-VI. 873-905

Vol - I X . 1 384-1401

Head O f f i c e . Vol-l . 1 74-179

FEDERAL �

4 . Shri Balgopal Ramkr ishnan , working as Deputy Manager i n May 1991 with Federal Bank , Mumbai . Vol-I . 180-188

46

OTHER WITNESSES

44. Shri Bharat S . Da rj i , working with M r . Abhay Narottam-Accused No . 3 upto 1992 i n Accounts Section, w r i t i ng account books , prepa r i ng vouche rs, receipts etc. along with Naval Kishore Pand i t , Arun Sudhale, Manisha

SC . S/93-J

Rawal and K i ran Sur t i . Vol - I X . 1 272-1383

18. Shri Tushar Jagannath Pati l , working as Peon i n the o f f ice of M r . �iten P . Dalal-Accused No . 2 . Vol-V. 733-741

4 7 . Shri B . N . P . Azad, Investigating O f ficer. Vol-IX . 1 407-1429

.36 . So far as documentary evidence i s

conce rned, various seizure memos and panchanamas

a re admitted i n evidence under section 294 o f

Cr . P . C . However, the other documents are not

admi tted. The documents are proved and in case o f

some documents when only a pa r t i cular portion of

the document was proved that portion alone was

admitted i n evidence a t that stage. The objections

raised to the admissibi l i ty of the documents have

been dea l t with whi l e recording the evidence.

Al though not adm i tted , accused are not disputing in

general the documents or the contents thereof i n

case o f bank documents and the bank account books

whereas accused No. 2-HPD has seriously cha l lenged

the entire account books of accused No . 3-ADN.

Al though evidence is lengthy running i n to 1500

pages ( i n 9 typed volumes) and documents are also

47

SC . S/93-J

voluminous refe rence can be restricted only to the

relevant portions as most of the o ra l evidence

consists of depots i tions pertaining to the desc rip­

tion of the documents and the proof thereof, which

at thi s stage generally is not i n dispute and

wherever i t is chal lenged , refe rence would be made

to the same . With this background I propose to

deal w i t h the evidence on record and i n my view i t

i s convenient to refer to the evidence transaction

wise.

37 . Sefore I refer to the docuMents and the

material evidence i n respect thereof , i t is neces­

sary to point out what i s "BR" and what is "SGL" .

SGL transfer form i s a document by which transfer

if effected from SGL account of bank or f i nancial

i nsti tution to the account of another bank o r

f i nancial insti tution. I t i s issued by the bank

which sel l s sec u r i t ies which are i n credit i n i ts

SGL account maintained with Public Debt O f fice

( PDO) of RBI . and as can be seen in the present

case, i t may be SGL Account sepa rately maintained

for a constituent, inasmuch as BOK was permitted to

open a separate SGL account for i ts constituents.

I n fact during the course of argument M r . R.D.Ovle­

k a r , learned Counsel appea r i ng for accused N . 2 has

48

SC . 5/93-J

made a reference to the contents of one o f the SGL

transfer forms used in this case . SGL Transfer

form Exh.33 is issued by BOK fo r the transaction of

GOI 2008 dated 27 . 5 . 1991 and the format of the form

i s as below:

FORM OF TRANSFER FOR OPERATION ON S . G . L. ACCOUNT .

We, The Bank o f Ka rad Ltd . , Bombay do hereby assign and t ransfer our i n terest or sha re i n the Subs i d i ­ary ledger account No.BYSL: . . . . . • . . . . . . . . . . . For Rupees . . . . . . . . . . . . . . . . ( Rupees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . .

being the portion outstanding at the credit o f the aforesaid account for Rs. • . . . . . . • • . . . . . . . . . . as registered i n the books of the Re�erve Bank o f India, Public Debt. O f fice, at Bombay together w i t h the accrued i nterest thereto rUp to . . . . . . . . . . . . . . . . . . . . . . . . . . . • . . . . . . . their

administrators or assigns and we • • . . • • . . . . . . • • • . • . . . . • . . • . . . . • . . . • • . • . • . do freely accept t he above amount t rans ferred t o us .

As W i tness our hand the thousand. nihe hundred Ninety

day o f

For THE BANK OF KARAD LTD . ,

One

Si gned by the above named transferor in

the presence of

Reg . Ma nager/Agent/Of f i ce r , 0ombay Se l ler

Signature

The Bank of Karad Ltd . , Raja Bahadur Compound,

Ambalal Doshi Marg, ( Hamam Stree t ) Post Box No . 1347 , Fo r t , Bombay 400 023.

Signed by the above named t rans fe ree i n the presence o f

49

Buyer

Signature : Occupa tion : Address o f : Wi tness

SIGNATORY

S C . S/95-J

For CANARA BANK TRUSTEE CANBANK MUTUAL FUND

AUTHORISED

FOR THE USE I N PUBLIC DEBT . OFFICE

I ndia

P . Manager ,

Reserve Bank o f

Publ ic Debt. Office, Bombay 400 001 .

I t i s clear from the above wordings of the SGLTF

that the sel l i ng bank makes a ·firm statement

regarding the assignment o f the i r interest i n the

particular SGL account mentioning the face value

with the desc r i ption o f the secu r i ties with a

f u rther statement that the said securi ties are

outstanding at the credit o f the aforesaid account

as registered i n the RBI booke with Publ i c Debt

Office and agrees to transfe r i t with interest to

the purchasing bank or f i nancial institution and

the purchasing bank accepts securi ties as

transferred to i t . I t i s also not disputed that i t

was requi red to be signed by two o f ficers in case

of SGL issued by CBMF. Howeve r , i n case of BOK

accused N . 4-Raje alone coul d issue the SGL transfer

form. The purchasing bank has to sign in place of

transferee.

so

38.

sel l i ng

SC. 5/93-J

Bank receipt acknowl 9d9es receipt by the

bank o f the amou nt i n favour o f

counterparty the l!>ecu rities w i th particular

desc r i ption mentioning the exact value as we l l as

face value , rate with a statement that the

securities or the bonds o f the face value

mentioned. There is a clear unde r taking that the

secur i ties wi l l be delivered when ready i n exchange

of the rece i p t . Thus the normal mode of discharge

of BR is by physical delivery o f securi ties. The

evidence of t r·ansac t i o n has to be considered on

this background.

Broker

FORMAT OF BANK RECE I PT .

JiQI TBANSFERABLE Tel : 262 0165-66-67-68

(Taken from form Exh . 86 )

CANARA fu1tlli

Trustee : CANBANK MUTUAL FUND . Orient House, 2nd f l oo r ,

Adi Marzban Pat h , BOMBAY 400 038.

No . 2272 Rs • . • • • • • • • • • • • • •

Received f rom • . • . . . . . . . . . . . • . . . . . . . . . . . . . . . . . . . . . .

the sum of Rupees . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

be i ng the cost o f . . . . . . . per cant . . . . . . . . . . . . . . . .

Securities/Debentures/Bonds of the face value o f

5 1

SC . 5/9:!-J

Rs . . . • . . . . . . . . . @ . . . . . . . . . . . . . . . . . . % w i t h interest

Rs . . . . . . . . . . . . . . . . . . . . . . less i ncome Tax Rs . . . . . . . . .

f r om . . . . . . . . . . . . . . . to date.

The Sec u r i t i es/Debentures/Bonds of the face value

of Rs . . . . . . . . . . . . . a re delivered herewi t h and Secu-

rities/Det>entures/Bonds

Rs .. 0 •••••• -••••• will Qn deliyered � r�ady in

exchange fQr. ..t.b..1.§. receipt � discharged.

39 .

T rustee For CANARA BANK. Canbank Mutual Fund

Managef" (Unde r l i n i ng is m i ne . )

The first two transactions are on paper

at least transac t i ons of sale between BOK and CBMF ,

but as a matter o f fact i t was accused No. 3-ADN who

was counter party and sold the sec u r i t i es to CBMF.

At the cost of repeti t ion transactions are ( i ) sale

of 1 1 . 5% GOI 2008 to CBMF by BOK (ADN) face val ue

Rs . 58 . 39 crores on 27 . 5 . 1991 and ( i i ) sale of 1 1 . 5%

GOI 2009

c rores .

to CBMF by

Evidence o f

'\i':-J.) BOK� face val ue Rs . 44 . 5805 " ..,.

P . W . 1 Vi las Rajadnya is of

general type desc r i bi ng the procedure in sale and

purchase transactions of the bank (BOK) and the

general procedure of bankers a l t hough ever-y bank

has i ts own pecu l i a r i ties. the basic requirements

52

SC . 5/93-J

and the concerned documents are of same type.

P . W . 1 Rajadnya has stated that in case of sale and

purchase o f securi ties head of fice af BOK was to

give i nst ructions to the sec u r i ties department that

the bank is holding in excess or short ce r t a i n

secur i ties f o r the purpose o f Stat1,,1tory Liquidity

Ratio (SLR) . Howeve r , i t needs to be noted here

o n l y that this would not apply i f the

is of a congtituent of the bank

transac tion

and not a

transaction by the bank as such. He has stated

that BOK was having Subsidiary General Ledger (SGL)

account with PDO RBI and subseque n t l y the SGL

accou n t was opened for the transactions i n

sec u r i t i es o n behalf o f i t s c l ients constituents.

40. The documents pertaining t o the

transaction are proved through P . W . 2 Mukund Kher a t

the relevant time working as Agent of the Fort

Branch of B O K . Evidence t h a t accused No.4 being

agent was i n -charge of sec u r i tie$ t ransactions and

was given power of at torney fo r that purpose and

had therefore powers to issue SGL i n sec u r i t y

transactions i s n o t i n dispute a l though t he extent

of his authority for entering i n to the transactions

on beha l f of the bank is a dispu ted quest ion . I t

is not necessary to go into that aspect of the

5..3

SC. 5/93-J

matter i n this case as the transaction even

acco rding to the prosecu t i o n , were of accused No . 3-

ADN, a consti tuent of the bank, a l t hough on

i t was shown to be a ban k ' s transaction.

pape rs

There

can be no monetary l im i t to a t ransaction ente red

into on behal f of the consti tuent but at the same

time i t cannot be even disputed that the

cons t i t uent can enter i nto transaction only when he

possesses concerned securi ties and i s i n a pos i tion

e i ther to give physical delivery or otherwise

securi ties a re held by h i m i n the SGL account fo r

which separate account was maintai ned wit h RBI PDO

by BOK No. BY-SL-107. I t needs to be noted that

this sepa rate account was not an independent

account for one consti tuent, vi z . AON-Accused No . 3 ,

but i t was an account for a l l the cons t i t uents of

the bank i n which the secu r i t ies held by

particular consti tuent were separately shown i n

his name .

4 1 . P . W . 2 Mukund Kher has deposed that i n

regard to broker • s (cons t i tuent ' s ) own

t ransactions . I f he wants to purchase sec u r i t i es he

would issue receiving order i n favour o f BOK

desc r i bi ng the particular sec u r i t y , face value,

rate and i ndicate the due date o f i nterest and also

54

a

SC . S/93-J

11ame of the counter party. Thereafter the

concerned person from the secur i t i es depa r tment

w i l l confirm from the Fort branch whether the

concerned broker has sufficient funds i n tha

account to purchase such secu r i t ies and i n case o f

sale by such broke r , he w i l l give del i very order

men t i o n i ng the aforesaid deta i ls as wel l as mode of

delivery v i z . SGL , physical o r BR and on the basis

of the said delivery order cost memo w i l l be

prepared by the securi ties department and o n the

original cost memo the name of the broker or his

account number are not mentioned whereas o n the

remaining three copies , the name o f the broker is

menti oned along with his account number and the

second copy is treated as advise to the broker and

the third copy is the office copy which i s to be

sent to the Fort Branch and one copy wi l l remain

with the secur i ties depa r tmen t . As stated earlier

evidence i n proof of the documents pertaining to

the transaction is not i n dispute. I t would be

convenient to refer to the evidence and documents

togethe r . Referring to Exh. 30 delivery order of

accused No . 3-ADN dated 27 . 5 . 1991 , he stated that on

the top of :i. t the words " N P " are mentioned which

means " not posted" or " no t to be posted " . This

different terminology he has used at two places

55

SC . S /93-J

but u l t imately i t is clear that i t was meant for

not posting the entry of the said docume nt i n the

account books o f BOK , which aspect of the matter

even accused No . 4 has not disputed but has given

explanation for the same. This delivery order i s

i n respect of GOI 2008 and simi lar i s the delivery

order in respect o f GOI 2009 Exh . 34 containing

simi lar endorsement as " N P " i n red i nk on t he top

as also the word "SGL" in red i n k . He deposed that

in the secur i ty l edger maintai ned by BOK for

Accused No . 3 in the concerned folio$ Exh . 32

Exh . 36 , there were no secu r i t i es i n balance.

the folio pe r taining to GOI 2008 balance was

1300 whereas i n the folio pertaining to GOI

AON

and

I n

only

2009

balance was ni l , which is not in dispute as wel l

as the fact that there were no sufficient

secu r i ties of aforesaid desc r i pt ion in the account

of BOK i ts e l f on that particular date.

4 2 . By issuing the delivery order Exh . 30 on

27 . 5 . 1991 accused N o . 3-ADN di rected the BOK to

deliver to CBMF 1 1 . S GOI 2008 a t the rate of

Rs . 10 0 . 78 face value Rs . 58 . 39 crores w i t h inte rest

t i l l date against SGL conveying thereby that the

sec u r i ties were held i n the SGL account maintained

with the RBI PDO. The delivery orders and SGLs

56

SC . 5 /93-J

pertaining to t ransaction o f GOI 2009 o f t he same

date are simi l a r ( Ex h . 34 and Exh . 37 ) . The ot he r

wi tnesses on the same point are P . W . 1 4 Meena

Arbune, P . W . 44 Bharat Dar j i , a l t hough P . W . 44 does

riot know what happened at BOK .

43 . Cost memo o f t h i s transaction Ex h . 3 1 i �

signed by accused No . 4 -Raje . I t i s prepared by

P . W . 14 M r s . Meena A r bune and she has stated that i n

the copies o f the cost memo Ex h . 3 1-A and 31-8

mentioning o f " ADN " means the amount has been

credited to O . D . Account No . 20 1 o f AON and that the

del i very o rder was given to he r by accused No . 4-

Raj e . I t is her speci fic evidence that whenever

she was required to work i n the de pa r tment in the

absence of regular C l e r k of Sudhakar A i l , she had

occas i o n to prepare SGL t rans fe r forms as well as

cost memos i n such transactions. Accused No . 4 gave

her delivery order Exh . 30 o f accused No. 3-AdN and

asked her to prepare the cost memos, she veri fied

the ledger f o l i o Exh . 32 pertaining to the securi-

ties and found that there was no balance and a.c-

cordingly i nformed Accused No . 4- Raje that there was

no balance pe rtai n i ng to the sec u r i t i es i. n the

account of bro ker ( AON) . Inspi te o f t hat Raje

asked her to prepare the cost memo and del ivery

57

SC . S/93-J

document and acco rdingly she prepared the same .

She went on to state that she was supposed to make

entry i n t he ledge r . Howeve r , as pr·evious pos tings

were pending , she did not make the entries . I n

reply to Court question as to how she realised that

many entries were yet to be made , she replied that

she saw a bundle of vouchers on the table of Sud har

A i l and immediately brought i t to the notice of

accused No . 4-Raje that vouchers are lying on the

table of Sudhakar Ail and he has not done po$ t i ng .

Shri Raje i n turn info rmed her that he knows about

i t and she should not worry and told her to prepare

cost memo and SGL transfer forms.

44. As against this i n the Receiving Orders

issued on t he same date by accused No . 3-ADN

re9a rdin9 the said securities GOI 2008 and GOI 2009

Exh . 67 and Exh.68 i t is mentioned that the sa id

secu r i t i es be recei ved by BOK 'from himsel f free and

011 this also thet"E� are s i m i l a r remarks as " N P " and

"SGL " . P . W . 2 has also deposed about the

endorsement " NP" which means not to be posted and

i t i s clear that i t was not posted on the

i nstructions o f accused No . 4 . Neither the sale to

CBMF was posted nor the recei v i ng order from BOK by

ADN was posted i n t he accounts books .

58

I t is t r ue

SC . 5/93-J

that i f ADN had i n fact purchased it then he had

every right to ask BOK to receive th� said securi-

ties " f ree " . But what has i n fact happened i s

importa n t . Adm i t tedly for purchase o f the secu r i -

ties , cheque was issued by C8MF and the a.mount was

credited to the account of BOK with RBI . The reat -

ter accused No .4 c redi ted the proceeds of the said

cheque to the account of accused No. 3 and accused

No . 3 issued receiving order as " free " . The pri ce

of the secu ri ties more than Rs . 103 crores ultimate-

ly got credi ted to the account of accused No . 3 -ADN.

He was not required to pay any thing. He received

the securi t ies " f ree" sold to CBM-F but liabi l i ty

was of BOK to rectify the SGLTF i ssued wi thout

balance in accoun t .

45 . P. W . 44 has also deposed about t hese

documents. He has stated tl1at on carbon copy of I

Exh. 30 i . e . Exh . 30-A the words '"HPD" on the left

hand side co r ne r are wri tten, which are in t ha hand

w r i t i ng of accused No . 3 . I t was so wri tten by

accused No . 3 to i nd icate that i t was transacti on of

HPD-accused No . 2 . Accordingly ent ry was taken i n

the Sauda book wherein de livery free to HPD is

menti oned on the basis of such endorsement on the

copies of the del ive ry orders. P . W .44 is employee

59

SC . 5/93-J

of accused N o . 3-AD N . H� has no doubt proved all

the accounts books , entries therein and has stated

that entries were at the i nstance of accused No . 3 .

His evidence shows that the account books are

systematica l l y maintained. a l l the concerned docu­

ments used to go to him and he used to take entries

based on the documents and the en t ries have been

taken f rom the documents . His evidence also shows

that accused No . 3 was maintaining account books

l i ke sale registe r , purchase registe r , sauda book,

posi t ion book, stock book, cash book , bank book and

securi ty ledge r . The entries were bei ng taken

systematica l l y f rom one book to other as explained

by the witness and t he re is mention of the name of

accused No .2 at di f ferent places as "HPD " , which is

al so e i ther by accused No . 3 o r at his instance.

Howeve r , his evidence also shows that to the know l ­

edge of accused No . 3 and even o n inst ructions o f

accused N o . 3 ce rtain false docume nts were c reated

and false ent ries were taken in the account books.

It is obvious from the entries in respect of cal l

money transactions wi th Karur Vyasa Sank and Feder­

al Bank that admi ttedly cal l money was called and

received by BOK and was given to accused No . 3

without there bei 119 any loan advanced. T h is call

money was returned by accused . No . 3 wi th i nteres t .

60

SC . 5 /93-3

Howeve r . i n the account books i t was shown as

transaction i n units and transactions pertaining to

Dhanraj Mills, another notified party. When there

was no sale and purchase of u n i t� at any time and

there was no concern of Dhanraj M i l l s at a l l . I n

the ci rcumstances, i t i s dangerous to rely on the

account books of accused No . 3 , merely because

entries are taken systema t i ca l l y . Accused Ho . 3 was

competent to take entries i n his account books o f

tota l l y bogus transactions to j ustify his receipt

of money from BOK by misuse of his posi tion as

di rector . P . W . 44 has clearly stated that transac­

t ions were shown as of uni ts as the credit and

debit of cal l money could not be shown i n the

account book� of accused No . 3 -ADN. According to

accused No . 4 , the cal l money was called and paid to

accused No . 3 o n i nst ructions of the Chai rman . 1 am

therefore keeping the evi dence of these accounts

books of accused No . 3 out of conside ration .

46 . Evidence of P . W . 14 Meena A r bune i s that

i nspite of i t being brought to the notice of accused

No . 4-Raje that there are no securi ties i n the SGL

accoun t , he asked her to issue SGLs and gave

di rections for not posting when he was told about

earlier entries not posted . The explanation of

61

SC . 5/93-J

accused No . 4 for not taking entries in the account

books i n h i s statement under section 313 C r . P . C . i s

found i n reply to question No . 44 wherein he has

stated that si nce there was no provision f o r

suspense account in the .ledge r i t i s mentioned as

" N P " . When accused No . 4 was questioned i n respect

o f evidence of P . W . 14 , i n reply to qu�stion N o . 507

to the effect that P . W . 1 4 Mr s . Meena Arb une had

brought i t to his notice that there was no balance

in the account, i nspite of which he asked her to

prepare the cost memo. accused No . 4 replied that

accused No . 3-ADN had asked him t o issue SGL

transfer form al though there was no balance i n the

account and si nce he was a D i recto r , he (accused

No . 4 ) could not disbelieve aqd i n reply to the same

ques tion accused n o . 3-ADN has stated that i t was a

transa c � � o n on simul taneous basis and i t was done

by HPD accused No. 2 who u l t i mately did not proc\He

and deliver the SGL transfer forms from other bank

to BOK fo r reasons best known to him and e n t r i es

not taken. In thE� resu l t , the e n t i re

transact ion o f GOI securities on 27 . 5 . 1991 e i t he r

purchase o r o f receiving order free is not

re fl ected in the account books o f BOK. The expla­

nation that because tl1er·e was no sus pense acco u n t ,

the entries were not taken ,

62

is not at a l l

SC . S/93-J

acceptable. I t is obvious that acc used No . 3 being a

Di rector of the BOK abused his posi tion. Accused

No . 4 -Raje abdicated a l l responsi b i l i ties o f the

off ice of 80K he was holding and thought i t proper

to obey the dictates of acc used No . 3-ADN even

though i t amounted to falsifying the bank account

books . This act of not tak i ng entries apart from

being very serious, i ndicates that it was wel l

p l a n ned stra tegy t o bring back the same SGLs and

show the transac t i ons settled.

47 . There were no secu r i ties ei ther i n the

account o f BOK o r i n the account o f i ts

constituent . Accused No . 4-Raje was fully conscious

of this i nspi te of i t he issued SGL transfer form

indica t i ng that there are secu r i ties in the account

and on the nex t date when the SGL t rans fer forms

were re tu rned by RB I . he me n t i oned account number

o'f the constituent of the bank wi thout speci f y i ng

the name o f accused N o . 3 as the concerned cons t i tu-

ent . However , as the SGL t rans fe r form was issued

by BO K , the l i a bi l i t y to credit the account o f pur

chas i ng bank was of BOK and i n t he relevant docu­

ments, the name of accused No . 3 nowhere appeared.

The s t rategy was to show as BOK ' s t ransac tion and

fasten the l i abi l i ty i f any , agai nst BOK . The

63

SC. 5/93-J

liabi l i ty to give delivery was created against BOK ,

despite the fact that there was no balance i n

ei ther o f the accounts and there was no possibi l i ty

of the securi ti.es corning even to the account of

BOK. No attempt was thereafter made to pw·chase the

said secu r i t ies either by AON o r by BOK. On pur­

chase of securi ties the C8MF lodged two SGL trans­

fer forms wi th RBI under letter Exh . 1 1 1 and the

forms ware not honoured even after lodgment for

the second t i me on 31 . 5 . 1991 .

48. It is specific contention of accused

No . 1 that he never came to know that SGLs o f BOK

were dishonoured. I n fact he means to say that

ti l l 22 . 5 . 1 992 when his explanation was called he

was not aware that SGL$ we re dishonoured.

4 9 . I n turn accused No . l entered into

t ransactions of sale of the very same secur i t ies

w i t h C i t i bank on the same date i . e . 27 . 5 . 1991 .

The deal slip Exh . 180 is s i gned by accused No . 1 and

the cost memo Exh . 181 is signed by Bipin Divecha.

Exh . 185 and Exh . 186 are respectively deal s l i p and

cost memo o f sale transaction o f the for GOI 2008

face value Rs . 58 . 39 croras. Exh . 183 is the SGL

transfer form of GOI 2008 and Exh . 188 i s for GOI

64

SC . 5/93-J

2009 . Accused No . 1 claims that by entering i n to

transactions of sale of securit ies on the same date

at a higher price . he in fact ear ned p r o f i t for

CBMF and acted i n the best i nterests of the �utual

fund . Now the f i rst thing worth mentioning is tha t

CBMF on that day did not own the securities ei ther

GOI 2008 or GOI 2009. The ent ries in the ledger

in respect of t hese sec u r i t i es ma i ntai ned with

CBMF , v i z . Exh . 107 (Exh . 107 ( i i ) and Exh . 110

(Exh . 1 10(2) c lea r ly show that apart f rom the secu-

ri ties which were to come by way o f SGL transfe r

from BOK. CBMF had no other securities o f the said

desc r i ption and therefore, the sale was e f fec ted

and t he SGL trans fe r forms were issued by accused

No . 1 . Exh . 183 and Exh . 188 only o n the backing o f

the SGL t ransfer form of BOK. A person o f the

seniority o f accused No . 1 who was Ass t t . General

Manager and was given respons i bi l i ty of a dea l e r

cannot be heard to say that he Wa$ not awa re about

the balance i n his own account . He issued SGL

transfer forms. expectin_g de l i very by BOK o r AON.

Therefore, at least after issuance o f the SGL

t rans fe r forms on the basis of purchase from BOK

(ADN ) , he would no rmal ly and i n fact he must, i f he

is a honest of fice r , fi nd out whether the secu1· i ­

ties are received from BOK (ADN ) . Not only he

65

SC . S/93-J

does not make any attempt, his explanation i s that

he was not concerned at a l l and his job was to

enter into the dea l . prepare deal s l i p . and then to

forget and not to bother whether the SGL transfer

form issued by him is honoured. It is hard to

believe and cannot be accepted.

50. The sale with Citibank would and should

norma l l y and logically be entered i nto af te r

transaction with BOK i n view o f the fact that there

were no securities of the desc ription in the

account of the CBMF . However, i t is on record and

not disputed that Citibank lodged the SGL transfer

forms Exh . 183 and Exh . 188 by lodgement letter

Exh . 267 on the very day i . e . 27 . 5 . 1991 . However.

admittedly· BOK ' s SGL Exh.33 and E x h . 37 were not

even lodged on 27 . 5 . 1991 . These SGL transfer forms

are valuable secu r i t ies and on i ts lodging CBMF

was to get credit of about Rs. 103 crores in the SGL

account. There is absolutely no reason why the SGL

transfer forms were not l odged on 27th i tse l f .

28 . 5 . 1991 was a holiday on account o f Budha

Pornima. Therefore, in fact accused No . 1 was

expected to be very careful i n lodging the SGL

transfer form on the date of i ts issuance i . e .

27 . 5 . 1991 itslef specially because he himse l f

66

SC. 5/93-J

i ssued SGL t ransfer forms for the same securi t i es

of the same face value at a higher price to C i t i on

the same dat e . The entries of these transaction i n

tha diary dated 27 . 5 . 1991 of accused No . l are at

S r . No . 3 and 4 i n respect of transactio11s wi th BOK

and S r . No . 1 4 and 15 i n respect of dea l i ng w i t h C i t i

Exh . 1 1 2 ( 1 ) and Exh . 1 1 2 ( 2 ) a nd Exh . 1 1 2 ( 5 ) to

Exh . 1 1 2 (7 ) . Fo r tunately deal s l i ps o f C i t i bank are

computer gene rated and they mention not only the

date but ti me also. Exh. 265 shows the time as

1 0 . 4 3 . 56 and Exh . 268 show·s time as 1 0 . 3 9 . 30 and

therefore , obviously tha deal o f CBMF rega rding

the t ransact ion

ea rlier to the

w i t h BOK should

deal w i t h C i t i bank

normally

( i n case

be

o f

genuine purchase) which would show that on 27tli

i tsel f there was sufficient time to lodge SGL

transfer forms w i th RBI PDO and merely because the

next day was public holiday cannot be pleaded as

excuse for the latches on the part of accused No . 1

i n lod9in9 the SGL transfer form. The moot question

i s whether i t was due to latches or i t was a

del i berate act on the pa rt o f accused No. l .

SL Accused No . 1 claims that he used to deal

i n transations w o r t h crores o f rupees and i n a year

transact ions were worth about Rs . so , ooo cro res . He

67

SC . 5/93-J

was regularly presenting such forms to RBI .

Howeve r , nei. the r accused No. 4 put account number

nor did accused No . l check i t before lodgement o f

the two SGL trans fer forms i ssued by BOK. SGL

transfer forms of BOK Exh . 33 and Exh . 37 were lodged

for the f i rst t ime on 29. 5 . 1991 and were re turned

for want o f the account number and thereafter

relodged on 3 1 . 5 . 1991 . Thus accused No . 1 should

normally be aware regarding the delay i n submission

o f SGL transfer forms. His con tent ion is tha t once

deal i s struck, deal slip is forwarded, he has

nothing to do . I t l.s the job of the F unds Manager

as tliere was no back up depa rtment and the work of

back up depa rtment was looked a f ter by the Funds

Manager and he was concerned only w i t h the front

office.

52 . Exh . 183 and Exh . 1 88 l odged on 27 . 5 . 1991

by C i t i bank were returned on the same date w i t h

endorsement '' i nsufficient balar1ce " . Evidence o'f

P . W . 15 Mrs . Annapurna Narayan Moor thy , employee of

the Ci t i bank is adduced in t h i s rega rd.

Endorsement o f RBI in penc i l regardi ng

" i nsufficient funds" as the reason for dishonour o f

the forms i s proved by P . W . 4 1 Nayan Samant ,

employee of the Reserve Bank of I ndia , page 1245,

68

1 vol . 9 .

SC. 5/93-J

He has also proved the ledger entries

showing that there was no sufficient balance i n the

account of CBMF to honour the SGLs. Howeve r , the

more important evidence i n this connection is of

V . N . Shenoy, P . W . 16 , deal e r of Cit ibank . He has

deposed at page 698 , vol . 5 , that SGL t ransfer forms

received by the bank (Citi ) are to be presented on

the same day to RBI PDO and i f there i s no balance

i n the account of the counterparty, RBI retu r ns the

forms on that ground and when the forms are

returned on such ground, he cal ls upon the

counterparty bank and talks to the conce rned person

and also informs his superiors and at page 700, he

stated (para 1 6) that on return of Exh . 183 and

Exh. 188 he contracted the representative of the

counterparty Shri Anil Narichania, accused No. l ,

and i nformed him that RBI had returned his SGL

transfer forms due to i nsuff i cient balance i n thei r

account and asked him to do the needful i n the

matter by providing sufficient balance and also

i n formed about this fact to his superior N . Venka-

t raman and to t hei r dealer M r . S . Begga . He did tal k

w i t h Anil Narichania (accused No . l ) who i n turn

assured that he w i l l make arrangement for providing

funds in the i r account w i th RBI . He also asked

his superiors to talk to Ani l Narichania-accused

69

SC.5/93-J

No . l . I t i s obvious that t hese talks were on

phone. Accused No . l denies to have any such ta l k .

Question i s why d isbe l i eve t he evidence o f this

wi tness. He was Ass istant Vice-President and when

the securi ties purchased were to the extent of more

than Rs . 1 03 crores and SGL transfer forms bounced,

i t was natural for him to contact the counterparty

and to pursue the matter . I n cross exam i na ti on

he no doubt stated that he had no occasion to see

Ani l Narichania at any time. but he further f i rm l y

stated that he had contacted him on telephone and

had talk with h i m . That he is not able to tel l the

telephone number today is not a ground to suspect

his evidence. He ha5 f u rther stated that whenever

he contacted CBMF, ha used to talk to Anil

Narichania {accused No . 1 ) and further stated on

page 714 on seeing t h e SGL transfer forms that he

contacted accused No . l-Ani l Na richania and

confi rmed further on page 7 1 5 that he contacted

Anil Narichania and i nformed him that RBI had

returned the SGL t rans fer forms o n the ground that

there was no sufficient balance. He had also

apprised his superiors about the reply given by

accused No . J. .

..

The conduct of the w i tness i n

contact i ng accused No . 1 on dishonour· o f SGL

transfer for is natural conduct of a consentious

70

SC. 5/93-J

honest officer and therefor e , I do not find any

reason to disbelieve that part of his evidence.

Thus atleast after dishonour of SGL t ransfer forms

Exh . 183 and Exh. 188 igsued by CBMF which had back­

i ng o f the SGL. transfer forms of BOK. accused No . l

did come to know that SGL transfger form o f BOK

were 11ot honoured by the RBI and thus there is

reliable evidence on record to show that o n the

same day o r immediately thereafter and i n any case

on 29 . 5 . 1991 accused No . 1 was aware that BOK ' s SGL

t ransfer forms were not cleared and he did not

pursue the matter w i t h BOK even after the dishonour

of SGLs for want o f balance i n the SGL account on

31 . 5 . 199 1 .

53. P . W . S Bipin Divecha has stated on page

191 and 196, v1>1 . 2 , of notes of evidence that

Cang i l t Scheme was known as back-up depa r tment and

it had secretarial sta f f . P . W . 6 Rajesh Bhatija

working in the Cangi l t Scheme o f CBMF has stated

that there was no separate back-up depa rtment i n

CBMF and i t (Cangi l t ) wag being looked after by

Ani l Narichania and he used to assist Accused No . 1 -

Ani l Narichatlia i n the w o r k i ng of back-up

depa rtment. Accused No . 1 conti nued to work in

Cangi l t Scheme even after his promotion and he

7.l

SC . 5/93-J

( P . W . 6 ) used to prepare cheques and SGL t rans fe r

forms on i nstruc t ions of Anil Narichania ( pages

384 , 386, vol . 3 ) . At page 406 he has c lea rly

stated that if SGL transfer form i s bounced i t will

coma to Anil Narichania, accused No . l , and he has

to take steps i n connection w i t h t ha t . There is

nothing in his c ross-examination to falsi fy this

part of the evidence. B i p i n Divecha " s ( P . W . 5 )

evi dence has been c r i ti c i zed on many grounds.

Adm i t tedly he is one of the signatories to the

cheque under whi ch payment has been made. He is

not an accused in this case and contention on

behal f of the accused i s that Bipin D ivecha i s

equal l y gui l t y , i f not more . He has been made a

w i t ness . P . W . S 8ipin Divecha al though he is a signa­

tory to t he cheque and ce rta i n other documents ,

that by itse l f does not show his involveme n t .

Accused No . 1 is not charged only because he has

s igned some documents o r the cheque, but on the

bas�� o f the enti re evidence collected. Even

assuming for the sake of a rgument that B i pi n Di ve­

cha had some pa r t to play i n all t his . there i s no

evidence against him and therefore, prosecution i s

justified i n not j oi ning him as an acc used . Let me

point out at this s tage only that the Court i s not

under any misconception regarding this wi tness,

72

SC. 5/93-J

because Bi pin Divecha l1imsel. f admitted i n crossex­

ami nat ion by accused No . 1 ( page 351 vol . I I ) that i n

Augus t 1994 , Chi e f Executive Of ficer o f CBMF dis­

missed four employees 4ncluding himse l f , General

Manage1· 8. R. Acharya and M r . D ' Souza wo r k i ng as

Divisional Manager and M r . Pravin Mal i k , working as

Manage r . This dismissal order was passed a f t e r a

departmental enqui ry. That however does not mean

that everything that 8ipin Divecha has stated

should be rejected outright . His evidence tested

by c ross-exami nation and cor roborated by documents

and c i rc umstance can be believed. In thi s case

there is material to lend assura nce to his

testirnony.

54 . P . W . 7 Ms . Nandita Rao , who was working i n

Canstar Scheme i n the sec retarial staff. has i n

fact stated i n her c ross examination by accused

No . 1 that i n respect of transaction where mode of

sec u r i ty is shown as SGL transfer form or physical ,

the same is required to be looked after by the

deal e r , namely accused No . 1-Anil Narichania. ThU$

there i s reliable evidence that i t was the duty o f

accused No . J. as in-charge of back-up depa r tment

which was pa rt of Cang i l t Scheme to pursue the

matter and secure credi t of the securi ties or c l a i m

73

SC . 5/93-J

back the amount from BOK. Even otherwise as a

dealer who had entered into a transaction of Rs . 103

cro res , he cannot be heard to say that i t was not

his duty to pursue the matter and after deal s l i p

i s prepared, further responsibi l i ty is o f the funds

Manager alone . I n any case after the dishonour of

his own SGL Transfer forms, accused No . l d i d come

to know that SGLs of BOK have bounced and as a

responsi ble officer and dealer he is expected to

know o r infer why CBMF ' s SGLs have bounced . To

accept thateven after that he did not even suspect

that BOK ' s SGLs are not backed by securties is to

reduce his posi tion to that o f a clerk or a peo n .

The copy o f letter sent by RBI to C i t i bank i s at

Exh . 57 1 . RBI info rmed C i t i bank by this letter

regarding dishonour o f SGL transfer form$ on

29 . 5 . 1991 and copy o f this letter was forwarded to

CBMF. It bears endorsement of receipt by CBM F .

Can i t be accepted even for the sake of arguments

that even a f te r this accused No . 1 was l i v i ng i n a

fool ' s paradise and did not realise what has hap­

pened and even important correspondence i n such

sensitive and important matter resulting i n huge

loss to CBMF was kept away from him.

74

SC. S/93-J

55. One more aspect of the matter is that

accused No . 1 was maintaining his personal diary and

was taking entries of a l l the t ransactions i n his

diary. Thus ha was meticulous i n noting a l l the

transactions i n his diary . I t is not mate r i a l

whether he was required to maintain i t o f f i c i a l l y

or h e was maintaining i t uno f f i c i a l l y f o r h i s own

purpose. These transactions a re entered in his

diary and therefore, at least a fte t· bouncing o f the

SGL i ssued to Ci t i bank he ought to have taken some

action . The re is also a copy of letter sent by RBI

to BOK Exh . 45 . This copy is addressed to CBMF

dated 3 1 . 5 . 1991 . I t is t rue that tliere i s no

evidence o f copy o f letter having been received by

CBMF . What is important to note is that the copy

meant for CBMF was found i n the record of BOK along

wi th SGL t ra ns fe r forms with endorsement of dis­

charge thereon ( Exh . 45 ) .

56 . In reply to questi on No . 1 99 accused No . 1

has disclosed the detai l ed procedure followed i n

CBMF. He has stated that he used to get feed back

from the Funds Manager rega rdi ng management of

funds or the necessity of deployment o f funds. He

used to call i nformation from brokers and f rom

market . I n reply to question No . 201 he stated that

75

SC . 5/93-J

there was no back-up depa r tment. Evi dence is that

there was no separate back-up department but

howeve r , Cang i l t scheme was looking after the wo rk

of back-up depar tment and accused No . I was i ncharge

of the same and other persons were working unde r

him. At this s tage I have made a passi ng refe rence

to Exh . 4 5 and that pa r t of the evidence w i l l be

discussed again at a late r s tage .

57. Before proceeding to the t ransac ti ons

which are entered i nto by accused N . 1 on t he basis

of the backing o f SGL t ransfer forms issued by BOK,

a f ter the dishonour of SGLs of CBMF in favour o f

C i t i bank , i t is necessary to consider as to how

normal l y a t r ansaction would take place i.n case o f

a genuine sale o r purchase.

58. These transactions of CBMF either w i t h

BOK o r wi th Citibank and even the t ransactions w i t h

SCB are all ente red into t h rough broker who is none

else than accused No. 2-HPO . The role of a broker

is to b r i ng two parties togethe r . Therefore, i n a

normal t ransaction, broker would i nform the se l l i ng

bank that some other bank or ·financial insti t ution

is ready to purchase o r i n fo rm the purchasing bank

that the securities which they i ntend to purchase

76

S C . 5/93-J

are w i t h a particular bank o r pa r t i cula r

securi ties a r e avai l a b l e w i t h counterparty for

purchase . I f the dealer has funds available the n

the same can be deployed i n purchase of certain

sec u r i t i e s avai l a b l e w i th a pa r ti cu lar party.

Therefore, i t was expected o f accused N o . 2-HPO to

i n form CBMF rega rding availabi l i ty of sec u r i t iss

w i t h BOK o r ADN on the basis of which the

transaction is entered i n t o . Howeve r , accused No . 2

is feigning i g norance. I s it is probabl e ? This

conduct of accused No . 2 has to be examined and

considered.

59 . With t h i s l would f i rst consider t he

f u r t h e r t ransactions in QOI securi ti�s entered into

by accused No . 1 and therea fter I w i l l revert to the

transactions of 27 . 5 . 1991 in respec t of PSU Bonds.

60 . I n the SGL account of CBMF maintained

with RBI namely BYSL-250, regarding GOI 2008 and

GOI 2009 secu ri t ies sufficient to clea r t he SGl.s

were not in c redi t on 27 . 5 . 1991 and it did not get

c redi t of the sec u r i ties in pursuance of the

t r ansac tions w i t h BOK . The SGL t ransfer forms in

favour of the C i t i bank were n o t honoured for want

of sufficient balance i n the account o f CBMF.

77

SC. 5/93-3

Inspite of this, accused No _ l went on entering into

further transactions i n the same secu r i ties.

6 1 . Thereafter on 26 . 7 . 1991 C8MF and on

i ts beha l f accused No . 1 -A n i l Narichania e nte red

i nto transaction of purchase of 1 1 . 5% GOI 2008 face

val ue Rs . 60 c rores. This was purchased f rom SCB .

Mate rial documents are deal s l i ps Exh. 190 , C<)St

memo of SCB Exh . 40 1 � and BR Exh. 198. Deal s l i p

Exh . 190 i s signed by accused No . 1 . Exh. 198 is the

BR by which SCB gave delivery. I t is BR No . 0970.

This BR incl udes interest for the period 23 . 5 . 1991

to 26 . 7 . 1991 , 63 day$, amoun t i ng to

Rs . 1 , 05 , 09, 400/-. Now the ledger o f CBMF pertaining

to GOI 2008 in respect of Can aocc 90 shows the

ent ries at Exh . 292 ( 1 ) mentioning Standchart BR 0970

and i t is f u r ther mentioned in remark column. which

is mar·ked Exh . 292 ( 7 ) , that BR-0970 is given to

Canstar and received on 27 . 7 . 1991 C i t i BR. It i s

further mentioned that SGL received on 20 . 8 . 1991

Rs . 1 . 61 cro res w i th f u rther stateme n t . remai n i ng

our SGL for Rs . 58 . 39 crores " . On the very next

day i . e . 27 . 7 . 1991 CBMF through accused No. 1

pu rchased the same security GOI 2008 worth Rs.60

cro res f rom C i t i bank. Deal s l i p Exh . 190 is signed

by accused No . 1 and Exh . 191 is cost memo of C i t i .

78

SC. 5/93-J

Exh. 192 is the bank receipt N o . 474 issued by

C i t i bank on 27 . 7 . 1991.

62. P . W . 20 Jothimani Nallaiah, Investment

Manage r o f CSMF at the relevant time , has deposed

that i n case o f money market operation. he used to

repo r t to accused No . 1 and in case of i nvestment he

used to report to B . R . Acharya, General Manage r . He

was also i n-charge of Can 80 CC 90 Scheme at the

relevant time . Refe r r i ng tQ the transactions o f

26 . 7 . 1991 regarding purchase of 1 1 . 5 GOI 2008 face

value Rs . 60 crores from SCB , he has proved the

necessary documents and has deposed about the

t ransaction. He is also signatory to some of the

documents as funds Manager of the Scheme. At page

766, 767 , vol . 5 , he deposed on being pointed out the

entry Exh. 292 ( 1 ) that i n remark col umn endorsement

is made by Jyoti Bhatt ( P . W . 21 ) . He further stated

that he had given instructions to Jyoti Bhatt on

the basis of i n s t r uctions received from accused

No . l in respect of BR issued by SCB being 0970

(Exh. 198) given to Canstar and received C i t i B R .

The witness is refe r r i ng to B R 474 Exh. 192. He

has furthe r explained the entry Exh . 292 ( 1 ) as "SGL

received 20 . 8 . 1991 Rs. l . 61 cro res and remai n i ng o u r

S G L Rs . 58 . 39 crores " . The entry i n the d i a ry o f

79

SC . 5/93-J

accused No . 1 is at S r . No . 1 which is marked as

Exh. 294 ( 1 ) and i n the diary of 27 . 7 . 1991 the entry

i n respect of t ransaction w i th C i ti is a t

Ex h . 1 5 1 (9 ) against which aocc 90 and star are

w r i tten and scored out . Why the remarks wer9 scored

out is a matter of guess for anybody.

63. It i s pertinent to point out here that

as a dealer accused No . 1 was i n -charge o f a l l the

schemes, whereas the funds manager of a pa r t i cular

sc heme has authority only over that scheme. But

exchange o f SR from one scheme to other scheme

would be possible only i f there i s e i the r

i n s t r uction from superior or otherwise supe rior i s

agreeable and therefore, evidence o f P . W . 20

Jyotimani that accused No. 1 gave instructions

appears natural and t r ustworthy . The fund managers

of the two schemes could not exchange w i th each

other the two BRs unless they get permission from

stJperior who has control over both the schemes .

64 . I n this connection there i s evidence o f

P . W . 30 Santosh Mulgaonkar at page 1069. vol . 7 .

Exh . 198 BR 0970 was shown to him and he stated that

he has made endorsement on the top o f i t as "RE

d t . 27 . 7 . which portion has been spec i f ical ly marked

80

SC. 5/93-J

as Exh . 198 ( 1 ) . His evidence is that " RE " means

repurchase by our bank (SCB) from CBMF on 27 . 7 and

i n respect of the said re-purchase C8MF has

enclosed the same recei pt which was i ssued by sea

on 27 . 7 . 1991 by way of delivery of secu r i t y .

Thereafter he wen t on to explai n that he has put a

l i ne diagonally across to show that receipt i s

received back and he has cancel led the recei pt i n

the books o f SCB and entry is taken i n BR issue

registe r . The concer·ned deal s l i p Exh . 349 was

shown to him and he deposed that i t is prepared by

Manoj Rane ( P . W . 24 ) and is i r' respect of purchase

o f 1 1 . 5% GOI 2008 Rs . 60 crores face value and

along w i th this he has received cost memo o f sea

Exh . 1 96 . see has enclosed bank receipt Exh . 1 98

issued i n favour of CBMF on 26 . 7 . l 991 for

Rs . 6 1 , 05 , 89 , 456/- i n exchange . Thus i t i s clear

that purchase o f Rs . 60 crores GOI 2008 on 26th was

n u l l i f i.ed by the sale of the same secu r i ty on the

very next date and BR given as secur i ty went back

t o SCB which was then cance l led. Another employ-

ee of SCB Sri kant Sheth ( P . W . 2 7 ) has also given

evidence rega rdi ng the return o f BR to SCB by CBMF .

6 5 . Thus i n view o f t he purcha$e by C8MF on

26 . 7 . 1991 and 27 . 7 . 1991 of GOI sec u r i t i es 2008 from

81

SC . 5/93-J

SCB and C i t i . CBMF was having two 8Rs out of which

BR 0970 Exh . 1 98 was retu rned to SC B . I n pursuance

o f the transaction of 27 . 5 . 1991 be tween CBMF and

C i t i ba n k , C i t i was ho l ding bounced SGL Exh. 183 o f

CBMF and C i t i was eager to get i t discharged.

P . W . 1 6 V . N . Shenoy when shown BR Exh . .192 issued by

C i t i bank ( S R 474 ) sta ted that l i ne i 5 drawn on i t

w i t h mention as 2 1 /08 by one C l e r k Sari ta Desa

working under h i m . P . W . 1 9 Sa r i ta Desa has stated

tpage 745 , vol . V ) " S R Exh. 192 ea r l i e r issued by

C i t i bank in favo u r o f CBMF and on 20 . 8 . 1991 � the �-

said BR was r e t urned to our ( C i t i ) bank and accord-

i n g l y on 2 1 . 8 . 1991 we made conve rsi o n . P . W . 16

V . N . Shenoy when show n deal s l i p Exh . 280 i n respect

of the t ransaction w i th C i t ibank dated 27 . 7 . 1991

stated that as per deal s l i p Ci t i bank sold 11 . s GOI

2008 to CBMF face value Rs . 60 c r o res t h rough

accused No . 2-HPO and C i. t i bank had issued BR Exh . 1 92

i n favo u r of CBMF. Howeve r . prior thereto i n

respect of t ransaction o f 27 . 5 . 1991 SGL transfer

form i ssued by CBMF Exh- 183 face value Rs . 58 . 39

crores had bo unced and was lying w i t h Ci t i bank and

�cco rdingly against the bank receipt issued b�

C i t i bank (Exh. 192 ) . he r·eturned the bounced SGL

t r ansfer form Exh . 183 to CBMF along w i t h one fresh

SGL of C i ti Ex h . 201 for Rs . 1 . 6 1 crores, so as to

82

SC. 5/9.3-J

make u p the consolidated face value of Rs.60

crores. This was done i n consultation w i th

S . Mukherji o f Portfolio Management Department and

h i s Supe r i o r M r . Venkat raman and against the two SGL

transfer forms he got back the BR issued by C i t i ­

bank and i t was duly discharged. Accused No . 1 was

dealer o f C BM F . He held a valid B R o f Citi and he

exchanged i t for bounced SGL o f CBMF. He got one

SGL o f Citi o f Rs. 1 . 6 1 crores. Being a dealer he

cannot say that he was not aware of this because he

was the person entering into a l l the t ransactions.

He took back the bounced SGL which C i t i bank was

eager to return. He knew that i t had bounced as i t

was backed by bounced SGL of BOK. Endorsement a t

E x h . 192 "SGL issued" therefore means bounced SGL

was given along w i t h one SGL of C i t i bank of Rs . 1 . 6 1

crores. The endorsement o f discharge on the reverse

o f Exh. 192 ( B R 474) i s under the signature of

accused No . 1 and date below the signature is

20 . B . 1991 which shows that it was discharged o n

20. 8 . 1991 as deposed t o by the witnesses refer red

ea rl ier . Accused No . l admits the signature and date

put by him. It is to be borne i n mind that there

was no t ransaction on 20th August o r 21st August

1991. A valid BR was returned and bounced SGL plus

one SGL of Citi was taken and accused No . 1

83

S C . 5 /93-J

discharged t he B R which i s required to be

discharged o n receipt o f physical bonds i n the

ordinary course i f the transac t i o n is genuine.

66 . Accused No . 1 d i d not stop here and coul d

not as he had received back bounced SGL . He entered

into f urther t ransactions o f sale i n favour o f

Standchart i n respect o f securi ties GOI 2008 1 1 . 5%

on following th r ee dates by three di fferent trans­

actions : Mode o f del ivery SGL. Those SGL were

issued.

( 1 ) 23 . 8 . 1991 Rs . 1 0 crores face value ( Exh. 298 ) .

( 2 ) 26 . 8 . 1 991 Rs . 7 crores face value (Exh . 203 ) .

(3) 4 . 9 . 1991 Rs . 43 crores face val ue (Exh . 31 2 ) .

Total o f t hese three t ransact ions comes to Rs . 60

crores . There were no sec u r i ties wi t h CBMF but

what i ·t had was bounced SGL returned by C i t i ba n k .

O n the basi s o f the bounced SGL these transactions

were entered i nto and CBMF issued the a foresaid

th ree SGL t rans fer forms Exh.298, Exh . 3 1 2 , Exh.203.

Al l these SGLs were issued by accused No . 1 under

his own signature which i s not disputed. Exh . 4 12 ,

E xh . 4 1 3 , Exh . 4 1 4 and Exh . 4 1 5 are the lodgement

letters i n respect of these three SGL transfer

forms which are dated

84

1 8 . 9 . 1991 , 5 . 1 0 . 1 99 1 .

SC . 5 /93-J

2 . 1 1 . 1991 and 1 5 . 5 . 1992. A l l these SGL t ransfer

forms were repeatedly lodged and bounced and

rema i ned dishonoured t i l l 1 5 . 5 . 1 992 and even

thereaft.er-. These SGL TFs were bound to bounce as

there was no back i ng and bounced SGLs of Rs . 58 . 39

crores and valid SGL of Citi o f Rs . 1 . 61 cro res was

w i t h C B M F . What is mate r i a l to point 01.1t is what

accused No . 1 did thereafter . SGL t rans fe r form

Exh. 203 for face value of Rs. 7 era res wc:us s p l i t

into two by CBMF and a f resh SGL o f Rs . l . 61 crore

was issued on 1 8 . 12 . 1991 and another SGL of Rs . 5 . 39

cro res was issued. SGL � Rs. 1 . 6 1 crores wa$ backed (1'(v

by C i t i bank SGL o f Rs . 1 . 6 1 crores and therefore.

SGL for Rs . 1 . 61 c ro res issued on 1 8 . 1 2 . 1991 wa5

honoured whereas SGL for Rs . 5 . 39 crores was not

honoured. on Exh.203 there i s endorsement " i ssued

fresh SGL of Rs . 1 . 6 1 crores and Rs . 5 . 39 cro res o n

1 8 . 1 2 . 199 1 " w i t h further remark " for spl i t up" .

These fresh SGLs are Exh. 200 for Rs. i . 6 1 crores

which was honounred by RBI and the other SGL for

the balance of Rs . S . 39 c r o res is Exh - 330 which when

presented was not honoured. Rega rding s pl i t t i ng up

evidence of P . W . 30 at page 1081 vo l . 7 is to the

effect that SGL of R3 . 7 c rores was bi furcated into

two SGLs o f Rs . 1 . 61 and Rs . s _ 39 crores and the SGL

of Rs . 5 . 39 crores Exh. 330 bea r $ rubber £tamp of RBI

85

SC . 5/93-J

for dishonour on 1 5 . 5 . 1992 and was forwarded to SCB

under letter Exh . 415 by RBI . He has also stated

t hat SGL 26 . 8 . 1991 Exh. 203 was not lodged w i t h RBI

t i l l 1 7 . 9 . 1991 as ha was told by o ne Jaideep Pathak

to keep the SGL form w i th him and not to lodge the

same w i th RBI fo r some days t i l l he is i nformed by

Jaideep Pathak to lodge. He f u r t her sta ted on

seeing letter Exh . 4 14 that he was told by Jaideep

Pathak that SGL t rans -fer form Exh . 203 be subm i t ted

with RBI PDQ and i t was lodged as per Exh . 4 1 4 on

1 7 . 9 . 199 1 .

67 . He deposed fur ther that as the three SGL

t ransfer forms lodged w i t h RBI bounced he was

i ns t ructed by Jaideep Pathal< that he should contact

A n i l Narichania (accused No. 1 ) working w i th CBMF

and to see that the said securi ties a re cleared and

therefore, in February 1992 he visited of f ice of

CBMF and contacted Ani l Narichani a-accused No . 1 and

asked him about the secu r i ties for which CBMF had

issued SGL t rans fer forms i n the sum o f Rs . 5 . 39

cro res Exh. 330 and the othe r two SGL transfer forms

for Rs . 1 0 crores Exh. 290, and Rs . 43 cro res Exh . 312

tota l i ng to Rs . 58 . 39 crores and requested A n i l

Na ri chani a t o settle the issue by providing

securities in favour of SCB and Anil Narichania

86

SC . 5/93-J

asked h i m to i n fo r m Jaideap Pathak his superior

o f f i c e r to take �P the matter with accused No. 2-HPD

and while v i s i t i ng office o f accused No . 1 -A n i l

• Na r i c h an i a , he had f i rs t i nqui red f rorn s t a f f o f

CBMF as he had not met accused No . l p r i o r to that

date and a f t e r ge t t i ng particulars from the s t a f f

o f CBMF , he approached Anil Narichania (accused

N o . 1 ) . He then i n t roduced himse l f and conveyed the

fact about bouncing of SGL tran$fer forms for which

h i s supe r i o r Off icer Jaideep Pathaf< had asked h i m

t o approach A n i l Narichania (accused No. 1 ) and o n

r e t u r n from t h e r e . h e informed Jaideep Pathak about

the message given by accused No . l that he should

pursue the matter wi th broker accused No . 2-HPD

(page 1084 to 1090 of vo l . 7 ) . I t i s true that

Jaideep Pathak is not examined but the facts

deposed to by this w i t ness regarding his v i s i t to

Ani l Narichania and his t a l k w i t h Anil Narichania

and i n s t r uc t i ons given t o h i m by Jaideep Patha k

cannot be discarded out-r.ight merely because

J a i deep Pathak is not examined. The evidence and

conduct o f the w i t ness i s n a t u ra l . Endorsement o n

SGL t ransfer form Exh. 203 i s " issue f r e s h SGL

Rs . 1 . 6 1 crores a nd Rs . 5 . 39 crores made on

1 8 . 1 2 . 1991 i s in the hand w r i t i ng of Mrs . Jyoti

Bha t t , P . W . 2 1 , and she has deposed that. t h i s

87

SC. 5/93-J

endorsement was put as per the inst ructions of her

superior , Accus-.ed No . 1 and that the endorsement by

her was made i n the chamber· of accused No . 1 a ... �·

inst ructed by him and she has also further made

endorsement "spl i t up on the very day i . e .

1 8 . 1 2 . 1991 . She has further stated that she

prepared Exh . 200 SGL t ransfer form on instructions

of accused No . 1 on 1 9 . 1 2 . 1991 as wel l as Exh . 300 on

his i nst ruc tions on the same date and these were

SGL transfer forms i n respect o f transactions of

Rs . 1 . 6 1 cro res and Rs . S . 39 cro res w i th SCB ( pages

8 1 7 , 8 1 8 , 8 1 9 of notes of evidence, Vol . 5) . In

fur ther part of her evi dence at page 827 , she has

stated that whi l e ente r i ng i n the ledger sheet

Exh . 292 pertaining to 1 1 . 5 GOI 2008, wherein she has

made endorsement "given to Canstar and received

back BR. SGL received on 20 . 8 . 9 1 Rs . 1 .61 crores .

received our SGL Rs . 58 . 39 c rores " , and that she was

asked by the Funds Manager Jothimani Nallaiah,

P . W . 20 , she approached accused No . 1 and as

instructed by accused No. 1 -Anil Narichania she put

the endo rsement i n the rema r k column of the ledge r .

There is practical ly no c ross-examination . I t is

not even claimed by the accused that there was any

t ransaction of the face value o f rs . 1 . 6 1 crores o r

Rs . 5 . 39 crores and obviously therefore, what the

88

SC. S/93-J

witness is stating is true that spl i t t i ng up o f the

SGL t ransfer form and the endorsements made thereon

were a l l at the i nstance of accused No . l as he was

the re a l l y i nte rested person at CBMF and this

fu r ther forti fies the conclusion that accused No . 1

was t h roughout aware about the bouncing o f SGL

transfer forms and therefore, bounced SGL on the

basis of which t hese t ransactions were entered i n to

were to the knowledge o � accused Na . l and he has

given i nst ructions and got two separate SGLs issued

and he himself sig ned the two SGLs a long w i th Bipin

D ivecha , P . W . 5 , i n l i eu of SGL t ransfer form for

Rs . 7 crores as he was knowing that to the extent o f

Rs . 1 . 6 J. c rores there are secur i ties i n view of t he

SGL given by C i t i bank.

68. The f u r the r t ransactions of GOI 2009 are

on 1 8 - 9 . 1 99 1 . C i t i sold to SCB 1 1 . 5% GOI 2009 Rs . 42

crores through broker HPO (accused No . 2 ) and on

19 . 9 . 1991 C i t i sold the same GOI 2009 1 1 . 5% face

va l ue Rs . a crores to see. The concerned documents

of C i t i bank i n respect o f Rs . 42 cror·es are deal

s l i p Exh . 27 2 , which mentions HPD (acc used No . 2 ) as

broker , cost memo Exh . 273 and secu,. i ty is by way of

BR of Ci ti Exh . 27 1 . As regards t ransac tion o f Rs . 8

er-ores deal s l ip is Exh . 27 6 , cost memo i s Exh . 277

89

SC. 5/93-J

and BR of C i t i is Exh . 274 . sea deal s l i p of Rs.42

crores is Exh . 358, and of Rs . 8 crores is Exh . 359.

Thus SCB came i n to possession of two 8Rs o f C i t i

Exh . 27 1 and Exh . 27 4 . I n the deal s l i ps o f SCB

Exh. 3.58 and Exh . 359 broke r ' s column ment ions "di r "

meaning d i rect the signi f i cance o f which wi l l be

clear after refe r r i ng to the evi dence o f Manoj

Rane , P • W • 2 4 . However , at this stage i t is

sufficient to point out that these transactions

were under 15% a r rangement between accused No. 2-HPD

and SCB . The conduct of SCB is very relevant i n

view of this a r rangement . SC8 came i n possession

of two bank recei pts o f C i t i which were obviously

valid and on the basis of whi c h sea could take

appropri ate action. Howeve r , what i s done by sea

on 1 9 . 9 . 1991 is that thei r Investment Officer wrote

a l et te r to the Manage r . C i t i bank NA Exh. 278. The

entire letter i s worth reproducing, which reads as

unde r :

"Dear S i r .

We hereby annex two BRs. ( i )

Rs . 4 2 c rores . and ( i i ) Rs . 8

cro res issued by you of 1 1 . 5% GOI 2009

on 1 8 . 9 . 1991 and 1 9 . 9 . 1991 respective l y .

We may request you to give us SGLs o f

CBMF i n exchange o f the same . "

90

SC . 5/93-J

Therefore, what SCB is aski ng to give in exchange

of val i d BR$ supported by securities is the bounced

SGLs of CBMF which conduct is othen.,ise

inexplicable. No prudent bank would get a valid

security substituted by a bounced SGL transfe r form

that too o f othe r bankor financial i ns t i tut ion .

69.

there

On the two 8Rs Exh _ 27 1 and f.xh - 274

is a cross l i ne wi t h endorsement as

conversion done with date mentioned on exh . 274 i . e .

fo r Rs . a cro res as 8/10 and on Exh . 271 i . e . for

Rs . 4 2 crores as 20/9 . Evidence of V . N - Shenoy ,

P . W . 16 on page 703 vol . S is that the endorsement

"conversion done·· w i t h ini tials of Mrs . Annapuf"na

Narayan Moorthy ( P . W . 1 5 ) shows that it was conver­

sion done f rom one fof"m o f secur i ty to another form

and he f u r t her expl ained that the ea r l i e r BR was

issued on 18 . 9 . 1991 and subseque nt ly on 20 . 9 . 1991

the said rece i pt was taken back f r om counter party

and C i t i bank issued another SGL transfer form and

si mi la r is the evidence i n respect o f o t he r BR

Exh . 274 at page 705 of the same vol ume . He further

stated at page 706 regarding Exh. 278 (ea r l i e r

marked as X-43) tha t this l e t te r i s issued by SCB

forwarding two BRs and reques t i ng C i t i bank to give

91

SC. S/93-J

them SGL of CBMF i n exchange. I n clear terms he

deposed that under l e t te r Exh . 278 SCB had encl osed

Exh . 271 and Exh . 274 making a request for SGL trans­

fer form of CBMF and accordingly w h i l e taking the

or i gi na l receipts Exh.271 and Exh . 274 be handed

over SGL transfer form o f CBMF Exh . 188 to a person

who came from sea and on page 707 he furthe r stated

that for the balance of amount a f resh SGL was

issued by C i t i bank to make the cumulative va l ue o f

the two bank recei pts Exh . 27 1 and Exh . 2 74 w h i c h was

Rs . S O crores and Exh . 188 o f CBMF was for Rs . 44 . 5805

c ro re s . The S G L t ransfer form iss ued for the bal-

ance by Citi is Exh . 2 79. He i ns t ructed Sarita Desa

( P . W . 1 9 ) t o prepare SGL transfer f o r m fo r 1 1 . 5% GOI

2009 o f face value of Rs . 5 , 4 1 , 95 ,000/- being the

d i f ference between Exh . 188 and Rs . SO crores and

s i gned the SGL transfer form. Later on to correct

himself he stated on page 709 that letter o f SCB

was brought to him by dealer of C i t i bank Sanj ay

Bagga along w i t h one representati ve of SC B , who was

i nt roduced to him by M r . Bagga and he asked the

wi tness to consider the reques t made i n the letter

to which the Bank receipts issued by C i t i bank were

annexed. (The fact that SCB ' s man had come w i t h

Bagga was ea rlier not stated by him and the refo re ,

he made the co r r ec tion on the very next day ) .

92

SC. 5/93-J

70. He has also give11 evidence in respect o f

the other SGL tran$fer form Exh . 183 at page 7 1 1 and

he depe>sed by stating that Citi had issued Exh . 192

i n favour of C8MF for 1 1 . 5 GOI 2008 face value

Rs . 60 crores. Prior thereto in respect o f

transaction dated 27 . 5 . 1991 SGL transfer for� o f

CBMF Exh . 1 83 face value Rs . 58 . 39 crores lodged wit h

RBI was bounced and was lying with Ci t i bank.

Accordingly against bank receipt is�ued by C i t i bank

he returned the bounced SGL Exh. 183 to CBMF along

with f resh SGL transfer form Exh . 201 for Rs . 1 . 6 1

crores so as to make up the conso l i dated face value

of Rs . 60 crores, which was in consultation with

M r . Shankar

Department

Mukherji o f Po rt folio Management

and his superior Venkat raman and

therefore. against the two SGL transfer he got

back the receipts issued by Portfolio Management

Department. P . W . 15 Mrs . Annapurna Narayan Moo rthy

who was working under him at the relevant time has

corroborated his evidence. She has given evi dence

regarding crossing (cancellation o r discharge) o f

BR w i t h endorsement "conve rsion done" with date

ment ioned thereon by her and she explained at page

681 what i s the meaning of endorsement conversion

done " as the process in which one form of security

93

is changed to another form .

SC. 5/93-J

Evidence o f

M r s . Annapurna Narayan Moorthy is not chall enged by

accused No. 2-HPD and practically there is no cross

examination even by accused No . 1 .

7 1 . Exh. 5 1 7 is letter w r i t ten by Jaideep

Pathak of SCB to CBMF Investment Department dated

8 . 10 . 1991 which i n respect o f exchange of BR of

1 1 . 5% GOI 2009 Rs . SO crores i n which it is stated

' by sea (Jaideep pathak) tha t :

"We had bought from C i t i bamk

NA 1 1 . 5 GOI 2009 Rs . SO crores o n

1 8 . 9 . 1991 i n form o f bank receipts. We

unde rstand that the same stock has been

sold by you to C i t i . Therefore , we

r e t u r ned their BRs in exchange o f your

SGL for Rs . 44 . 5805 crores. We now

request you to issue a fresh SGL i n o u r

favour for the same amount to enable us

to lodge i t urgently . "

The curious conduct of SCB o f f i cers in going out of

way to take back the bounced SGL t rans fe r forms i n

lieu of val i d BRs as indicated by the correspond-

snce, can be explained only on the background of

15% a r rangement with accused No. 2-HPD . Accused

94

SC . 5/93-J

No . 2 is broker through whom these deals are s t r uck .

Accused N . 2 ).s aware as to which party has got

security and which party has not the securities and

unless there i s some such person or such medi ato r ,

i t is not possible for SCB of fi ce rs to come to know

that C i t i had bounced SGL of CBMF and further they

would go out o f way to take i t f rom C i t i and then

w r i te to CBMF demanding fresh S G L .

7 2 . The ora l evidence regarding this i s of

P . W . 30 Santosh Mulgaonkar working at the relevant

time w i t h SCB i n the Investment Department under

Jaideep Pathak. He has deposed that this letter

Exh . 517 was dictated by Jaideep Pathak to him and

he has reduced i t to w r i t i ng . He $tated further

that Jaideep Pathak had handed ove r th� or i g i nal

letter to del i ve ry boy of Hi ten Dalal who was al��o

present at that time. He howeve r did not recollect

the name of the delivery boy . At later stage I

would be referring to the evidence of Tushar Pati l .

employee o f Hi ten Dal al . However , i t i s suf f ici e n t

to pai nt out here that there were 3 to 4 del ive ry

boys o f Hi ten Dalal and he i s no t referring to

P . W . 18 Tushar Pa t i l . C ha l l enge to h i s evi dence is

on two counts. F i rst ly as Jaideep Pathak is not

95

SC . 5 /93-J

examined and second l y as that ha does not disclose

the name of delivery boy . So far as non-disclosure

of name o f del ive ry boy i s concerned. I do not

think that there is any substance i n i t . I t i s not

poss ible for any one to remember or one may not

even enqui r e about the name of the delivery boy .

The effect of t hi s oral and documentary evidence

would show the close connection of accused No . 2 i n

all t hese t ransactions . Furthe r discussion would

show that the role of accused No . 2 was not merely

as a broker but he had far greate r and wider role

to play and his autho ri ty was even more than the

dealer of SCB which was obviously due to 15%

a r rangement as he had comm i t ted that much return to

SC8 i n the transactions of sale and purchase of

securities t hrough h i m . In the absence of a pe rson

l i ke HPD-accused No.2 i nvolved, there was no reason

for see to get the k nowledge of the fact that

bounced SGL t ransfer forms of such a particular

amount is with C i t i and see would alsonot give up

va l i d BRs i n exchange of bounced SGL.

73 . P . W . 30 Santos h Mulgaonkar has al$o given

evidence regarding receipt of two SGLTFs f rom

Jai deep Pathak i n exchange of two BRs Exh . 2 7 1 and

Exh . 274 and has further stated that Jaideep Pathak

96

SC . S/93-J

asked him that SGL transfer· form Exh. 279 received

f rom C i t i bank dated 1 9 . 9 . 1991 for 1 1 . 5% GOI 2009

Rs . 5 , 41 . 95 , 000/- be lodged w i t h RBI PDQ and when he

asked Jai deep Pathak i n respect of the other SGL

transfer form of 1 1 . 5% GOI 2009 for Rs . 4 4 . 5805 i n

favour of C i t i and also questioned how SC8 is goi ng

to get credit in respect o f SGL t ransfer form

Exh . 188, Jaideep Pathak i nfo rmed him that he would

take up the issue with broker Hi ten Dalal (accused

No . 2 ) and ha would set tle the issue . The SGL

transfer form o f Citi for Rs . S , 4 1 , 95 , 000/- was

l odged w i t h RBI and credit was gi ven to the same,

i t was lodged on 1 5 . 10 . 1991 and SGL transfer form

Exh . 188 was kept back by him as instructed by

Jaideep Pathak who was to take up the issue w i th

accused No . 2-�PD . I t is also his evidence that

Jaideep Pathak told hi m to w r i te le tte r to CBMF for

exchange of SGL transfer form E x h . 188 wi th BRs . He

even dic tated the l e t ter addressed to CBMF and then

asked the w i t ness ( P . W . 30 ) to si gn the same . The

wi tness however refused to sign i t because he did

not want to get involved i n the matter and he

insisted on Jaideep Pathak to sign the letter and

accordingly Jaideep Pathak signed the letter

addressed to CBM F .

97

SC. S/93-J

74 . The SGL tr·ansfer fof·m given for the

balance amount by Citibank for Rs . 5 , 41 , 95 , 000/- was

not honoured on 28 . 9 . 1991 as there was no

suffi cient balance in the account of the C i t i bank

and evidence o f P . W . 4 1 Nayan Samant i n that respect

is not challenged. I t was presented tw ice . On

1 0 . 1 0 . 1991 i t was honoured as there was suf f i c ient

security i n the account of C i t i bank.

7 5 . As a resul t o f the 15� a r rangement

accused No. 2-HPD had gai ned ·a st rong hold over SCB.

Evidence o f P . W . 24 Manoj Rane dea l er of SCB throws

l i ght on this aspect of the mat te r . He deposed at

page 59, vol . 6 , that the bank had

accused No . 2-HPD much before

agreement

he was

wi th

given

respons i bi l i t y of managing S L R . The Bank had to

buy and sel l securities a$ would be di rected by HPD

to the counter party on the terms as i nstructed by

h i m . Recor d was maintained w i t h front office i n

the spread sheet on the computer so as to work out

the sale price for ensuring that the bank obtained

15% return when sale was e ·ffected as per h i s

instructions. When he was asked to work i n

secu ri ties department in early 1991 , he was told by

A . Mohanl a l ,

w i t h Hi ten

his superior, about the ar rangement

Dalal and he was also told that the

98

SC . 5/93-J

a r rangement was documented by the Funds Commit tee

of the Bank and later on during the yea r

the concerned documents were shown

1999-2000

to him by

Bhupendra Kuma r , Officer of the CBI i n the of fice

of the SCB.

7 6 . As a matter of fact accused No . 2- HPD

does not deny the 15% a r rangement . What

material i s as a result HPD-accused No . 2 exerci�ed

great influence over SCB and its officers. P . W . 24

Manoj Rane has stated that transactins done under

the a r rangement were either conveyed o r a l l y to him

or Mohanlal by HPD or on telephone o r in his own

hand w r i t i ng and i n respect of

i nformation they used to note down on a

telephonl!!

piece of

paper and then on the basis of i n st ruc ti ons o f HPD,

they used to prepa re deal s l i p and that i n many

such t ransactions, HPD used to instruc t in his pwn

hand w r i t i ng and on the basis of such instructins

deal s l i p used to be prepa red. Such inst r uctions

were received through representative of HPO on

1.111signed piece Q.f paoer � nn preparation Q.f. �

§.ll.Q t.h.€, unsigne.d paper � .tQ. � preserve<;! �

h!Ull in � fil':,. Whi l e prepa r i ng deal s l i p as per

instructions of HPD-accused No . 2 , they used to

men t ion i n deal s l i p i n broke r ' s column the word

99

SC . 5/93-J

" d i. r " which means di rect . His unde rstanding was

that while preparing such deal s l i p , since back

of fice was not receiving contract note from t he

concer ned broker (HPD) the practice o f wri t i ng

" d i r .. ( di rect ) was started and this practice was

fol lowed much ear l ier of his tak i ng ove r . He has

further stated i n par a 1 2 . page 6 1 , that � �

agreement .t1.fQ � DQ..t. eotitleg .t.Q. � brokerage .f.su:.

� transactions and that a l t hough he stated that

the word "di r " would indicate that i t was ei ther a

direct tra11sactio11 or unde r the a 1· r angement or

agreement w i t h HPD , i t clearly appears t h a t there

we re no di rect dea l i ngs between see and othe r banks

and in any case most o f the t ransactions which we

come across i n the present case between SCB and

other ba nks are e i t her under the a r rangement o r

atleast through HPO as broke r . I n the w r i t t en note

subm i t ted by accused No. 2-HPD after the oral argu­

ments, he has mentioned that the transactions i n

respect o f GOI 2008 Rs . 43 , cro res , Rs . 7 cro res and

Rs . 1 0 crores, as well as the transaction w i t h Bank

of America on 29 . 1 0 . 1991 were not under the 15%

a r rangement . Similarly regar di ng the t ransaction

o f 26 . 7 . 1991 GOI 2008 between SCB and CBMF, he Wa$

not the broker and it was not under 15% ar range­

ment. I n fact it is not the prosecut ion case that a

100

SC . 5/93-J

particular transaction was under 15% ar rangement .

The case of the prosecution i s that because o f this

arrangemen t , accused No . 2 was having i n f l uence ove r

SCB of ficers . They were assu r ed 15% return by ac

cused No . 2-HPD and ev idence of P . W .24 shows that

even the dealer o f SCB had no choice but i nst ruc ­

tions of HPD lAlere bi ndi ng and the witness made no

secrete o f i t by stating that neither he nor Mohan­

lal or any othe r Bank authority had any discretion

to be exercised when i t was on inst ructions of

accused No.2-HPD.

77 . There i s one more very crucial and

important ci rcumstance which c l i nchingly connects

accused No. 2-HPD w i t h a l l t hese t ransactions not

only a a broker bu t as a person more than a brok e r .

I t i s the payment o f i nterest by accused No . 2-HPD

i n respect o f these sec u r i t ies GOI 2008 and GOI

2009. At the cost of repetition i t i s necessary to

point out that sec u r i ty GOI 2008 and 2009 i n which

dealings were s tarted by AON wi t h CBMF, CBMF could

not get the securities which were transferred on

the same date to C i t i ba n k . C i t i bank also could not

get the SGL transfer forms of CBMF honoured.

However , SCB had come to possess bounced SGL for

Rs . 50 • .39 c ro res as stated ear l i e r . On these

101

SC. 5/93-J

secur i ties i nterest was payable s i x monthly and i n

November 1 991 i nterest became due which was the

f i rst due date of interest after 27 - 5 . 1 99 1 . The

payment of i nterest was made by aocused No. 2-HPD

from his own account to see. He paid by cheque

Exh . 284 dated 2 5 . 1 1 . 1991 Rs . 3 , 45 , 00 , 000/- by

cheque Exh. 283 dated 25. 1 1 . 1991 Rs . 2 , 56 , 3 3 , 187 . 50

ps . The inter·est due dates are 1 5 . S and 1 5 . 1 1 . As

the amounts are paid by cheque . accused No . 2-HPD

does n<Jt and cannot deny the payment. He however

cl a ims that payment was towards some other t ransac-

tion which he does not remember . Howeve r . SCB

credi tad i t towards i n tet·est and he is not respon-

s i ble for t ha t . P . W . 30 Santosh Mulgaonkar has

stated that i nterest on GOI 2008 was received' by

sea from H i te n Dalal and out o f Rs . 3 .45 crores

received by way of i nte rest i n respect of GOI 2008 ,

SCB paid Rs . 1 , 49 , 50 , 000/- to Bank of America by pay

order 231061 and cred i t Vc)Uche r i s Exh. 485 and by

pay order 231063

Rs . 57 , 50 , 000/- ( page

to State Bank

1 1 09, Vo l . VII , of

o f India

notes o f

evidence ) . He stated that cheQua o f

Rs . 3 , 45 , 00 , 000/- received from accused No. 2-HPD for

secur i ty GOI 2008 face val ue Rs.60 crores and pay

order issued to Bank o f Ame rica was for

Rs . 1 , 49 , 50 , 000/- i n respect of securi ties face

102

( SC . 5/93-J

value Rt> . 26 c r o res . There is evidence regard i ng

transfer o f securities i n favour of Ban k of America

by sea and that is not cha l lenged. S i m i l a r ly

Rs . 57 , 50 , 000/- was paid to State Bank of India as

there was transaction w i th State Bank o f I ndia

whi ch i s also not disputed. He stated f u rther that

the i nterest would be rece ivable by SCB i f seci..1r i ­

ties are held by SCB. This clearly shows t ha t

accused No . 2-HPD was fully aware that bounced SGLs

were w i t h SCB. They are o n the back i ng of SGLs o f

BOK and SCB would not get interes t . He therefore

went out of way and paid interest from his pocket

as his deals w i t h see under the 15% a r rangement

were i n cro res . SCB having parted wi th the securi­

ties forwarded the i nterest to the banks to which

securities were $Old .

78 . P . W . 28 Sanjay Shah, employee o f sea, has

stated how the i nterest was paid to Bank of America

of Rs . 1 , 4 9 , 5 0 , 000/- and State Sank of I ndia

Rs . 57 , 50 , 000/- and remaining amount of

Rs . 1 , 38 , 0 0 , 000/-was kept i n the sundry i n te res t ac

coun t . S i m i l a r l y out of the i nterest received by

cheque from HPD on GOI 2009 Rs . 2 , 56 , 33 , 787 , 50 ps . ,

the same was paid to Bank o f Amer ica. Securit i es

GOI 2008 1 1 . 5% wo rth Rs . 1 . 6 1 c ro res SGL transfer

103

SC . S/93-J

form which was issued on the backing of SGL o f

C i t i bank was honoured and i n terest thereon was paid

to CBMF by SCB amo un t i ng to Rs . 9 , 25 , 750/- . I n

repl y to ques t i o n No . 752 , accused No . 2 stated that

he did issue personal cheque to SCB but not for·

interes t . Howeve r , he does not say for what he paid

this amount ta SCB .

secur i ty fo r Rs . 1 . 61

In respect o f i nterest on

crores , amounting to

Rs . 9 , 2 5 , 750/- which was pa i d to CBMF, accused No . 1

admits that i t is paid in CAN aocc 90 scheme unde r

letter dated 26 . 1 1 . 1991 for the period 23 . 5 . 1991 to

23 . 1 1 . 1991 and the Letter i s at Exh. 328.

79. During i nves t i g a t i o n t he bank book o f

HPD i n unreconci led form is sei zed . It i s a com­

puter generated documen t and t he . e n t r i es Exh . 677 ( 1 )

and 67 7 ( 2 ) therein a r e proved. Exh.677 ( 1 ) rel a tes

to entry da ted 22 . 1 1 . 1991 wherein cheque No. 944073

is me nt ioned , arid account code number 001 ADN i s

also mentioned and further i n the account name

c o l umn i t is clearly sta ted "'Abhay D . Narottam"

( acc used No . 3 ) and below that i t is stated NARR;

i nterest on Rs . 44 . 5805 cro res 1 1 . 5 GOI 2009 and the

cred i t amount is me nt i oned as Rs . 2 , 56 . 33 , 787 . 50 ps .

Si m i l a rly the other entry shows c heque number

944078, account code numbe r 001-AON, account name

104

S C . 5/93-J

Abhay D . Narottam (accused No . 3 ) , narration: Inter­

est on Rs.60 crores, 1 1 . S GOI 2008 Std . Ch . BK (SC B )

and the credit amount is shown Rs . 3 , 4 5 , 00 , 000/-.

The cheque numbers tally with cheques Exh. 284 and

Exh . 283 . Accused Na . 2-HPD is totally denying any

concern w i th accuse d No . 3 i n these transactions o f

GOI 2008 and 2009 and emphatica l l y claims that they

are transactions between BOK and CBMF and further

transactions between CBMF and other banks and he is

not aware if i t was accused N o . 3 w h o was dealing i n

the name o f BOK. His own computer record cl ea r ly

poi nts out to the cheque numbers and the exact

amounts s t a t i ng desc ription o f secur i ties and their

face val ue , and t he name o f accused No. 3-ADN. These

entries were brought to my no t ice during the argu­

ment and therefore, spec i f i c quest io n was pu t by

fur the r examining the accused under section 313

Cr . P . C . and in reply to ques tion No . 4 put on

30 . 1 2 . 2002, he has stated that the re is no question

o f paymen t of i nte res t to SCB . SCB wa!; not holding

the said sec u r i t ies and i t had sold secu r i t ies to

State Bank of I ndia and Bank o f America through

broker B . C .Oalal and further stated that in civil

suit specific issue regarding interest between the

parti es was raised f o r the period 23 . 5 . 1991 to

23 . 1 1 . 1991 and ul timately it was held that SCB had

105

SC. 5/93-J

not received the said amount as inte rest pursuant

to the arrangement which was known to the tr�asury

o f f ice chief dealer and even to the management af

SC B . SCB was ca l l i ng from h i m various amounts by

cheque or pay order. Some time they used to be i n

round figures and sometime they used to be odd

figures. He was not awar-e about adjustment sea was

making i n the i r books o f account . Exh. 283 and

Exh . 284 are among many s uch cheques/pay orders

is5ued by h i rn to SCB and e n t r i es i n respect o f

Exh . 6 77 ( 1 ) . 677 (2) have been made by his staff

under di rections of see and it was unreconci led

when seized by CBI . In fact by thi s accused N o . 2

i s disclosing the closeness between him and sea.

How come SCB give inst ructions to his s t a f f . can

be explained o n l y on accepting the fac t of ex t reme

c l oseness o f accused No. 2-HPD w i th SCB . This

apa r t , these e n t r i es c l i nchi ngly es tabl i $h t he

nexus between accused N o . 2-HPO and accused No. 3-ADN

i n respect of transactions of GO! secu r i ti es 2008

and 2009. SCB kept th� amourit i.n suspense account

as they were not holdin9 the securi ties . They

received i t as i n t rerest due but credi ted i n sundry

credito r ' s account and later passed on the same to

the othe r banks w i t h whom they had transac tions i n

the conce rned secur i t ies .

106

SC . S/93-J

80. In addition CBMF has paid on 26 . 1 1 . 1991

Rs . 9 , 2 5 , 750/- to SCB and Rs.3 , 62 , 250/- to BOK by

cheques Exh . 326 and 325. regardi ng which evidence

is given by P . W . 20 Jothimani Nallaiah at page 790,

vol . 5 . Accused No . l is one o f the signatories to

these cheques. Accused No . l i n reply to question

No . 64 5 to 649 could not throw any l ight on why

i nterest was paid to BOK and i t remai ns a my$try.

It shows how accused No.l is fully aware that

cheques were i n respect of RBI i ntrerest received

i n respect of 1 1 . 5% GOI 2008 for which CAN aocc 90

scheme pr·epared a voucher by debi t i ng the amount to

sundry credi tor ' s account on the same date. The

voucher Exh . 328 i s prepared by Jyoti. Bhatt , P . W . 2 1

and i t i s $igned by P . W . 20 Jotimani Na l laiah . He

has deposed that under this cove r i ng memo RBI

cheque of CBMF for Rs.9 , 25 , 750/- dated 26 . 1 1 . 1991

Exh.326, was forwa rded to Money Market Department

for onward transmission to SCB. P . W . 28 Sanjay Shah

has also given evidence i n this regard. P.W.30

Santosh Mulgaonkar has also deposed in respect o f

the same at page 1 1 1 3 saying that i n terest o n 1 1 . 5

GOI 2008 face value Rs . 1 .61 crores was paid as per

cheque Exh.326 to SCB Rs . 9 , 25 , 750/-

107

SC . 5/93-J

8 1 . As per 0 . 0 . Aocount No . 201 of AON-accused

No . 3 , balance i n his account on 27 . 5 . l.991 was

Rs . 3 , 1 7 , 94 , 684 . 36 ps . Exh . 40 ( 1 ) ( 6 ) is the entry.

There was credit of Rs . 10 crores cal l money re­

ceived by BOK from Federal Bank and credited to the

O . D . Account No.201 of AON. I n addition the pur­

chase price of two securities GO! 2008 and GOI 2009

total amounting to Rs . 58 , 90 . 1 6 , 04 2 . 44 ps. and

Rs . 44 , 92 , 3 1 , 253 . 16 ps . (Total Rs . 103,82 . 47 , 29 5 . 6 5 )

( i n respect o·f face val ue o f Rs. 5 8 , 3 9 crores and

Rs . 44 . 5805 crores respectively) was credi ted and

this amount was uti lised for fur ther transactions

which are the t ransactions of purchase of PSU Bonds

from C8MF by accused No . 3 i n the simi l a r fashion by

creating documents i n the name of BOK . The total

amount of Rs . 102 , 65 , 53 , 287 . 67 ps. was paid towards

sale price o f five different types of PSU Bonds of

face value o f Rs . 100 crores approximately and the

evidence i n respect of these transactions i s led to

show the uti l i sation of money by the accused not

only by accused No . 3 but also by accused No . 2 . The

amount was pai d by BOK to CBMF by cheque.

108

SC. 5/93-J

82 . The payment was by BOK but the amount was

debited to the O . D . Account o f accused No . 3-ADN.

All the entries i n the O . D . Account No . 201 a r e

pr·oved ( E x h . 40 ( l ) ( i ) to Exh . 40 ( 1 ) (vi ) . Evidence i n

respect o f these t ransac tions iz s im ilar and the

w i t nesses concerned are P . W . 2 Mukund K he r , P . W . 14

Mrs . Meena Arbune. and P . W . 44 Bharat Darj i . They

ei ther proved documen t s o r gave evidence from the

documents and t he i r knowledge i s from the documents

alone . The f i rst t ransaction is i n respect o1 sale

o f 15% NPCL Bonds by BOK (ADN) tp CBMF. Evidence o f

P . W . 44 Bharat Darjee i n short i s to the e f fect that

accused N o . 3-AON issued orde rs to BOK to receive

the sec u r i ty pa rt i cula r PSU Bonds at a particular

price and CBMF issued a BR for each transac t i on and

gave delivery by BR. When reversal was was dona

accused No . 3-ADN issued de l i very order mentioning

as " f ree" to BOK and BRs were taken by accused

No . 2-HPD as they were i n fact transactions o f

accused No . 2-HPD . Oral evidence of P . W . 2 Mukund

Khe r , P . W . 7-Ms . Nandita Rao and some o f the docu­

ments to which reference has been made by P . W . 44

Bharat Darj i , employee of accused No. 3-ADN are

mate rial . I t i s not necessary to reproduce the oral

evidence. The following table indicates the trans-

actions :

109

SC . 5/93-J

S/No. Desc ription. Face val ue

Receiving order

B . R . & Exh . No . Exh . No .

1 . 13% H i n d Z i n k Rs.SO Exh . 51 CBMF 2271

2 .

3 .

4 .

crores 27 . 5 . 91 Exh . 70 Deal s l i p - Exh . 1 1 4 . Cost Memo - Exh . 1 1 5.

13% DVC Rs . 25 Exh . 53 CBMF crores Exh . 54 .

Deal s l i p Exh . 120 - Cost memo E><h. 121 -

L�% NTPC Rs . 5 Exh. 56 CBMF crores E>< h . 57 .

Deal s l i p Exh . 125 - Cost memo Exh . 126 .

9% NHPC Rs . 5 Exh . 59 E><h . 60 crores.

Deal sl i p Exh . 130 - Cost memo E><h . 1 3 1 .

5 . J.3% NPCL Rs . 1 5 cro res .

Exh.48 Exh . 73

Deal s l i p Exh . 135 - Cost memo Exh . 136.

The deal s l i ps are si gned by accused No . 1 and cost

memos are signed by Bipin Divecha and the BR number

is menti oned i n each of the cost memo. The debit

voucher Exh . 62 is in respect of cheque issued by

BOK . The cheque and debit voucher are signed by

accused N o . 4 debi ting the amount i n respect of

these purchases to the O . D . Account No . 201 o f

accused No . 3 . Copies o f the receiving orders a re

marked as Exh . 48 A , Exh . 59A, Exh . 53A , Exh . 56A,

Exh . 51 A . On the respective copies o f the receiving

orders signed by accused No . 3 on left hand side

1 10

SC . 5/93-J

corner name o f HPD is me11tioned and there is

evidence o f P . W . 44 Bharat Darj i. . employee of

accused No . 3 , that i t is wri tten e i t he r by accused

No . 3 o r a t his instance . Accused No. 3-ADN issued

receiving o rders and received bank receipts as

delivery was given by different bank receipts as

stated above . Thereafter on 26/27th July 1991

accused No. 3-ADN issued dif ferent delivery orders .

These delivery o rders are at Exh . 69 . Exh. 66 .

Exh . 74 , Exh . 7 1 and Exh . 7 2 . A l l these delivery

orders are admittedly signed by accused No . 3 and

are addressed to BOK asking deliver to himsel f

" f ree" and Exh . 7 1 is for 9% NHPC bonds , Exh . 74 is

for 13% NTPC Bonds, Exh . 72 is for 13% NPCL Bonds as

wel l as Exh . 69 is ·for 13% DVC bonds . There is

signature of one Tushar Pati l , P . W . 18, employee of

accused No . 2-HPD i n token of receiving BRs and he

has put date 24/7 under his signature on some

del i very orde r s . These PSU bo1ids which were

pu rchased w i t h the amount paid by BOK by RBI cheque

issued by accused No . 4 were taken " free" delivery

by accused No . 3-ADN. Although they are transactions

o f accused No. 3-ADN, neve rtheless he has not paid a

single pie. This shows clea r l y how accused No . 3-

ADN was misusing his posi tion i n BOK as Di recto r .

Accused No . 4 -Raje was behavi ng l i ke his most

1 1 1

SC . 5/93-J

obedient servant. His atti tude towa rds the bank (BOK)

was total l y callous. The Bank was used by accused

No. 3-ADN and accused No. 4-Raje as a n instrument o f

perpetua t i ng fraud. Payment was by BOK and l i a b i l -

i ty was also created against BOK and s t i l l accused

No . 3 wants the Court to believe that he i s a victim

and he was used as a tool by accused No. 2-HPD.

83. P . W . 44 has given evidence about. accounts

books maintained by AON-Accused No . 3 . I n fact he

has deposed regarding a l l the t ransactions of

27 . 5 . 1 99 1 . He has stated that the word " HP D " on

the copy of the cost memo are w r i tten by him at· the

ins tance o f accused No . 3 . The major part of his

evidence relates to the account book o f accused

No. 3-ADN. He has proved concerned entries . However

as pointed out ea r l i e r the account. books of accused

No . 3 are not rel iable and are kept out of

consideration.

8 4 . The securities (physical bonds) as such

were never delivered. The transactions were shown

as reversed and the BRs recei ved from CBMF were

returned on 26th and 27th July to CBMF and endorse ­

ments on the BRs . as BR exchanged were made . Eve1i

the stock o f CBMF was i n the form o f BRs and

1 1 2

SC. 5/93-J

transaction was by issue and return o f BRs . P . W . 1 8

Tusha r Patil employee o f accused No . 2- HPD has

re fer red to the cost memos w rongl y desc r i bing them

as del ivery orders. On being shown the doct1ments

Exh. 149 , Exh . 154, Exh . 161 , Exh . 164 , Exh. 168 ,

Exh . 1 72 , and Exh . 17 7 , he has stated that these are

in the hand w r i t i ng of accused No. 2 and are signed

by accused No . 2 . Accused No . 2 does not dispute the

posi tion that t hese are his cost memos . He refer red

to the documents as delivery orders. That appears

to be a mistake . After a l l he i s a peon. He has

also deposed that delivery orde rs were handed over

to him by accused No . 3-ADN. He was asked to collect

the BRs from BOK . On getting the said BRs the same

were to be handed over to accused No. 2-HPD i n his

office. Accordingly P . W . 1 8 visi ted BOK on

24 . 7 . 1991 and handed over all the delivery orde rs

to the concerned person i n BOK. The said person

obtai ned signature of the w i tness ( P . W . 18 ) on

delivery orders as BOK returned BRs Exh . 57 , 60 , 70

and 73 dated 27 . 5 . 1991 (endorseme nt o f BR exchanged

is made } , and on each delivery order he has put his

signature wit h date "24/7 " . On bringing back BRs

from BOK he handed over the same to HPD (accused

No . 2 ) . He is employee o f HPD . This evidence is not

even challenged by accused No. 2-HPD. Thus the l i nk

1 1 3

SC . 5/93-J

betwene accused No . 2 and accused No . .3 i n the deals

of PSU Bonds is clearly seen.

85. In the reversal t ransactions the cost

memos are issued by Hiten Dalal and not by CBMF.

In case of transaction o f 13% DVC Bond the

endorsement is " BR 2272 dated 20 . 7 . 1991 enclosed;

Please issue cheque in favour of Andhra Bank " .

Below that there is endorsement as CBMF BR 2272

dated 27 . 5 . 1991 exchanged and evidence regarding

exchange and discharge is given by P . � . 7 Ms . Nandita

Rao. On the other four cost memos simi l a r

endorsements are made by HPD "enclosed BR No. 2274,

2275 , 2271 and 2273" and the endo rsement below i s

"please i ssue banke r • s cheque i n favour o f BO K " .

Thus i n case of 13% DVC Bonds accused No. 2-HPD made

endorsement for issuance o f cheque i n favour of

Andhra Bank . Andhra Bank i s not the counter party

and there i s no t ransaction between Andhra Bank and

CBMF. I t is not even cl aimed that there was a ny

such transaction. This was result of a well

designed plan

Andhra Bank

of securing a cheque i n

and thereby getting

favour of

the amount

transferred to his own account w i t h Andhra Bank.

P . W . 7 Ms . Nandita Rao has deposed i n respect o f

these documents and the transactions as s tated in

1 1 4

SC . 5/93-J

the docume n t . I n view o f the fact that cost memo

is of Hi ten Dalal , she has stated speci a l l y

regarding 13% DVC Bonds that CBMF purchased 13%

DVC Bonds f rom Hiten Dalal and mode of delivery was

BR exchange and BR 2272 dated 27 . 5 . 1991 was

exchanged i . e . returned, which was i n favour o f

BOK. Howeve r , at page 432 and 433 (vol . I I I ) she

has stated that on 27 . 5 . 1991 CBMF sol d 13% DVC

Bonds i n favour of BOK under BR 2272. The t ransac­

tion ref lected i n ledger fo l i o statement Exh . 1 2 6 ( 2 )

indicates that CBMF has purchased same secu ri t y 13%

DVC Bonds from Andhra Bank. In column No . 1 0 i n

e nt ry Exh . 1 24 ( 2 ) she has w r i t te n Andhra Bank. She

further states that the name of the bank was

w r i t t en by he r as she was told by the dea le r Anil

Na r i c hani a , accused No. l . I n the cost memo Exh . 1 41

there is an endorsement to t h e e f fect " please issue

cheque i n favour of Andhra Bank" and t h i s

endorsement i s not made by any person working with

CBMF and i t i s obvious that the endorsement i s made

by the person who i ssued cost memo i . e . Hi ten

Da l a l , Accused No . 2 . The e n t i re cost memo is

wri t teri by one person and t he o t h e r cost memos are

also iss ued by h i m . He has spec i f i c a l l y sta ted

therein that the cheque be i ssued i n the name of

BOK . As a result he obtai ned one cheque i n favour

1 1 5

SC . 5/93-J

o f Andhra Bank i n respect o f BR o f 13% DVC Bonds

returned (exchanged) and what was done thereafter

and what was conduct of accused No . 1 :i.15 c rucia l and

exposes the sinister motive o f accused No . 1 .

Accused No . l issued a letter ( Exh . 144 ) addressed

to Andhra Bank di rec t i ng Andhra Bank to credit the

amount of that cheque No . 164926 dated 26 . 6 . 1991 to

Hi ten Dalal . Speci fic wording of that lette r is

"� have issued filU. £h.™ 164926 dateg 26. 6 . 1991

favouring yoyrself fQr. crediti.ng Q.f. 9ccgunt Q.f

Hi ten e. ... Dalal. Please coofi rm". The let tar is i n

the hand w r i t i ng o f accused No . 1 and is sig ned by

him �hich he does not dispute . As a result

Rs . 25 , 42 , 89 , 041 . 09 ps were received by accused

No . 2 . Accused No . 2 could get that amount onl y

because letter to that effect was given by accused

No . l and in the absence of such letter even i f

amount had been credited to Andhra Bank, accused

No . 2-HPD would not have been able to

amount legally credited to his own account.

get the

86. After BR of 13% DVC 8c>n�was taken away

by HPD and sold under his cost memo w i t h a claim of

cheque in favour of Andhra Bank. the defi c i t was

made up by cal l i ng upon BOK to give " f ree" delivery

by AON-accused No . 3 of PSU Bonds of dif ferent

1 1 6

SC . S/93-J

description worth Rs . 25 crores ( ·face value) to make

up face value o f Rs . 100 cro res . In these case?

del i very orders a r e also given by AON-accused No . 3

to deliver to himsel f " f ree " . The documents

pertaining to the tour BRs were of ear l i e r dates.

Cost memos i n the four BRs exchanged are a l so

issued by accused No. 2-HPD. He gave d i rections for

issuance o f cheque in favour of BOK in exchange o f

BRs mentioned the r e i n . The purpose o f refe r ring to

a l l t hese documents i n detail i s to show how

accused Nos . 2 and 3 were acting w i t h one mi nd .

A l t hough today they have fal len apa r t , i n that

period they were together . A l l the i r fraudulent

acts were done with one mind . These transac t i o ns .

a r e · o f AON done i n the name o f BOK so as to create

l i abi l i ty against BOK i n case of sale and payment

for purchase i s made by BOK and the secu r i ty is

used by ADN (accused No . 3 ) . I t shows how cunningly

accused No. 3-ADN was taking only the advantage at

the cost of BOK. Instead o f protecting the

i nte rests of BOK, he was only jeopardising them .

87 . One more impor ta11t aspect of the matter

is that in the debit voucher iss�ed to ADN by BOK

(Exh . 62 ) , the deta i l s mentioned are of the five PSU

Bonds and on the reverse the desc ri ption is also

1 1 7

�

SC. 5/93-J

g i ven of these 5 PSU Bonds which indicate that the

arAo unt of Rs . 1 02 , 65 , 53 , 287 . 67 ps was covering the 5

PSU Bonds . Howeve r , the personal diary of accused

No . 1 , on 26 . 6 . 1 99 1 e n t ry Exh . 147 ( 1 ) does not make

reference to BOK o r ADN. I t r�fers only to HPD

showi ng that transaction was between CBMF and HPD

only. I s this a sheer mistake or accident? Deal

s l i ps s i gned by accused No . 1 also show accused

No . 2-HPD as counter party. Replies given by ac­

cused to the concerned questions i n examination

under section 313 C r . P . C . are material . In reply

to question 235, accused No . 1 stated that cost memo

Exh . 141 for sale o f 13% DVC Bond i s issued by Hiten

Dalal . Accused No . 2 also a dm i ts this pasition i n

reply to the said question stating that delivery

was completed by returning BR N o . 2272 to CBMF and

delivery was completed i n a l l respec ts . Question

No . 238 was asked to the effec t that i t has come i n

the evidence of prosecution that Exh . 1 44 is lett�r

o f CBMF under s i gnature of accused No . l issued to

Andhra Bank i n hand w r i t ing of accused No . l

i n f o r m i ng that RBI cheque was issued by CBMF in

favour o f Andhra Bank calling upon the Andhra Bank

to give c 1·edi t to HPD. Acc used No . 1 admitted this

and stated that del ive ry had come f rom HPD and as

per his instructions RBI cheque was issued in

1 1 8

SC. 5/93-J

favour of Andhra Bank and accused No . 2 replied that

the said sale o f Rs . 25 crores 13% DVC Bond vide

Exh . 1 4 1 was e f fected on 26 . 6 . 1991 and consideration

of sale was to be received by him i n his Andhra

Bank account and according to market practice and

normal routine course o f business, the said cheque

was f o r proceeds accompanied by Can Bank Mutual

Fund letter Exh . 144 to credit the proceeds i nto his

accou n t . I n reply to quest ion N o . 242 accused No . 1

also admitted regarding conce rned entry i n the

ledger fol io ot 13% ovc Bonds wherein name o f

Andh ra Bank appears and i n entry of 26 . 6 . 1991 i n

bank column name o f HPD appears. I n

question No . 2.34 accused No . 2 stated

26 . 6 . 199 1 , he sold Rs . 25 c rores 13% DVC

CBMF and delive red them BR of BOK.

reply to

that o n

Bo nd to

The said

de l i very of Rs . 25 crores 13% DVC Bond was given by

AON-accused No . 3 i n view o f his purchase of Rs . 28

crores 9-1 /4% 1992 ( 2 ) . The said transaction was i n

the normal and routine course o f busi ness and at

the relevant time t h i rd party BR was an accepted

mode of delivery and i t was prevalent market prac-

tice. This is in contrast to his ent i re stand in

defence t hat he has absolute ly no conce rn i n these

transactions w i t h ADN and t ransactions are not o f

AON and :i.n fac t are between BOK and CBMF . Having

. 1 1 9

SC. 5/93-J

taken away Rs . 25 c rores, he cl aims that he sold the

BR and he took away the money because Rs . 28 crores

were due to him f rom ADN. Therefore he recei ved

the amount of Rs . 25 crores and recovered the dues

f rom AON i n respect of ea r l i e r t ransactions with

AON. The question is how could he sell the said

secu r i ty . Did it belong to h i m . I t was pu<·chased

earlier by ADN and BR was issued by CBMF which was

to be retu rned to BOK . Deal i ng i n t h i rd party BRs

is one thing but how he gets i t has to be

explained. I n the reply to general question No. 934

accused No . 2 has stated about market practice to

deal i n t h i rd party BR and that such transactions

used to take place regularly and has further stated

that he received Rs.25 crores i n respect of sale o f

15% DVC Bond f rom AON-accused No . 3 by way of BR

issued by CBMF i n favour o f BOK in lieu of prt

consideration of Rs . 28 crores 9-1 /4% 1992 dated

23 . 5 . 1991. A suggestion was given to P . W . 44 i n

cross examination at his instance, a t page 1373 &

1374 , vol . 9 . That Rs . 28 crores were due to accused

no . 2-HPD f rom accused no . 3-ADN i n respect of 9-1 /4%

l.992 bonds. A l l these transactions are between

accused no. 3-ADN and CBMF but the documents are

created so cleverly that in no case l iabi l i ty would

come to accused no . 3 -ADN and payment is always made

120

SC . 5 /93-J

by BOK . Acused n o . 2-HPO i ssued cost memos as

broker for CBMF menti o n i ng him �;e l f as the counter

party and played the mischei f o f getting one cheque

i n h i s ban k ' s name to take away the proceeds wi th

active support o f accused no . 1-Narichania. Accused

no . 3-ADN f u l l y supported this act by subs t i t u t i n g

o t h e r BRs of d i f fe rent PSU bonds to make up the

face value o f Rs . 100 c ro res . A l l t h i s clearly shows

that accuswed no . 1-Nari chania �as also f u l ly aware

of t he fact not only that these transactions are

shown i n the name of BOK and the person behind . i s

not only accused n o . 3-ADN but accused no. 2-HPD was

also equally the party . I t clearly establishes the

compl i c i ty of accused no. 1-Naricha n i a , accused

no . 2 -HPD and accused no . 3-ADN . The nexus between

accused No . 1 . accused No . 2 and accused Ho . 3 is thus

f u l l y exposed . Otherwise accused no . 1-Narichania

woL1ld no t agree to issue a c heque merely because i t

i s claimed by accused n o . 2 i n a transaction which

according to him is between CBMF and BOK . Accused

No . l doss not even c l a i m that accused no . 2 told him

that he has to receive R s . 28 c r o res from BOK a nd

BOK has therefore agreed that cheque o f Rs . 25 and

odd c rores and be issued i n the name o f Andhra Bank

and made payable to accused No . 2 by w r i t i ng l e t te r

to Andhra Sank. It i s not a case whe re

121

merely

SC. 5/93-J

because cost memo is issued by Accused No . 2 , cheque

is w ri tten as d i r ected by him i n as much as a l l the

other cost memos are also i n the hand w r i t ing of

accused No . 2 and he is mentioned therein as the

counter party" but the cheque is asked for and

issued in favour o f BOK. On his part accused No . 3

to fac i l i tate this act of accused N o . 2 i n taking

Rs . 25 crores issued further delivery orders f o r

free delivery to him of PSU Bonds o f d i f ferent

di scri pt i on of transactions and of d i f ferent date$

totaling to Rs . 25 crores to make up the figure of

Rs . 100 crores i nstead of asking accused No . 2 the

reason for taking away the BR and consequently

amount of more than Rs . 25 crores. I f there were

t ransactions o f actual sale and purchase by accused

No . 3-ADN i nvolvi ng his funds would he keep quiet

when Rs . 25 crores are taken away by accused No . 2-

HPD and further more would he make up the def i c i t

o f face value o f Rs . 100 crores ? The nexus between

accused No . 1 and accused No . 2 , accused No . 2 and

accused No . 3 , and accused No . 1 and 3 which they

have t ried hard to hide has come out naked by t he i r

conduct . A l l the acts were fac i l i tated as deal i ngs

were only on BRs not involving physical bonds and

accused knew w e l l that the ques tion o f physical

delivery would never arise .

.122

SC . 5/93-.J

88 . Before proceeding f1.1rther i t w i l l be

appropriate to refer to some o f the general

arguments . The fi rst contention raised by a l l the

accused is that none of the wi tness P . W . 5 Bipin

Divecha, P . W . 2 Mukurld Khe r , P . W . 7 Ms . Nandita Rao.

P . W . 1 4 Mrs . Meena Arbune and even any other w i t ness

e i t he r from CBMF o r from BOK , o r even P . W . 44 Bharat

Da rj i , any personal knowledge of the

transactions and what they have deposed is from the

documents and reco rd . I t is true that

wi tnesses do not have pe rsonal knowl edge .

the

These

t ransac tions, speci a l l y t ransaction o f ADN or BOK

w i th CBMF o r of CBMF wi th other i nst i t u t ions a re

such that personal knowledge is to the accused. On

behal f o f BOK accused No . 4 was dealing and when

transact i o ns are of accused No . 3 , accu$ed No . 3 is

also dea l i ng and so other employees o f BOK were

unaware of the nature of t ransaction and similarly

in CBMF i t i s accused No . 1 who i s the dealer and

he was ente r i ng i n to the transactions and the

broker is accused No . 2 and accused No . 4 was deal i ng

on beha l f of BOK or ADH and therefore , accused

Nos . 1 , 2 , 3 & 4 have personal knowl edge . Question

is whethe r , merely because wi tnesses are not aware

o f the nature of tr ansactions, the i r evidence is of

123

S C . S/93-J

no hel p to prove what has happened. As per section

62 of the Indian Evidence Act, the document i tsel ·f

when prod uced i n origi nal i s a primary evidence .

The contents of the documents are proved and a re

not even disputed. Oo ri gi nal documents are produced

and proved. Section 3 of the Evidence Act defines

" p roved " , "disproved" and " no t pr·oved " . According

to this section a fact i s said to be proved when

afte,. considering the matters before i t , the Court

ei the r believes i t to exist o r cons iders i ts

existence so probable that a prudent man ought ,

under the c i rcumstances o f the pa rticular case , to

act upon the suppos i t io n that i t exi sts .

There'fore , even though the w i t nesses have proved

the documents and the proof o f the document is to

the h i l t and every part thereo·f is proved , merely

because persons who have the personal knowledge of

the t ransaction are accused before the Court , the

Ce>urt cannot say that unless somebody havi ng

personal knowledge of the t ransac t ion comes forth

to depose about it the Court wi l l hold the facts

as proved. At least GOI secur i ties t ransactions

were not on any backing ei ther of physica l s , BR o r

SGL , so far as BOK and CBMF ar-e concerned , and as

such these sales and purchases were only f o r name

sake and n ot ge n ui ne sale and pu rchase

124

transactions.

SC . 5/93-J

Showi "1P o f sale and purchase was

()>' made. which i s the crux o f the matte r . In case o f

such clandestine acts of showing sale and purchase

by documents w i th a view to si phoni ng money the

persons other than the perpet rato rs of fraud cannot

have personal knowledge. Therefore proving and

explaining the documents i s the only o ral evi dence

which the prosec ution could adduce .

89 . Anothe r ar gument that was st renuously

advanced was that the cha rge pertains to the

t ransactions o f 27 . 5 . 1991 i n respec t o f two GOI

securities and the refo re , the prosecut i on s hould

not have been a l l owed to lead evi dence of other

t ransact ions. That evidence is i r relevant and

inadmissible . I have discussed a l l the

t ransac tions i n GO! securities as well as

transacions o f PSU bonds i n detail to show the

l i n k . The f i rs t two t ransac t i ons of GOI securities

2008 and 2009 in respect o f sale to CBMF by accused

No . 3-ADN th rough BOK gene rated the funds. The

funds were c re di ted to the acco un t of accused No . 3

and used by accused Nos . 2 and accused No . 3 . I f

t ransactions had been genuine and documents had

been prepared accordingly c reat i ng l i abi l i ty

against accused No . 3 there was no question . Had

125

SC. 5/93-J

t he SGLs been issued by BOK not only by mentioning

the account number of the cons t i tue n t . but also by

mentioning that i t was on account o f Abhay Narottam

(accused No . 3 ) then l i abi l i t y for bounc i ng of SGL

transfer forms woul d be of AON and precisely to

avoid th i s the documnts were manipulated through

accused No . 4-Raj e , agent of BOK. The documents were

prepared to s u i t the purpose of accused spec i a l l y

o f accused Nos . 2 and 3 o f s i phoning the CBMF funds

and creating l i a bi l i ty against SOK and accused No . 2

and accused No . 3 u t i l i zed that money for t he i r

n e fa r i o us ac t i v i ties . Now accused No . 1 w i t h the

h e l p o f accused No . 2 went on entering into f u r t h e r

transactions so that the fact that SGL t r ansfer

forms are bounced is suppressed and there fore . on

the same day he again sold the same sec u r i t i es

show i ng p r o f i t to CBMF when i t had i n fact los t the

enti re amount paid to BOK. The SGL transfer forms

issued by him bounced on bei ng presented to RB I by

C i t i bank . He dealt � i t h the same sec u r i ties

further wi thout the secur i t ies having come to the

account of CBMF". The fu r t her transactions done by

accused No . 1 are a l ready referred to above. Accused

No . 1 and accused No . 2 then managed t o see that the

bounced SGLs come to CBMF and see. SCB accepted

the bounced SGL even by returning va l i d BRs which

-------------·· . . .

126

SC . 5 /93-J

i � due to 15% a r ra ngement between accused No . 2 and

SCB and accused No . 1 i n turn acts as per dictates

of accused No . 2 by issuing the cheque and also

letter to And h ra Bank to e naol e aCCU$6d No . 2 to

s i phon o f Rs . 25 c r·ores which �wen according to h im

a re not o f his own but he claimed i t in order to

recover old dues f rom accused No . 3-ADN. Assuming

fo r the sake o f argument that there wai some deal­

i ng between acc used No . 2 and accused No . 3 in which

accused No . 2 was e n t i t l e d to claim Rs . 25 crores

from accused No . 3 , he cannot secure a cheque which

had to be issued to BOK o r ADN. I f accused Nos . 2

and 3 were not having i n terconnection accused No . 3

would not keep quiet when Rs . 25 c r o res had gone out

o f his reach and are not brought back. The con­

nection between accused Nos . 2 and 3 is f u r t he r

es tab 1 i s hed by the e n t r i eg Exh . 677 ( 1 ) and

Exh . 677 ( 2 ) the computer print out statement of

account maintained by accused No . 2 to which I have

al ready made reference. Accused No . 1 and accused

No . 4 become a part of this when accused No . 4 not

o n l y iss ued SGL t rans fer forms w i thout there bein�

secu r i t ies i n the account but the rea f te r he neither

made any attempts to get back the SGLs duly

discha rged nor does he insist on accused No . 3 to

bring the sec u r i ti e s . Accused No . l actively hel ped

l.27

SC. 5/93-J

accused Nos . 2 and 3 by s i t t i ng tight over the

bounced SGL transfer forms without taking any

action thereafter i n spite of having knowledge of

bouncing of the SGLs :issued to Citibank. When

P . W . 16 V . N . S henoy o f Ci t i cal l ed upon him to make

good the loss by credi t i ng the secur i ties to the

account of C BMF , instead o f taking any action and

proceeding against BOK o r AON he went on t rading i n

the same securities, without there bei ng secur i t i es

i n the SGL account o f CBMF . An honest a11d

unconcerned of ficer in his place would have

seriously persuaded BOK to rec t i fy the SGLs o r

ret u rn theamount w i t h i nte re�; t . A l l these

transactions a re therefore done i n pu rsuance o f the

corispi racy . F i r'!S t l y to conceal the fact of boi..mcing

of BOK ' s SGLs and secondly to u t i l i ze t he funds

f r audulently obtained by accused No . 2 and 3 . Al l

the acts are done i n a very systematic manner which

required a designed plan and i t i s also implemented

w i t h one m i n d .

9 0 . As a result o f this , the C i t i bank was

ul timately requi red to file a s u i t agai ns t SCB and

Canara Bank (Suit No . 20 o f 1994) . Accused No. 2-HPD

was a party to tha t sui t . C i t i bank made a claim i n

respect of the amounts o f SGL t rans fer forms o f

128

SC . 5/93-··J

1 L 5% GiOI 2009 Rs . 42 crores and Rs. 8 c::rores i n

respect o f transaction o f 18th and 19th Septembe r .

SCB had al ready filed a suit against CBMF in the

High Court which came to be transfer red t o the

Special Court and was numbered as 13 of 1994 . I t

was f o r recovery i n respect of the SGL transfer

form o f GOI secu ri ties 2008 for Rs . 58 . 39 crores i n

respect of three transacti ons o'f Rs. 7 crores. Rs . 10

cro res , and Rs . 43 crores. C i t i bank claimed that i n

case suit No . 3837 i s decreed against them, they

should be held enti tled to a decree against CBMF .

Canara Bank and Trustees were the other defendants

in Suit No . 20 of 1994 . Accordingly decrees have

been passed i n these s u i t s . The certified copies

are on record and I am refe r r i ng to the decrees

only to show that u l timately the SCB as wel l as

C i t i bank were required to approach the Court for

the loss of f unds i n these transact ions as the

transactions entered into were without backing o f

securi ties.

9 1. P . W . 8 K . R . Acharya, compl ainant , reti red

as General Manage r . I n Apr i l 1992 he took over as

Chief Executive of CBMF at Bangalore. He had come

to Bombay on 1 9 . 5 . 1992 along with General Manage r ,

Gop�lkri shnan and visi ted CBMF office at Ba l la rd

129

SC. 5/9J;-J

Estate and approached General Manage r , 8 . R . Achayra ,

who told him that there was a claim ·from sea

regarding SGL transfer forms issued by CBMF amount-

i ng to Rs . 58 . 39 crores . As accused No . l was on

leave on that day , he asked M r . B . R. Acharya to

contact accused No . l and come to the of fice on the

next day. On the next day accused No . 1 came to the

o ffice and thereafter enqui ry was made about the

claim o f SCB and accused No . 1 informed him that

M r . Hiten Dalal , accused No . 2 , was the broker and he

(accused No . 1 ) sought permission to sort out the

ma tte r . Accused No . l was asked to give acknow l -

edgement of a letter received from SC8 dated

1 9 . 5 . 1992. By that letter SC8 was claiming

Rs . 58 . 39 c ro res f rom CBMF i n respect of 3 SGL

transfer forms issued by CBMF and photo copies of

th ree SGL t ransfer forms were annexed.

92 . He furthe r stated that on 20 . 5 . 1992 they

(i . e . he and Gopalk rishnan) di rected accused No . 1

to see that he should contact accused No. 2-HPD i n

respect of c l a im of see and sort out the matte r .

During that per:i.od he used to vi si t Bombay office

everyday

off ice

whet her

and on 21 . 5 . 1992 when he w9nt to the

(.r'l.{l to enquire from accused No . 1 Gopa l k rishna

I'.._. the matter had been sorted out from HPO

130

SC . 5/93-J

(accused No . 2 ) , he was told that accused N . l had

not sorted out the matter and so on 22 . 5 . 1992 i n

the morning, he suggested M r . Gopalk rishnan that

they should go to the office of acc used No . 2 and

accordingly

of f'ice of

at about 1 0 . 30 a . m . they went to

HPD (accused No . 2 ) . There they

the

saw

accused No. l . Accused No . 1 int roduced t hem to

accused No . 2 . When he ( P . W . 8 ) i nqui red from accused

No . 2 about the claim o f sea. accused No . 2 told him

that the BOK office opens a t 12 noon and on ly after

that he can contact the persons from BOK and

thereafter he would i nform the outcome of his visit

to BOK after which P . W . 8 and Gopalkrishnan left the

office of accused No . 2 . They however thought i t

necessary to visit BOK whi ch is si tuated nearby

the office of accused No . 2 and they went to the

o f fice of BOK and met Mr . Raje accused No . 4 and

i nqui red about SGL transfer forms issued by 80K i n

favour o f CBMF i n May 1991 . He also asked M r . Raje

that the sai d ·forms were returned and sent to t hem

for rectification t h rough accused No . 2 . Accused

No . 4 Raje informed him that t he transactions have

been settled and thereupon they inqui red i n what

manner the transactions were settled. M r . R�je then

t o ld that the two SGL t rans fe r forms were issued i n

favour of CBMF i n May 1991 and they saw i n his f i l e

131

SC . 5/93-J

the said forms w i t h marks of cross i ng showing that

they were set tled and they took photocopies of the

two ·forms from Raje , acc:used No . 4 . W i t h the said

photo copies they went to the office of HPD-accused

No . 2 . On showing the photo copies to HPD i n h i s

office , they requested h i m to explain as to why SGL

t ransfer forms were found with 80K and HPD (accused

No . 2 ) requested for t i me to look into the matter

and told that ater contac t i ng BOK he would let them

know . O n 23 . 5 . 1992 he l e f t f o r Banga l o re . A l etter

was however issued on 22 . 5 . 1992 by CBMF to BOK

stating that transactions pertaining to SGL forms

have not yet been squared ot by BOK and request i ng

BOK ei ther t o pay money o r to provide fresh SGL

t ransfer forms with balance i n RBI SGL account.

The letter is Exh . 242 .

9 3 . H e further stated that before leaving

Mumbai for Bangalore on 22 . 5 . 1992 he asked accused

No . 1-An i l Narichania to hand over charge of his

department to M r . Ram raj . Divisional Manager and

asked accused Na . 1 to work on the same post but o n

special duty with Mumbai o f f i ce and on leaving

Bangalore. he obtai ned the permission of the

superiors and i nvestigation was carried out by the

supe rior officer M r· . K . V . Hegde , P . W . 1 3 . K . V . Hegde

132

SC . 5/93-J

came to Mumbai and conducted enquiry and again on

2 8 . 5 . 1992 complainant K . R . Acharya came to Mumbai

and at tended the o f f ice. He a l so held a mee t i ng

w i t h the Solicitors and on return i n the ev eni ng to

the office , B . R . Acharya, Gene ra l Manager, handed

over to h i m a l e tte r si gned by accused No . 1 giving

deta i ls i n respect o f these t ransactions. Thi�

letter is in the 'fo rm of I nfo rma tion Note Exh. 244.

He read the letter which was signed by accused

No . 1 - A n i l Narichania and then called acc used N . l to

his chamber and asked him whether i t was his

explanation . A n i l Narichania a nswered the query i n

the a f f i rmative . He inquired from him ( accused

No . 1 ) whether statement i n this note was g i v e n by

free w i l l and A n i l Na. r i chan ia (acc used No . l )

repl ied that query in the a f f i rmative and there upon

he asked him (accused No. 1 ) to put endorsemen t on

the said letter i n his presence and i n presence of

M r . Gopa l k r ishnan and M r . B . R . Acharya which An.il

Narichania-accused No . 1 put i t i n his own hand

w r i t i ng . A Court quest ion was asked to h i m as to

why he himse l f did not put an e ndo rsement

certi fying that the e ndo rsement was put i n his

presence by accused No . l . He stated tha t it was a n

e r r o r not to put such endorseme n t .

133

SC . 5/93-J

94 . Mr . K . V . Hegde subm i t ted repo rt Exh . 262 .

On get t i ng the report from Mr . Hegde on 30 . 5 . 1992,

he took act i o n against accused N . l by issuing

suspension order w i t h effect from 1 . 6 . 1992. From

the report of Hegde (P . W . 13 ) he found t ha t thers

were i r regul a r i ties and lapses on the part of

accused No . 1 . He lodged complai nt w i t h C . B . I .

a fte r about a month on 1 9 . 6 . 1992.

95 . I t is true that this w i t ness does not

l1ave personal knowl edge o f e a r l i e r incidents.

Howeve r, what t ranspi red after his a r r i val to

Bombay i s very mate rial . In c ross-exam i nation by

accused No . 2 , he stated that his grievance was

that CBMF was dece ived and fraudulently i nduced to

deliver Rs. 103 and odd crores to BOK . His evidence

was cha l lenged f i r�t ly on the ground that he has no

personal knowledge and second ly on the ground that

there are certain improvements . Certain material

facts a r e not stated in the compla i nt and al though

he had seen SGL transfer forms and he had knowledge

that i t was accused No . 4 -Raje who had issued the

SGL transfer fo rms , he did not lodge complai nt

against accused No . 4 -Raj e . I do no t find that

these factors in any way affect the credibi l i ty of

the witness . His compla i n t set t he law i n motion

134

SC. 5/93-J

and may be, at that time he did not f i nd i t

necessary o r prope r to complain agains t Raje

although he knew that Raje had issued the SGL

transfer

f i nd� �

forms. He admitted that he did no t t ry to

executives o f the BOK who were involved i n

the conspiracy. This also i n my opi nion is not a

ground to suspect his evidence because he is the

person who after coming to know that CBMF was put

to loss has taken action against the person

resPonsi ble i . e . accused No . 1 by asking him to hand

over charge even before suspension order could ba

passed .

96. There is also evidence of P . J . Subba rao,

P . W . 1 1 and Advocate Mr . N . J . Jagtap , P . W . 1 0 , No ta ry

Publ i c . Evidence is regardi ng the aff idavit sworn

by accused No. 2-HPD on 23 . 5 . 1 992 and P . W . 10 has

stated that on 23 . 5 . 1992 P . J . Subbarao . Ass tt .

Gene ral Manager of CBMF had brought Hiten Dalal

(accused No . 2 ) to hi s o f f i ce . Affi davi t �as signed

i n his presence by Hiten Dalal (accused No . 2 ) and

i n presence of Nota ry Public and at that time one

M r , Ashokkumar o f "Ca11fina." was also w i th t hem .

Evidence o f P . W . 1 0 , Advocate Jagtap, Notary Public,

was challenged on the ground o f some i nf i rmi t ies .

P . W . 1 1 Subbarao was di rected by the General Manager

135

SC . 5/93-J

to accompany Hiten Dalal for identification before

the Notary. I t is true that there is no evidence as

to who has w r i t ten the name and particulars of

Hiten Dalal i n i nk on a f fidav i t . However , accused

No . 2 tiiten Dalal does not dispute his signature on

the affidavit Ex h . 250 as we l l as on the notary " s

regi s te r . Therefore, eve n though there are some

entries i n the register on which there are no

signatu re� of the deponents , fact remains that so - - �

far as accused No . 2 is conce rned� he ha$ si gned the

a f f i davit as well as the register on 23 . 5 . 1992.

The Notary is an Advocate practicing i n High Court

and therefore. for some such i n f i rmities it is not

poss i ble to dis regard evi dence o f the Notary and

P . W . 1 1 Subbarao and thereby discard the affidav i t .

I t must be borne i n mind that accused No . 2 i s a

sh rewd broker and was dea l i ng i n securities and

shares. I t is his claim that he was doing busi nes$

i n thousands of crores every yea r - He i s

conversant w i t h execution of documents and is well

aware of what is meant by a f fidav i t . T h i s

a f f i davi t i s on a stamp paper a n d accused No . 2

f u l l y knows what i s an affidav i t on stamp pape r .

The a f fidavit sworn and �igned by accused No . 2 is

reproduced be low :

136

SC . 5 /93-J

B E f l Q e Y .l 1.

I , Hiten P . Da l a l son o f S r i Prasan J . Dalal aged 34

years recently residing at 201 , Shanti Towe r s ,

M i l i tary Road , Marol , Andhe ri ( E ) , Bombay hereby

make the following A f fidavit o r Declaration on oa th

as under

I say that I have acted as a B roke r i n respect o f

sale of .1 1 . 5% Government of India Loan 2009

Secu r i ties of the face value of Rs . 44 , 58,05 , 000/­

by Bank of Karad (hereinafter re fe r red as ' BOK' ) to

Canbank Mutual Fund (hereinafter refer red to as

' CMF ' ) on 27th May, 199 1 . I also acted as broker

for sel l i ng the same Secu r i ties on the same date to

C i t i bank NA (hereinaftE!r referred as • c i t i ' ) by CMF

giving i ts SGL T ransfe r Form to me for giving to

C i t i .

I say that I also acted as Broker for purchase o f

CMF o f 1 1 . 5% Government o f India 2008 Loan

Sec u r i ties o f the face value o f Rs . 58 . 39 Crores

f rom BOK and o btai ni ng Transfer Forms signed by SOK

on 27th May, 199 1 . I also acted as broker for

sel l i ng the same Securities on the same date to

C i t i by CMF giving its SGL T ransfer Fo rm to me for

giving to C i t i .

i file{. 1.bSl. � ab9ye � transactions eot@red .in.t.Q

Q:i fill!$. � .cJ.1f. � gacked � SGl,.§ issued � � in

137

favour. Q.! .fillli.a..

SC. 5/93-J

l aa:t. .t.hil 1. � received .th§ Transfftl:. f.Q.!:m in

respect gf tJ)e gig Securities originally issued illL

� in favour Qf. QtlE. which � return§d !2Y P.D.O.

R.8.I. QD account Qf. insufficient b�laoce ru1Q �

.:t.hat. the same was handed ™ !& .fillK...

I say that I have also acted as a Broker for

purchase by CMF of Rs . 60 . 00 Crores of 1 1 . 5%

Government o f India Loan 2008 from C i t i on 27th

July, 1991 and Citi returned to CMF the Transfer

Form e><ecuted by i tse l f in respect of the same

1 1 . 5% Gove rnment of India Loan 2008 of the face

value of Rs . 58 . 39 Crores and also issued a SGL

T ransfer Form i n favour of CMF for Rs . 1 . 61 Crores

and which was then presented to Reserve 8ank o f

India for crediting to i n the SGL Account of CMF.

There«�.fter I acted also as a Broker i n respect of

the t ransaction between CMF and Standard Chartered

Bank (hereinafter refe rred as • see ' ) in respect of

11 . 5% Government of India Loan 2008 by delivering

the Transfer Forms as under :

1 . 23 . 08 . 1991

2 . 26 . 08 . 1991

Rs . 1 0 . 00 Crs.

Rs. 7 . 00 Crs. The ori 9i na l SGl was

returned by SCB i n

Decembe r , 1991 to CMF

and QME .executeg �

1 38

3 . 03 . 09 . 1991

SC . 5/93-J

f resb � transfer

crores i!Q.9. �.1.pl

c rores wbicb �

delivered .tQ. �

Rs . 43 . 00 Crs .

I say that the demand made by sea on CMF on the

return of SGLs issued i n t he i r favour by CMF is not

i n order as they are against the i r own ea r l i e r SGLs

issued i n favo u r of BOK . Hence , I say that CMF has

no obligation to SCB i n respect o f the t ransactions

made th rough me between sea and CMF .

I say that I have declared the above statements are

based on my personal knowledge and I declare the

same to be t ru t h on oath.

Declared on this 23rd day of May 1992 .

Declared by within named deponent

Iden t i fied by me . Sd/-

( P . ,J . Subba Rao. )

Declared on oath before me

Sd/-

NOTARY PUBLIC Niranjan Jagtap & Co .

(Unde r l i ning i s m i ne ) .

H i s explanation that i t was taken f rom hl.m under

coercion i s to say the least on the face o f i t

unacceptable and after-thought . He has not even

139

S C . 5/93-J

disclosed as to what type of t h reat was given to

him and what he means by coercion. Mere use o f

word coercion i s not sufficient t o accept the

explanation that i t was under coercion. Even after

having sworn and signed the affidav i t . he d i d not

take any action to i nform the superior officers of

the Mutual Fund o r to the Police that under

coercion some af fidavit was obtai ned f rom him and

i t should not be acted upo11 . Si nce i n formation

note of accused No . 1 and the af fidavi t of accused

N o . 2-HPD are taken long before even lodging of FIR

and at a time when even prosecution was not i n

contemplation o f the CBMF authori ties. no objection

was raised to the admiss i bi l i ty thereof in ev idence

and on this point there was no argument at a l l and

i n my view these documents are admissible i n evi­

dence .

97 . I n the i n formation note Exh. 244 accused

No . 1 has stated regarding transactions o f sale and

purchase o f GO! secur i t i es on 27 . 5 . 1991 between

CBMF and BOK. The i nformation note reads as below:

"INEOBMAIION NOTE.

On 27 . 05 . 91 the fol lowing t r·ansactions were done :

Purchase from Bank o f Karad through broker Hi ten

140

SC . 5/93-J

P . Dalal .

1 ) 1 1 . 50% GOI 2008 (23/0S)FV Rs . 58 . 39 Croree @

Rs . 100 . 78 by way o f SGL .

2) 1 1 . 50% GOI 2009 ( J.5/05) FV Rs . 44 . 5805 Crores

@ Rs . 1 00 . 48 by way of SGL .

Sale to Citiba n k t hrough broker Hiten P . Oalal .

1 ) 1 1 . 5 )% GOI 2008 (23/05) FV Rs . 58 . 39 Cro res @

Rs . 100 . 80 by way of SGL.

2) 1 1 . 5 )% GOI 2009 ( 1 5/05) FV Rs . 4 4 . 5805 Cro res

@100 . 50 by way o f SGL.

SGL s issued by Bank o f Ka rad were lodged w i t h RBI

on 29 . 05 . 91 .

On 27 . 07 . 9 1 purchased 1 1 . 5 ) % GOI 2009 (23/05) FV

Rs . 60 . 00 C ro res from C i t i bank th rough Hite n P . Da l a l

@ 101 . 35 by way o f their BR No . 47 4 .

On 1 9 . 08 . 91 the above BR was exchanged by return of

our SGL dated 27 . 05 . 91 f o r FV Rs . 58 . 39 Crores and a

f resh SGL for Rs . 1 . 6 1 Crores issued by C i t i bank i n

our favou r . On 21 . 08 . 91 this SGL was lodged by us

with RBI .

The fol lowing sales were made to Standard Chartered

Bank through H i ten P . Dalal in respect of 1 1 . 50% GO!

2008

On 2 3 . 0 8 . 9 1 FV Rs . 10 . 00 Crores @ Rs . 101 . SO by w.::a.y

o f SGL.

On 26 . 08 . 9 1 FV Rs . 7 . 00 Crores @ Rs . 1.01 . SO by way

1 4 1

of SGL .

On 04 . 09 . 91 FV Rs . 43 . 00 Crores @ Rs . 1 01 . 50 by way

of SGL .

( T he SGL for FV Rs . 7 . 00 C ro res was later spl i t into

two SGLs w i th FV Rs . S . 39 Cro res and Rs . 1 . 6 1 Crores

at the request of the buyer )

Quriog .t.b§. fip:;.t � Q..f Jyly. 1.2.2.J.. .lJ::J§. � issyed

.l2Y. the � Q.f K�r§d in ouc favour � retyrned �

filU. f.Q1:. � Qf balaoce. Tbe � � handed �

1Q .:t..h§. brok�t Hiten P.Dalal fQr. rectificatigo fillQ

� M Q§L telephon]J;. advice of � Q.f

Ka rad.

� brokec inform� !.ha..t. � woulg �eliver .t.Q Stand­

ard Qbartereq fulnk fresh SGLs Q..f. � Qf Karad .ao.9

return our SGLs issued � Standard Chartered Bank.

Thereafte r , there was no c l a i m from Standard

Chartered Bank regarding the delivery or even for

half yea r l y i nterest which fell due o n 223 . 1 1 . 9 1 .

Therefore i t was presumed that the SGL del ivery as

a5sured by the broker had i n fact taken place .

Howeve r , af ter February 1992 , Standard Chartered

8.ank began to enqui re orally about the SGLs which

were yet to be recti fied. Therefore, � Q[Oker

� again contact13d 1Q a§cert9i,n .ttm position.

However , the mat te r was not solved by him t i l l

date , in spite of personal follow up.

1.42

SC . 5/93-J

As regards our sale of 1 1 . 5) % GOI 2009 FV

Rs . 44 . 5805 Cr-ores to C i t i bank by way o f SGL, the

fi rst ever communication from them came only on

1 9 . 05 . 92 by way of tel@Qhonic gyery i n·forming .t.tlA!;. Q..!J.L. filll:. J.1i lying � � uncleared. Hence the re

was no occasion for us to believe that the SGL of

Bank of Karad had bounced .

During the period May 1991 to Oc tober 1991 our

purchase/sale deliveries wen'! average 20 per day

cove ring many schemes . r was assisted by only one

secretarial staff . Hence. we were not able to

follow up the wo r k .

Lt. 1..§. the marker practice to follow .Y.Q .f.Qr:. filil.. returneg fil.t.h ..t.b§ CQOQecned brokec. QJm fil;z lS&..ls QJ.

staff � IIl.Ql:§ t ransactions L cQ.l.L.\.g D2.t. inform .t.lli:l

� to mx b.igher ups.

( U nde r l i ning is mine . )

This information note clearly discloses the nexus

between accused No . 2 and accused No . l and the fact

that SGL t ransfer forms were handed over by accused

no . l to accused No . 2 for rec t i f ication and replac -

eent as per the telephone advice of BOK . I t is

pertinent to point out that accused Nos .iand �re

c l aiming that SGL t rans fe r forms were handed over

to accused No . 3 by accused No . 2 to whom , they were

J.43

SC. 5/93-J

given by accused No . l . He a l so re fers to the

spl i t t i ng up o f SGL t ransfer forms and clearly

shows how he ente red into further transactions

rega rding the same secu r i t i es . He has also re­

ferred to the return of CBMF SGL transfer forms fo r

Rs . 58 . 39 crores . l n this note he has stated re-

garding 1 1 . 5 GOI 2009 Rs . 44 . 5805 crores sold to

Citibank and that the fi rst ever communication

from them came on 19 . 5 . 1992 on telephone query that

SGLs were l y i ng uncleared. I t was contended on

beha l f o f accused No . 1 that accused No . 1 could not

have made such a s tatement if i nformation note had

been prepar·ed by h i m .

the argument . I t is

I am not at a l l impressed by

also contended that i t was

computer pri'nt out and accused No . 1 does not know

typing or working on computer and ther-e is no

evidence as to who typed and who took the p r i nt

out . The fact remains that i t is signed by accused

No . 1 and on 28 . 5 . 1992 and at the instance of

K. R . Achar-ya he has put thereon in his own hand a

note that i t is given by him voluntarily and not

under duress. In his examination under section

C r . P . C . he was conf ronted w i t h evidence of 313

P . W . 8 K . R . Acharya. He stated i n reply to question

No . 451 that he was suffering from Herpes and was

on leave from 13th May to 19th May 1992. O n 20th

144

SC . S/93-J

May i n the morning he received a message from the

General Manage r 8 . R . Acharya that there is some

bogus claim o f Rs.200 crores i n respect o f sale of

units by CBMF and that he should immediately come

to the office and so he at tended the office i n the

afternoon. He met Mr . M . V . Kama t , Deputy General

Manager of Canara Bank, Bangalore . 8 . R . Acharya

told him to go to RBI of fice to meet H r . Parameshwa­

ran, Chief O f f icer of DBOO along w i t h M r . Kamat and

so he went with Mr . Kamat . M r . Kamat was carrying a

forged bank receipt issued by CBMF f o r sale o f

units and had also taken pri nted bank recei pt

book with liim which they were using. That book was

taken to M r . Parameshwaran and was shown to him and

after seeing both tha bank receipts , Mr . Kamat told

M r . Parameshwaran t hat the other receipt is

one and somebody had forged the signature

forged

o f ac-

cused No . 1 on the same . M r . Parameshwaran was also

convi nced . Thereafter Mr . K . R . Achayra told that SC8

had claimed SGL for Rs . 58 . 39 crores and that they

were looking into the ma t te r . A lette r was ad­

dressed to General Manage r . CBMF by SCB but he has

not seen that lette r . Howeve r , reply o f that

letter was prepared by K . R . Acharya i n his presence

and thereafter ha was asked to sign that letter and

accordingly he signed. Accused No . 4 , howev�r ,

145

, SC . 5/93-J

admit ted in reply to ques tion No . 458 that

K . R . Acharya visi t ed the i r office on 22 . 5 . 1992 and

i nqui red about SGL t ransfer forms Exh . 33 and Exh . .37

received f rom accused No. 3-ADN w i t h his rece i v i ng

orders and exchanged with a l l BRs of BOK issued by

CBMF on 27 . 5 . 1991 and he handed over photo copies

o f the SGL transfer forms to P . W . 8 . In reply to

furthe r quest i o n he also stated that SGL transfer

forms were crossed as t ransactions were set t l ed on

24 . 7 . 1 991 . P . W . 1 8 Tushar Pati l getting back the BR

on 24 . 7 . 1991 and s igning on del i ve ry order on that

date in token o f getting back BR is not a coinci-

den t . 24 . 7 . 1991 i s a s i g n i f i cant date. I t i s

ea r l i e r to the soca l l ed t ransaction� dated

�(�27 . 7 . 199 1 . I n reply to quest ion No . 465 accused No . l

�o admitted that on 22 . 5 . 1992 he wa$ asked to

hand over charge to M r . Ramraj and M r . K . R . Acharya

told him n o t t o come to the department and si t

outside the cabin o f B . R . Acharya. In reply to

question No . 467 he stated that he was called to the

cabin of K . R . Acharya where Gopa l k rishnan was

present with B . R . Acharya and P . W . 8 K . R. Acharya told

him that SCB had a claim for Rs . 1 1 . 5 GOI 2008

Rs . 58 . 39 crores and a l so told him that they had

checked and found that these SGL t ransfer forms

were not cleared and a t that time 8 . R . Achayra

146

SC. 5/93-J

submitted the information note Exh . 244 . This note

was prepared by them and B . R . Acharya told him

( accused No . l ) that the i nformation note is about

the claim o f SCB on account o f three SGLs and

t hereupon accused No . l told that i f t hi s was the

case then these SGLs were signed by him and Bipi n

Divecha (P . W . S ) , Funds Manager o f Canstar Scheme .

He refused to sign the letter but Mr . K . R . Acharya

told him that i f he does not sign the lette r , they

would take �egal action and dismiss him. Afte r

hearing this he was mentally upset because he had

not recovered f rom a disease called " Herpes"

(involving head portion ) . Thereafter he was told

that i f he signs the lette r , they would take signa­

ture of Bipin Di vecha on the next date and on this

assurance he signed the letter with protest and

thereafter he was asked to w r i te the sentence that

he has signed of his free wi l l . The statement i n

that letter that the C i t i bank communicated on

telephone on 1 9 . 5 . 1992 could not be i n his i nforma··

tion note as he was on leave on that day. He

stated further that the SGLs were i n fact l y i ng

w i t h SCB as stated by Mulgaonkar i n his evidence

and the refo r e , i f information note states that SGL

were with C i t i then somebody must have contacted

C i t i bank office r s .

147

SC . 5/93-J

98_ The i nformation note bears the signature of

accused No . l w i t h date 2 7 . 5 . 1992 . M r . K . R . Acharya ' s

second visit to Bombay was o n 28 . 5 . 1992. The

i n formation note was submi tted to him during his

v i s i t and at that time it was al ready signed by

accused No . 1 and P . W . 8 asked accused No . 1 to state

fur·ther that it was given as per his free wi l l and

not under duress which sentence accused No . 1 has

added i n his hand w r i t i ng at that time i . e _

28. 5 . 1992. I t is to be noted here that accused

No _ l had al ready been asked to hand over cha r ge o f

his post and was humi liated when he wa5 asked to

s i t outside the cabin of B . R. Acharya on 22 . 5 - 1992-

I t is therefore obvious that he was conscious of

the fact that some action i s contemplated against

him and that the higher officers have come to k now

about the fraudulent acts resulting i n loss to CBMF

and i f i n such a si tuation he has given explanation

then it i s d i f ficult to accept that under threat o f

dismi�sal from. service his signature was obtained

and further sentence that it is given voluntarily

was got w r i. tten from him by the superior of f i cers .

These two documents i . e . the i n formation note

Exh . 24 4 and the a·ffidavit of accused No . 2 E)(h. 250,

i n fact conclude the involvement o f accused No . l

l.48

1 SC. 5/93-J

and accused No . 2 i n the entire matter and fully

corroborate the evidence oral and documenta ry which

has been heretobefore discussed in detai l . Even

accepting for the sake of argument that accused

No. , l si gned because he was assured that Bipin

Divecha 's signatur·e would be obtained later on, i n

my view that does not make any d i f ference.

99 . Exh. 242 is letter dated 22. 5 . 1992

wri tten by P . W . 8 K . R. Acharya to · Bank of Karad

regarding t ransaction of 27 . 5 . 1991 GOI 2008 and

2009 i n fo rmi ng that the SGLs issued by BOK were

returned by PDO RBI on account of insufficient

balance. It also refers to the discussio11 in which

BOK confi rms about SGL transfer forms issued and

returned by RBI a� lodged w i th BOK and si nce no (JY

fresh SGLs were rece ived nor refund of money was

made en 27 . 5 . 1991 , the authorities o f BOK were

requested to send fresh SGL t ransfer forms f o r the

amount i n question or make immediate a r rangement

for providing su ffic ient balance w i t h Publ i c Debt

Of fice o f RBI . This is a letter which norma l l y

would be w r i t ten by any higher o fficer when the re

i s huge l oss suffered by the ban k . I t also shows

that Mr . Acharya • s testimony is t rue . These th ree

documents as well as report of M r . Hegde subm i t ted

149

SC . 5 /93-J

after enquiry f u l l y corroborates P.W.l�� Hegde and

P . W . 8 K . R . Acharya. In fact accused No . 3 i n reply to

question No. 458 clear ly stated that accused No . 2

told him and accused No . 4 that the transaction was

squared of and he did not de l iver any objection

memo of RBI s i nce the transactions were squared o f

by giving back SGL t ransfer forms free and taking

back i n l ieu thereof 8 BRs o f PSU Bonds f ree . The

PSU Bonds which he had taken under delivery order

from BOK " f ree" were subsequently sold by accused

No . 2 on his own cost memos and accused No . 2 admits

regarding sale of one of the BRs of Rs . 25 crores

DVC Bond and also admits to have issued cost memos

on his letter head in respect of the other BRs.

1 0 0 . There is no di rect oral or documentary

evidence of SGLs having been brought back byaccused

No . 2 through accused No . 1 and having been given to

accused No . 3 and thereafter to accused No . 4 or BOK .

However , there is reliable evidence of finding o f

the SGLs and copy of letter Exh . 45 meant .foY BOK <Y

wi th BOK . The SGLs would not be sent to BOK by

RBI . As per procedure RBI is req�red to send i t to

CBMF and copy to BOK . Accused No . 1 was at the helm

of af fai rs for securi ty transac ti ons . Had he been

sincere and honest , he would get in touch with

1 50

BOK .

SC. S/93-J

He did not. The SGLs not only came back to

BOK and they were crossed to show discharge. There

being no secu r i ty in the SGL account of BOK , no

entry was taken i n BOK " s records. The BOK was

required to get back the SGLs on the basis o f

which action could be taken against i t . Having got

back the o r iginal SGLsv SOK kapt quiet. Accused

Nos. 3 and 4 claim to have recei.ved bacl< the SGLs as

i f i t was a settled transaction. They claim that

accused No . 2 gave it to accused No . 3 . Accused No . 2

had earlier promised to bring back the SGLs from

CBMF . The SGLs have come back not through legal

and proper channel . They have come in a clandestine

manne r . Who was i n terested i n this at CBMF? I t

was accused No . 1 -Narichania. Logically therefore

it is accused No . 1 who would given it to accused

No . 2 through whom he got i t . When the prosecution

was not even contemplated accused No . 1 as wel l as

accused

M r . Moh i te ,

No . 2 took the same stand. I n

learned Advocate for accused

fact

No. 3

pointed out that same stand was tkaen by accused

No . 1 at the time of discharge application. I have

not considered this argument as there is no w r i t ten

note o f a r gument and i t was also not put to accused

No . 1 i n examination under section 313. There can

be no entry in any record when SGLs are $imply

151

SC. 5/93-J

brought back and shown as discharged when there i s

no e nt ryat the time of issuance. The case of the

prosecution is that i t was planned and so accused

No . 4 d id not take entries and as ex pected by hi m

when SGLs came back he crossed them and also showed

them to P . W . 8 K . R . Acharya and Gopa l k rishnan, claim­

i ng that they are d i scharged. CBMF could not take

action i n vi ew of the discharge of SGLs held by

BOK. Thus i t is clearly establis hed that SGLs of

BOK were brought back by acc used No . 2 f rom accused

No . 1 and given to accused No.3 and through him to

accused No . 4 .

101 . The prosecution also led evidence of

f u r t he r uti l ization o f money i n certai n payments

made to d i fferent banks by accused No . 3 which

evidence has not been pract ica l ly challenged . I t

i s not necessary to refer to that pa rt o f the

evidence as the evidence is led only to show how

the money was used i n rol l i ng ove r . Before consid­

e r i ng the various arguments advanced by the learned

Advocates appearing for the accused and of the

prosecution, i t is necessary to bear l.n mind the

background of the case.

152

SC . 5/9.3-J

102. This case arises out of secur i ty

transactions i n a period of scam. Accused No . 2

has sta ted i n his reply that i n those days prac-

tice of such transactions on the basis o f t h i rd

par t y BR was i n existence. I t may be true that

such practice had developed. The practice most ly

relates to the period o f scam. The prosecution has

relied on certain ci rculars of RBI . Exh . 534 ( 1 ) is

dated 1 5 . 4 . 1987 and Exh . 534 (2) is dated 1 1 . 4 . 1988.

Exh . 534 ( 1 ) prohibits buy-back ar rangement regarding

corporate security bonds and bonds issued by PSU.

So far as buy-back arrangement in Government and

other approved securities , there are certain di rec-

tions issued , which are as under :

B . Buy-back a r rangements in Gove rnment and other approved securities w i. t h (non­bank) cl ients.

i ) The buy-back deals should be exclusively

i i )

confined to Government and other

approved securit ies and the re-purchase

dates shou ld be fixed after a mini�um

period of 30 days f rom the date of sale

of the securi tiesin question .

i i i ) No sales of Government and other

approved securi ties under the arrangment

should be ef fected by banks unless the

153

SC. 5/93-J

same are actua l l y held by them on the i r

own i nvestment po rtfolio ei ther i n the

form o f actual sc rips o r i nSGL account

mai n tained with Reserve Sank.

iv) Immediately on sale. thecor respondi ng

amount should invariably bededucted f rom

the investment account of the bank and

i ts SLR assets f o r theentire pe riod

(minimum 30 days ) of holding by the

purchasers/counter-pa r t y .

The ci rcular also directs submission of qua rterly

reports. By the second ci rcular Exh . 53 4 ( 2 ) dated

1 1 . 4 . 1988, some more rest rictions were put on the

buy-back a r rangement i n Government and other

approved securities di recti ng the Banks to strictl y

adhere to the guidelines o f the earlier circul a r .

The third c i rcular Exh.535 is no doubt issued after

the date of this of fence. It is dated 26 . 7 . 1991 .

Reference i.s ma.de to it to point out why i t was

required to be issued. The material portion o f

this ci rcular is as unde r :

1 . I t is a matter for great conce rn for us

that certain banks are engaged in types

of t ransactions i n secu ri ties which

theyshould not be undertaking. A l i st of

1 54

SC. 5/93-J

such t ransactions i s appended .

( i ) Ready forward (buy-back) deals at

rates which have no relevance to the

market rates, i nter·-al i a , w i t h a view to

w i ndow dressing their balance

compliance of SLR requirements.

sheet/

( i i ) Double ready forward deals with a

view to covering thei r oversold po$i tion

in a specific secu r i t y .

( i i i ) � transactions .!2Y jssye Q.f �

Receipts (88s)/SGL fgrms r,iithoyt @ctually

holding .the. securities/without haying

sufficient balance .:iJ:l their � �.,L.

( i v ) . . . . . . . . . .

2 . You may be awan! that w i t h a view to

helping the banks to over come various

de ficiencies in the long-t,rm sec u r i t ies

market and toenable them to manage thei r

short-term cash de f i c i t /surplus6s more

efficiently. we have permitted banks to

enter .i..n.:t.Q t?uy-back deals i.o Government

securities among themsely�s ll!lQ Q.Qt fil.:tb

their non-bank clients). It was our

expectation that such deals wi l l be

155

SC . 5/93-J

undertaken by t he se l l i ng bank , only i f

i t holds sufficient $ecur i t ies (either i n

the physical form or i n SGL accou nt ) , at

market related rates and �uch dea ls wi l l

be prope rly reflected i n thei r books o f

accoun t . Howeve r , we observe that

certain banks have been reso rti ng ' tothis

type o f transactions. without actually

holding sufficient securities either i n

physical form o r in the i r SGL account

( resu l ti ng i n substitution of BRs/return

of SGL forms for want o f sufficient

balance ) , a t rates which have no

relevance to ma rket . with a vl.ew to

wi ndow-dressing t hei r profitabi l i ty/

maintenance of SLR requirement wi th a

tac it u nde rstandi ng w i th the counter

pa rty banks. Some o f the banks appear to

be taking outright ove rso ld pe>sit:ion i n

securities and i n the i r desparate bid to

cover the oversold pos i t ion in a part ic•.J­

la r security/ies enter i ntodouble ready

forward deals and o the r banks oblige them

i n tl"le matte r .

156

SC . 5/93-J

3 . Anothe r disquie t i ng feature observed is

� extrensive � Q.f. � .trt. banks . l.t.

� beeo ruu:. inteQ'�ion J;& ensure .t.!:l9..t .t..b§

banks Q.Q not undertake � transactions

i.o securities without. actually baldio.g

1.lliiml a.ru;t � OQ..t. i ss u� � u nl e:::;s � a..r.ft

in � posit:i.oo to delive r � securiti,es

wjtbin � reasonable time, Contr.AD:'.. !.Q w.u::.

above expectation. t>sfil...§. �. � issu­

.i.o.fa �Rs freely <without regard 1Q whether

� w i ll t1Q in 2 12o:aitio11 .t.Q. deliver .:t1:t§.

securiti�s tbere against within � reason-

� time) iailif again.fil;. fill initiAl. ru.d;.::.

standing � S!. series Qi transactions �

ruLt: throuqtJ 2Y further issue Q.f eBs �

in � final anaJ..ysis Q.llly_ tM � �

exchanged .e.o.st !lQ security � delivered"

Some of the banks have also been i ss ui ng

BRs on behalf ot t he i r broker c l i ents ,

wi thout verifying whether the i r broker

clients hold the secu rities covered by

the relative BRs .

4 . I t w i l l be abso l u t e l y essential for· your

bank to frarne and implement a suitable

i nvestmen t policy to ensure that

1 57

SC. 5/93-J

operations in sec u r i ties are conducted i n

accordance with sound and acceptable

business practices . Whi le evo lving the

policy you are requested tokeep i n view

the following guideli nes :

( i )

( i i )

( i i i )

( i v )

(v)

( v i )

fJ::Qm

� instsnce .Q.f return Q.f �

� public QJ::.Q1 Office Q.f the

ser:lle � .fru: � Q..f suffici�o.1 balanc..§.

in 1.h§. account should � immediately

brougl1t 1Q Q.Y.C. notice nth. � detail..§ Q.f

� transactions.

No doubt the last ci rcul ar is issued after the date

of offence . However, relevance of the same cannot

be ove r l ooked. The restriction$ which are inherent

and should have been fol l.owed were requi red to be

put 011 the banks and f i nanci a l ins t i tutior1s by

issuance o f c i rculars by the RB I .

No party either bank o r constituent of a

bank can e f fect sale on the basis of mere SGLTF or

158

SC. 5/93-J

BR unless t he r e are secur it i es held by them either

i n the SGL account or otherwise for issuance of BR.

SGL transfer fo rms issued gives an undertaking tliat

the secu r i t ies are held i n c redi t i n the SGL ac­

cou nt of the sel l i ng bank w ith RBI PDO whereas tl'1e

BR is a tempo rary ar rangement and has to be dis­

charged by physical delivery of s e c u r i t i e s wi t hi n a

pa r t i cula r period which i s approximately 90 day£.

I t is thus a fac i l i ty given for giving delivery by

issuance of bank rece i pt i n l i e u of physicals for

the reason that many times there may be d i f f i c u l ­

ties i n handing over the sec u r i ties physica l ly

f o r t hwi th or w i t h i n a sho r t time . That does n o t

however mean that sale arld purchase can be e f fected

m e r e l y by exchange of BRs or iss ua nce o f SGLs and

taking SGL or BR i n exchange. The fact that such

ci rcula r was requi red to be issued indicates how

rampant use was made of the fac i l i ty o f issuance o f

BRs and how SGLs were bein9 issued without there

being balance i n the accoun t . Therefore , the

contention of accused No . 2 that there was a prac­

tice of t radi ng i n t h i rd pa rty 8Rs has to be con-

side red on this background . Even norma l l y when a

party sells any property movea ble or immovea ble ,

the party m u s t own that prope r t y . Sec u r ities a re

moveable properties and SGLTF or BR are documents

.159

SC . 5/9:3-J

of ti tle wh ich can be te rmed as valuable securi-

ties . The banks cannot transfer money f rom one

account to another or f rom bank account to that of

broker o r of othe r bank, merely by creating docu-

ment such as cont ract notes, deal s l i ps , or cost

memos as i t would amount to creating documents o f

bogus deals i n respect o f non-existent securi ties

and thereby funding the brokers for thei r nefa r io us

act i v i t ies and thus al lowi ng the bank money to be

used by the brokers wi thout there being a case for

loan made out and wi thout loan having been sane-

tioned as required by the procedu re after fol lowing

va r i ous cr iteria and taking precausions to asslffe

recovery laid down for grant of loan. It would

amount to i l legally funding the brokers and that is

what is si phoning o f funds by the brokers from the

banks i n col lusion wi th bank o f fice r s .

1 04 . The documents styled herein as of sale . 0 I B"'� '""J. !,.-. ,� l}.:.r<-� <.� , ,,1.-;; and purchase o·f GOI secu r i t i es 2008 & 2009 ar-e� o f J ¥

I\ en.-- 0.-make-believe deals when there was no secur i ty held

by the sel l i ng party and neither i t was expec ti ng

to get t he security from any other source nor was

any attempt made i n pu rsuance o f the sale document

to b r i ng securi ties from any other source and to

f u l f i l the commitment . In fact the scam took place

160

SC. 5/93-J

and many banks and financial institutions s u f fered

loss and some ot the banks went i nto l iquidation,

one of whic h was BOK , as the res ul t of such act i v i -

ties o f the bank off icers and broke rs.

105. A careful examination o f the undisputed

entr ies i n the security ledgers of CBMF and BOK and

thei r SGL accounts w i t h RBI PDO reveals that the

transactions be tween CBMF and BOK o f GOI

securities were o f such type. On the date of sale

the se l l i ng party rleither owned the said sec u r i ty

nor was expecting i t to come from any source.

There was also no attempt whatsoever to procure the

securi ty after the so called sala. In case o f GOI

securi ties the same wer-e sold o n the basis o"f BOK

SGLs by CBMF and the SGLs went back to BOK i n a

clandestine manne r . I t was not f e l t necessary even

to create a show of reversal of re-sale by CBMF to

BOK and to faci l i tate this at BOK l�vel even en-

tr·ies were not taken in any rec;ords and accused

No . 4 di rected the subordinate s t a f f not to �st the

entries. I n case o f PSU Bonds also there \�

We+'-e no )-

ev idence of physical secu r i ty with C8MF �hen i t

sold and del ivery was given by issuance o f BRs.

The transactions were reversed but on record the

transactions were not shown as ready forward. Cost

161

memos

SC . 5/93-J

were issued by HPD-accused No . 2 . The date

of so called reversal t ransactions are 26. 7 . 1991

and 27 . 7 . 1991 but some of the delivery orders

Exh . 69 , Exh . 7 1 , Ex h . 72 , Ex h . 74 are s i gned by P . W . 1 8

Tushar Patil on 24 . 7 . 1991 i n token o f having re­

ceived BRs Exh . 57 , Ex h . 60 , Exh . 70 , and Exh. 7 .3 . He

has deposed acco rdingly. The endorsement is "BR

exchanged " ( Page 731. , Vol . V ) . The e n t r i es of credit

and debit in case of GOI 2008 and 2009 in C8MF

accounts were made o n the basis o f documents. The

documents were thus nominal or make believe o r i f

I may .say so " bogus " . There was neither sale nor

purchase of secur i ties involved. This was the

modus operandi of accused Nos . l to 4 to create such

false and bogus documents in order to w i t hdraw o r

si phon bank funds and use for t he i r own nefari ous

ac t i v i t i e s . Non-existant sec u r i t ies were shown to

have been t raded i n to by prepa r i ng false docume nts

of sale and purchase i n a systema t i c manne r . The

physical sec u ri t i es and bonds never came i n pic­

ture . Nobody fe lt it necessary to inquire about i t

as every body was part of the game plan.

l.06 . I n his statement under section 313

Cr. P . C . accused No . 1 constantly pointed out that

the accounts of CBMF were subjected to regular

162

SC . 5/93-J

audi t . I t is not even contended that either regu-

lar auditor o r any other charte red accountant was

given the job o f i nvestigating the nature o f trans-

actions. The auditors would check the entries and

documents and may not verify the posi t ion o f phys i­

cals unless they suspect that t ransactions were not

supported by stock. If the auditor fi nds SGL has

bounced , he would make appropriate rema r k . I do

not find that the fact that auditors fai led to note

the defects can be an answe r to the charge.

special l y the charges of conspiracy and cheati ng .

107 . I would now proceed to consider the

arguments . Some part of the argument on facts has

been cons idered while discussing the ev idence .

Howeve r , i t is necessary to consider argument

advanced by each of the learned Advocate.

108. The learned Speci a l Public Prosecutor

Shri Raja Thakare strenuously contended that the

pr·osec ution has f u l l y established the conspiracy

and the p r i ncipal of fence of cheating commi tted by

the accused and conspi racy was ma i n l y for chea ting .

He i s not pressing the charge of c r imi nal breach o f

t rust qua CBMF by accused No . 1 -Narichania, but is

pressing that charge as agai nst accused No . 4-Raje

163

SC . 5/93-J

qua BOK and i n this latter aspect of the matter his

argument was also supported by Mr . Ovlekar, learned

Counsel for accused No . 2-HPD. Mr . Thakare

meticulously took roe through al l t·he documents and

material evidence showing i nte r connection o f the

transactions and laid st ress on the nature o f

transactions be tween BOK and CBMF i n GOI secu r i t ies

asse r t i ng that sale and purc hase are mere nomencla-

ture and the transac tions ware make believe and

bogus or ostensible sales o r purchases. As a

matter o f fact only documents were created and at

t i mes even entries were n o t taken i n account books.

The en t i re modus operandi was pre-pl anned and was

executed i ngenuously so that on seeing the docu-

ments even other bank employees would claim and

state that they represent sale o r purchase as the

case may be . The object was to s i phon huge funds

of CBMF (more than Rs . 103 crore$) �nd that amount

was even swttJ lowed and digested by accused �

Nos . 2 and accused No . 3 . There was no i ntent ion to

bring back the money. The money was used accused

No . 2 and 3 as i f , i t was i n fact the i r own earn-

ings. Accused Nos . 1 and 4 joi ned hands with ac-

cused Nos . 2 and 3 and without the coming together

of a l l four accused , the object could not have

been achieved and further more the f raudulent acts

164

SC . 5/93-J

could not be success f u l l y conceal ed from the supe­

r i o r s . The accused to some extent not only suc­

ceeded in th i s but were able to c reate a show o f

CBMF having earned pro f i t , when i n fact it lost huge

amount and was requi red to face l i tigation and

decrees, (copies of which a r e produced ) . The

contradictions i nter se i n the sta tements of accused

speak volumes and lend assurance to the prosecution

case and evidence adduced . He also pointed out

that the conduct of all the accused in pass i n� on

the buck to the o ther exposes the i r gui l ty mind and

feeble attempt to come out after rea lising the

weight of evidence agai nst them. This acco rding to

M r . Thakare i s one of the case i n the scam whe re

there is overwhe lming evidence to prove t he

charges, spec i a l l y of cheating and conspiracy and

e n t i re evidence on record can be used against al l

the accused . There is pos i tive evidence o·r money

fraudulently obtained be i ng used by accused i n PSU

Bonds transactions and that money neve r came back

to CBMF - I t su f fe red huge loss of funds. I n the

course of the discuss i o n , I have a l ready referred

to some part of his arguments and further refe rence

would be made as and when necessary .

165

SC. 5/93-J

109 . Shri K . R . Pawa r . learned Advocate for

accused No. 1 , submi tted a w r i t ten note of a rgument

and was also heard. Referring to Exh .244, he

contended t hat letter Exh . 242 shows that i t was

considered as civi l liabi l it y . I do not find any

substance i n t h i s argument . Merely because the

claim was advanced by this lette r , it cannot be

said that i t was considered only as a civil l i abil-

ity . So far as Exh . 244 is conce rned, he stated that

it bears date 27 . 5 . 1992 whereas Mr . K . R . Acharya

visi ted on 28 . 5 . 1992. Mr . K . R . Acharya when visi ted

on 28th May 19q2, this i nformation note of accused

N�l was given to him and thereafter accused No . 1

was cal l ed in the chambe r . Accused No . l had a l -

ready signed and P . W . 8 K . R . Acharya asked h i m wheth-

er he has given the i n formation note volunta r i l y

and asked him to make endorsement to that e f fect

which accused N . l has made i n h i s hand w r i t i ng and

therefore, there is no contrad iction whatsoeve r .

1 1 0 . I t was also contended that the t ransac-

tions of 27 . 7 . 1991 ware behind the back of accused

No . l as he was on leave and on 26 . 7 . 1991 he had

taken decis i on . The t ransactions were fi nal -

ized on ea r l i e r date i tsel f but i n his absence

P . W . 5 B i pi n Divecha and General �anager 8 . R . Acharya

166

SC . 5/9.3-J

changed the nature and purchased o f securities

from HPD accused No . 2 i nstead of BOK and hurr iedly

issued RBI cheque and as a result C8MF is put to

loss. as chance o f recove ring the amount of two

SGLs from BOK was l os t . Thereafter the top o f ficers

of CBMF had come to Bombay and di rectly talked to

accused No . 2 and obtained from him affidavit and

a l l this goes to show that C8MF and i ts top brass

havi ng l i nks with accused No. 2-HPD di rec tly and for

t h i s obvious reason General Manage r had asked

accused No . 1 to deal with BOK. The argument is

misleading and f u l l of contradictions. I n j uxtapo­

s i t i o n 1r we cons ide r the evidence of P . W . 18 T us har· �

Pat i l , employee o f accused N o . 2-HPO, that BRs were

received back on 24 . 7 . 1991 when he signed i n token

o f receipt of BR on the delivery order of ADN

( referred i n para 97 ) the falsity o f defence

version becomes obvious. The a f f idavi t of HPD i s

dated 23 . 5 . 1992 and he has contended that

immediately after 26 . 7 . 1991 top brass o f f i c ers had

come and taken t h i s a f f idavi t . I n fact the argument

shows that he had become aware of the fact at least

a t that time , i f not earl ier , rega rding bouncing of

SGL t rans fer forms. He further contended that a l l

the transactions which accused No . 1 -Narichania has

undertaken for sale or purchase are s t rictly ac-

167

SC. 5/93-J

cording to the rules and regu lati ons and he has not

committed any i r regularity much less any offence .

Referring to para 34 of the evidence of K . R . Acharya

he contended that it is admitted i n cros$-examina­

tion by the wi tness that accused No . 1 was a victim

of cheating. I do not thi.nk that any such opinion

of witness can have any ef fect i f othe rwi se the

o f fence is establ ished. He has also contended that

accused No . 2-HPO was appoi nted as broker by the

head office and that he had no part in t ha t ap­

pointment. However , this argument does not lead us

anywhere because what i s a l l eged is that there was

close nexus between accused No . 1 and accused No . 2

and the evidence rega rding the same has al ready

been referred to i n the ea rlier paragraphs .

Ref e r r i ng to his reports to head o f fice he stated

that he has reported the

superiors from time to time.

transactions to the

Howeve r , what is

contended by the proseclJtion is that accused No . l

was not repo rt ing t r u t h f u l l y .

that most material aspect

The contention is

regarding the

bouncing o f SGL accused No . 1 neve r i nformed the

head office . He did not i n form even when C8MF " s

SGLs bounced. He does not even claim to have in-

formed the head o f fice the exchange of BR from one

scheme to the other and the reasons therefo r .

168

SC . 5/93-J

He did not inform why SGLs were requi red to be

spl i t up and the fact that bounced SGL was came

back to CBMF .

1 1 1 . Mr . R . D . Ovleka r , learned Counsel

appear i ng for accused No. 2-HPD has in fact advanced

argument even in support of accused No . 1 probably

as the case of accused No . 1 and acc used No . 2 has to

be considered togethe r . There is some

contradiction i n thei r defence as also i n t he i r

stand i n respect o f par ticular part o f the pr-osecu­

tion case . Howev e r , M r . Ov l ekar also streneously

contended how accused Nos . 3 and 4 have comm i t ted

d i f fe rent offences .

1 12 . M r . Ovlekar contended that a l l scam

matter transactions are in breach of the guide l i nes

and re9ulations of RBI . The report o f the JPC and

Janki raman Comittee are sufficient to indicate the

same . Fai th of common man i n the Reserve Bank of

India, State Bank of India and other financial

i ns t i t u t ions was shaken and the scam and i ts a f ter

math could have led t o the f a l l of Government. The

prosecution of accused No . 2-HPD is proli tically

motivated. He however contended that the reports

of the aforesaid commit tees are no substitutes for

169

SC . 5/93-J .

evidence . In a c r i m i na l case the principle o f

proof beyond doubt can neve r be d i l uted . A t the

same time he also submitted that from the various

reports i t is clear that the checks and balances i n

the system were giving way. RSI Officers were a l so

lethargic and t hose a t the helm of a f fai rs were not

doing t he i r duty as requi red . According to the

learned Counsel these ci rcumstances should not

weigh w i t h the Cou r t and the Court must i nsist on

proof as i s required i n any criminal case . I have

refer red to the reports only to point out the

s i t uation and back ground.

1 L 3 . Pol i tical motive, i f any , cannot have

any i mpact on the Court as the Court has to cc:.msid-

e r the facts on record. This a.pa r t . there i s

absolutely no material 011 record to show existence

o f any pol i t i ca l motive i n the i nvolvement of

accused lio . 2 . The contention o f the learned Coun-

sel was that s i nce there was a big scam, CBI wanted

to involve prominent brokers and get credit and

please t he i r pol i tical bosses. I n the ent i re scam

two names i . e . Harshad Mehta and Hiten Dalal f i g-

ured promi nently and the re fore, according to

M r . Ovleka r , the i r roles have been highlighted out

170

SC . 5/9.3-J .

of proportion by CBI and accused No . 2 was the

p r i n c i pa l target.

1 1 4 . The l earned Counsel fu rthe r contended

that accused No . 1 had acted on the SGL transfer

forms issued by accused No . 4 and he was fully

j usti fied as accused N.4 was lega l l y authori zed to

sign SGL transfer forms and accused No . 1 had no

reason to suspect any foul play . P . W . 5 Bi pi n

Divecha, P . W . 6 Raj esh Bha t i j a , and P . W . 7 Ms . Nandita

Rao have practical ly stated nothing against accused

Nos . 1 and 2 . The action of accused No . 1 was i n tend­

ed to secure funds and he has in fact ea rnEH� prof­

i. t , accused No . 2 was onl y a broker and therefore.

d e a l s l i ps mention his name and no i n f e rence

against accused No . 2 should be drawn from t h i s .

Act o f chea t i ng i f any . is only by accused No . 4

alone and accused Nos . 1 and 2 have acted on the

representation of accused No . 4 and i n spite of this

CBI has i nvo lved accused Nos . 1 and 2 . I t was h i s

contention that accused Ncs . 1 and 2 w e r e not even

aware that it was the transaction of accused No . 3

and not of BOK. In the earl i e r part o f the

ment I have pointed out how accused No . 2 was

j udg­

f u l l y

aware . I n the PSU Bonds transaction accused No . 2

has taken away one BR and has sold i t . He has a l so

1 7 1

S C . 5/93-J .

issued cost memos for t ransaction of CBMF claiming

cheques in the name of BOK . I f he was i n fact not

aware of the fact that it is not the t ransac t i o n of

Bank of Karad but of accused No . .3, he would not

dare claim the price of one of the secur i t i es under

his cost memo. They are not i5sued mentioning

himself as broke r . He is mentioned as counter party

i n these transactions and even in some record o f

CBMF. I f accused No . 2 was not at all involved he

had no reason to make payment of i nterest and more

so to take any entry i n his own record regarding

payment mentioning name of accused No . 3 i n respect

of the same payment o f interest w i th reference the

very cheque numbers.

1 15 . Refe r r i ng to the p r i ncipal charge o f

conspi racy, H r . Ovleka r , lear ned Counsel contended

that the re is no evidence o f conspi racy and much

less any evidence of i nvolvement of accused Nos . 1

and 2 as conspi rators. He c r i t i c i zed the CBI i n

reso r t i ng to section 120-B I PC whenever i n diffi-

cul ty . He contended that i f at a l l there was any

conspiracy i t was between accused Nos . 3 and · 4 and

accused Nos . 1 and 2 a re unneces$a r i l y i nvolved,

when accused Nos . 3 and 4 could have taken away

money from CBMF by getting cheque issued i n the

172

SC. 5/93-J .

name of BOK . Accused No . 4 i n fact gave credit o f

the amount to accused No. 3 , where was the necessi ty

for accused Nos . l and 2 to conspire with them for

that purpose '? Had the SGL t r ansfe r fo rms the

backing of secu r ities in SGL account , there was no

offence. Merely because i t was later on found that

the re were no secur i t ies in the account , accused

Nos . 1 and 2 cannot be imputed w i t h the knowledge

that the SGLs had no backing. That fact was within

the exclusive knowledge of accused Nos . 3 and 4 .

Acco rd i ng to the learned Counsel accused No . l was a

highly placed officer . There is no l i nk establ ished

between accused No . l and accused Nos . 3 o r 4 .

Accused No . 4 has t ransferred the amount to the

account of accused No . 3 after crediting the cheque

is i n the account of BOK. Why would accused No . 3

and accused No . 4 approach accused No . l o r accused

No . 2? When i n fact the purpose of siphoning the

funds could be and was achieved. Therefore, the

enti re prosecution case is a cock and bul l story,

espec i a l ly when tha bene f i t under the so cal l ed

conspi racy is derived by accused No . 3 , where is

question of the u l t imate bene f i t o f accused No . 2 as

stated i n the charge? This according to the learned

Counsel is enti rely false and even the prosecu tion

is aware of i t . Howeve r , CBI was i nsisting on

1 73

SC . 5/93-J.

i nvolvement of accused No . 2 and therefore section

120-B I PC was i nvioked. I n fact application of

sec tion 1208 he l ps accused No . 3 to come out of the

charge of offence under section 4 1 1 IPC.

1 1 6 . Referring to the def i n i ti o n o f chea t i ng

contained i n section 415 o f I PC , he contended that

accused No . 1 and P . W . 5 0ipin Divecha are in fact

victims of conspiracy between accused Nos . 3 and 4 .

I f accused No . l was cheated then alone o f fence of

chea ti ng can be said to have been commi tted and

cheating will not be complete unless i t is shown

that accused No . 1 was i nduced to part with money

and the person who has been cheated cannot be said

to have committed cheati ng . It was his contention

that CBMF is a t r us t . I t i s not a legal e nt i t y .

I t cannot be subjected to chea t ing. This i ntel l i ­

gent argument is misleading and fail$ to convince.

Reference to sub-sec tion ( 1 1 ) of se�tion 6 of the

IPC shows that the word pe rson i ncl udes any

company o r association o r body o·f persons whether

incorporated or no t . A trust is however not a

legal e n t i ty o r even an association of persons , A

t rust is an obligation annexed to the ownership of

prope r t y . The property vests i n the trustees.

There is a concept of dual ownershi p. Trustees a re

174

SC. S/93-J .

i n law the owners whereas the bene f i c ial owners are

t.he bene f i c i a r ies. Unless a person i s cons t i tuted

as legal owner of the property entrusted to h i m , a

trust is not created. I t is necessary that the

t rust property must vest in the trustees. The

t r ustees as legal owne rs are required to carry out

the di 1·ectio ns for the bene f i t o f the cestui-que­

t rust . When a property is said to be t rust property

i n law i t means pcope r ty of which the legal owners

are t rustees and beneficial owners are the bene f i -

c:i.a ries . Therefore when i t is said that CBMF was

cheated and was the victim of the fraud i t i n

st1bstance conveys that the t r us tees were c heated .

To accept the contention that because a t rust i s

not a legal e n t i t y o r body o f perso11s, i t cannot be

subjected to cheating, would be putting a premium

on the fraud and fraudulent conduct . The words

.. cheating CBMF" are used i n the charge for conven-

ience. I n law i t means the t rustees and herei n

Canara Bank i s the principal t rustee. In any case

i n the record o f RBI , Canara Bank is s hown to be

the t r u s tee representing the t rust . Therefore the

cheating was to Canara Bank and the other T r us tees

who i n law hold and represent the T rust property.

To accept the a rgument of M r . Ovlekar would be

tentamount to l icencing fraud on t r ustees of publ ic

175

SC. S/93-J .

or private trusts. Therefo r e , the absurdity of the

argument is obvious. Accused No . 1 -Narichania was

employed by the Trust after he resigned from Canara

Bank. The Canara Bank and other trustees a re in

law the owners of the t rust property, are the vic­

tims o f cheating. The f raud also adve rsely a f fect­

ed the bene f i c i a r i es . Therefo r e , the a rgument of

the learned Counsel is only a clever device to side

trac the reality and in the u l timate analysis an

exercise i n fut i l i ty .

1 1 7 . M r . Ovleka r , learned Counsel for accused

No . 2-HPD , drew my attention to the def i ni ti o n of

chea�ing contai ned i n secti.on 4 1 5 IPC_ Section 415

reads as unde r :

" 4 1 5 . Cheating. - Whoeve r , by deceiving any

person , fraudulently or dishonestly i nduces

the person so deceived tode l i ve r any property

to any person. or to consent that any pe rson

shall retain any prope r t y , o r i ntentionally

i nduces theperson sodeceived todo o r omit

todo anything which he would not do or omit

i f he were not sodeceived. and which act o r

omission causes o r isl ikely to cause damage

or harm to that person in body , mind , reputa-

1 76

SC. 5/93-J .

tion or p ro pe r ty , is said to "cl1ea t " .

Explanati o n . - A d i s honest concealment o f

facts i s a decept ion wi thin the meaning o f

this section . "

The fo l lowing i l lustrations to section 4 1 5 a r e

material to note:

(d) A, by tende r i ng in payment for an a r t i ­

cle a b i l l o n a house within which A keeps no

rnoney, and by which A expects that the bi 1 1

w i l l be dishonoured, intentionally deceives

Z , and thereby dishones t l y i nduces Z to

deliver thea r t i c l e , intending not to pay fo r

i t , A cheat$ .

( g ) A i n tentiona l ly deceives Z into a belief

that A means to deliver to Z a certain quan­

ti ty of i ndigo plant w h i c h he does not i n tend

to delive r , and thereby dishone s t l y induces Z

to advance money upon the f a i th o·f such

delive ry , A cheats; but i f A , at the time of

obtaining the mone y , i ntends to deliver the

indigo plant , and afterwards breaks his

contract and does not deliver i t , he does not

chea t , but i s liable only to a civil acti on

for breach of contract.

1 7 7

SC . 5/93-J .

( i ) A se l l s and conveys an estate to 8. A .

know i ng that i n consequence of such sale he

has no right to the property, sel ls o r mo rt-

gages the same to Z, wi thout disclosing the

fact of the previous sale and conveyance to

8 , and receives thepurchase or mortgage money

f rom Z . A cheats.

The necessary ingredients are {i ) f raudulent and

dishonest i nducement of the person by deceiving

hi m ; ( i i ) person who is deceived is i nduced to

deliver any property to any person or to consent

that any person sha l l retain any property; ( i i i )

the persons who is decei ved is i ntentional l y

i nduced todo o r omi t t o do anythi ng which he would

not do or omit omi t to do i f not so deceived a nd I

that act or ornission should be one intend�\to cause CY'

damage to the person i nduced i n body , m i nd, reputa-

tion or property. Dishonest i ntention i s the gist

of the of fence and i t can be i nferred from fac ts

and ci rcumstances of the case . Explanation to

section 4 1 5 makes i t clear that the dishonest

conceal i ng of facts is deception wi thin the meaning

o f the section. I t is more so i f the dishonest

concealment is by a person who i. n law is bound to

1 7 8

SC . 5 /93-J .

discl ose .

1 1 8 . I n the present case accused No . 1 -

Narichania was de.a l e r of CBMF . He was a responsi-

ble o fficer having cont rol over the funds of CBMF

and in case the t r ust and i n consequence the trus-

tees . were l i kely to suf fer any loss from a t rans -

action, then it was his duty to disclose these

aspect5 of the transaction to t he t r ustees who were

l i kely to suffer loss of funds . Therefore, his act

of entering i nto such ostens i ble and make bel ieve

t ransaction wi thout the possibli ty of getting the

secu r i ty which was bound to resul t i n loss to

CBMF , amounts to chea ting . Tha ear l i er discussion

clearly shows that he had the knowledge that the

secu r i t i es were not to come and even then he went

on t radi ng on the basi s of the dishonoured SGL

tra1isfer forms which could have further endange red

the i n terest of the mutual fund and the t r ustees .

1 1 9 . According to sec tion 420 IPC a pe r$on

who cheats and t he reby dishones t l y i nduce,& the other c:>-

to del iver any proper ty to a11y pe rson is said to

have comm i t ted the of fence punishable under sect ion

420 I . P . C . Here the ac t o f accused No . 1 i n accept -

ing SGL t ransfe r· forms without the backing of

1 7 9

SC . 5/93-J.

sec u r i ties was an act which i nduced the trust and

the lawful ow1-.e rs of the t r ust property i . e . the

trustees, to par t with and lose Rs. 103 and odd

crores. The w i l l ful suppress ion of material facts

frorn the t rustees by acct1sed No. t is deception

wi thin the mean ing of section 4 1 5 . Section 4 1 5

does not speak of any oral representation and i t

pertains to fraudulent o r di shonest inducement of

the pe rson decei ved . The legislature has avoided

to define what exactly is dece pt ion and t herefore ,

the words used i n section 4 1 5 are " whoeve r , by

decei vi. ng any person" . This is i n fact recongi t i on

o f the fact that there are i n numerable ways even

beyo11d comprehension i n which deception can be

practicised and therefore, legislature has avoided

to define what i s deception or fraud.

120. Thus in consequence of the i nducement

the trustees were made to pa rt with t he t ru5t

prope r t y . This inducement by conduct of accused

No . l and a l l the accused joining him in this ac t .

pl�yed d i f ferent roles as is indicated i n the

ea r l i e r part of the j udgment . A l l the accused were

party to this act o f cheating and were playing

thei r own roles and this resulted into w rongful

loss t o the CBMF ( t r ustees) which ul timately was

180

SC. 5/93-J .

wrong ful gain o f accused Nos . 2 and 3 . Accused No . l

further suppressed the fact of SGLs being w i t hout

the back i ng of sec u r i t i es and a t tempted to give an

impression to the trustees that in the transaction

there is a prof i t . Thus chea t i ng was complete by

this deception caused by accused No . 1 by j o i n i ng

hands w i t h accused Nos . 2 • .3 and 4 and a l l the

accused had come together for the purpose of s i ­

phoni.n9 money from the trust property. Thus the

contention that trust is not and cannot be cheated

is w i t hout �substance and deserved to be rejected i n

toto.

121 . Conspiracy for cheating is the pr i nc i pa l

charge . Conspiracy according to Halsbury ' s Laws o f

England, 4 t h Edi t i o n , Vol . 1 1 , page 4 4 , para 58, i s :

" T he essence o f the offence o f

conspiracy is the fact o f combi nation of

agreemen t . The agreement may be express o r

implied, or i n pa rt express and i n part

implied. The conspiracy a r ises and the

offence is committed as soon as t he agreement

is mads; fill9 � offenc� continu� to �

commit t�d §.2 lruJ.g 9.§. the �ioatjon �

181

The

SC . 5/93-J .

sists. .t..b.9..i i.§. until !c..bg cgospiratoria1

agreement � termina ted � completion Qf �

performance QL .Qx: abandonment QL frust ration

QL howeyer i.l � � The actus reus i n a

conspiracy is the agreement to execute the

i l legal conduc t , not the e�ecut i on of i t . I t

is not enough that two or more persons

pursued the same unlawful obj ec t at the same

ti. me o r i n the same place ; it is necessary to

show a meeting o f mi nds , � conseo�Y§ .!Q

6ffect fill vol�wtul oyrposs . .Lt. iJa. ..QQ.t..._ .bQwev­

§.L.. necessary .:t.ruU. � conspiratpr should

� � in communicaticm wi..t!l evary other. "

lUnde r l i niog is m i ne . )

learned Public Prosecutor as well as

M r . Ovleka r , the learned Counsel for accused No . 2 ,

relied on a recent j udgment of the Supreme Court

reported in 1999 All.Mah.Reoorter � (Supreme

Court). State g.f Tamiloadu � Nalini £ � The

relevant portion is para 574 at page 1999 which

reads as unde r :

' Some of the broad p r i n c i ples �overning the

law of conspi racy may be summarized thou9h,

as the name l.mpl ies . a summa ry cannot be

182

SC . 5/93-J.

exhaustive of the principles.

1 . Under Section 120A, IPC o ffence o f

crimina l conspiracy is commi tted when two o r

more persons agree to do o r cause to be done

an i l legal act o r legal act by i l legal means.

!'l.h.fill i!. iJa legal � .Qy illegal means oyert

� .i.§. necessary. Offence of c r i minal con-

spi racy is exception to the general law where

intent alone does not cons t i t ute crime . I t

i s intention to cornmi t cr·ime and joining

hands with persons having the same intention.

Not only the i ntention but there has to be

agreement to carry out the object o f the

i nten t i o n . which is an offence. The question

for consideration in a case is did a l l the

accused had the i ntention and did they agree

that the c r ime be commi tted. I t would not be

enough for the of fence o f conspiracy when

some o f the accused merely entertained a

wish, howsoever hor rendous i t may be,

of fence be comm i t ted .

that

2 . � subsequent to .!Jm achieving o f

obiect Q.f conspiracy � .t§.0.Q. .,tQ. proye .:tMt. g.

Qatti�ular 9ccused � party .k.Q � coospira-

183

SC . 5/93-J .

� Once the object of conspiracy has been

achieved, any subsequent ac t , which may be

unlawful , wo u ld not make the accused a pa r t

o f the conspi racy l i ke giving shelter t o a n

absconder.

3. Conspi racy is hatched in private or i n

secrecy. ll � rarely ppssible .12 §Stablish

� 9oospjracy � direct evidence . U§ually .

.t2Q..t.b. � existence Q..f. � conspiracy � i.t.a

obiec t§ � .tQ � infer red .f.l:.Qm � circum­

stances � .t..l:lst conduct o f. th� accused.

4 . Conspi rators may, for exampl e , be en­

rolled in chain-A �nrolliog fl.a.. � eorglliog .Q.

i!.0£ §.Q. Ql1 illJ..Q a.!l. � be members Q_f

s ingle conspiracy il � fill intend

a,qree. even though � member knows Q.O.U::

parson wb.Q enrolled bil11 ao.2 ..t.ill1 oersons

.b.g_ enrolls. They may be a k i nd o f umbrel l a

spoke enrol lment . where a s i ngle person a t

the center doing the enro l l i ng and a l l the

other members bei ng unknown to each othe r ,

though they know that there are to be other·

membe r s . These are theories and i n practice

i t may be d i f ficult to

184

tell whether the

SC . 5/93-J.

conspiracy in a pa r t icula.r case fa l ls i nto

which catego ry . I t may , however , even over­

lap. fUJ.t. then there has !:.Q 12§ present mutual

interest.. Persons maybe members of s i ngle

conspi racy even though each i s ignorant of

the iden t i fy of many others who may have

diverse role to play. It i s not a part of

the crime of conspiracy that a l l the

conspi rators need to agree to play the same

or an active rol e .

5 . When two o r more persons agree to commi t

a cri mb o f conspiracy, then regardless o f

making o r consi de r i ng any plans for i ts

commi ssion, and despite the fact tha t no 5tep

i s taken by any such person to ca rry out

their common purpose, a c r ime is commi tted by

each and every one who joins i n the

agreement . There has thus to be two

conspi rators and there may be mor·e than that .

To prove the cha rge of conspi racy i t i s not

necessary that i ntended crime was committed

o r not.

prosecution

conspi racy.

I f committed i t may fu rthe r help

to prove the charge o f

185

SC . 5/93-J .

6 . I t i s not necessa ry that a.11

conspirators should agree to the common

purpose a t the same time . They may join w i t h

other conspirators at any time before the

consummation of the intended objective , and

a l l are equally responsi b l e . What part each

conspi ra.tar is to play may not be known to

eve ryone or the fact as to when a consp i r a t o r

joined the conspi racy and when he l e f t .

7 . a charge Q.f. conspiracy rn preiudice t..Qg

accused because ..Lt. has forced 1.tmm .i.o.t.Q s

ioi.nt trial fill9. � Court � conside r the

§.JJ�j...r....� rn��� Q.f evidence against every ac...:,

cused. Prosecution has to produce evidence

not only to show that each of the accused has

knowledge of object of conspiracy but also of

t he agreemen t . l.o .!Jlii charge Q.f gon§piracy

Co urt he.§ .1& gusrc! � .�t � danger

Q.f. ynfairoess .:t.Q. � accu�eg, I n t roduc t i o n

of evidence aga i ns t some may resul t i n the

convi c t i o n of a l l which is to be avoided . By

means of evide nce i n conspiracy, which is

otherwise i nadmissible in the t r ial of any

other substant ive o f fence prosecution t r ies

to implicate the accused not only i n t he

186

SC . S/93-J.

conspiracy i tsel f but also in the substantive

c r ime of the alleged conspi rators . There �

always difficul ty i.u tracing .t.ba precis�

contributi on Qf � member of � cgnspiracy

Qy,.t 1bftn tbe re � ..t.Q. � cogent .ru:iQ conyinc­

i.Qg evidence against � Q.D.f! .Q.f � accused

charged with the offence Qf conspjracy. As

ob�erved by Judge Learned Hand t hat • this

distinction is impo rtant today when many

prosecutors seek to sweep w i t h i n the dragnet

o f conspiracy all those who have been

associated in any degree whatever with the

main o f fende rs . "

8 . As stated above i t i s the unlawful

agreement and not i ts accomplishment, which

is the gist of essence of the c r i me of

conspi racy. Of fence of c riminal conspiracy

is complete even though there is no agreement

as to the means by which the pw·pose is to be

accomplished. I t i s the unlawful agreement ,

which i s the g ravamen o f the crime of

cons pi racy . The unlawful agreement which

amounts to a conspiracy need not be formal o r

express, but may be inherent i n and i n f e r red

from the ci rcumstances, especial ly

187

SC . 5/93-J .

declarations, acts and conduct of the con­

spirators. � agreement � DQt. � entered

.in.tQ !2Y ill ..th§. R�U-ti es .t.2 il .at t.b.c �

time. t2.fil. llli!Y � reached � sypcessiye ru;;.::

tiQQS eyidencing tb�:i.r joining Q.f. ..t.hi2 .Q.QLl:::

spiracy.

9. I t

spi rac)!'

has been said that A criminal �

il s QSLtnersbiP i...o. grime. fillQ .t.b2.:t.

there i§. in � R.QQspiracy � jgint QL mutual

agency i.sJL ..till;! prosecutiQ.D Q.f � cqmmon plan.

Thus. .if � QC. rn oersoos ente r in.:t.Q. S.

co11spi racy, � � �...Q.0.§ �. arrL Q.f .tb!!m

pursuflil.1 !..Q. � agreement is.in contemplation

Qf. � ..t.llii. � Q.f � Q.f ..t.b!Jm .e.n..Q � �

joint.lY: responsible theretore . Thi� means

that everything said .. wri tten or done by any

of the conspi rators i n execution o r further­

ance of the common pu rpose is deemed to have

been sai d . done, or w r i t ten by each o f them.

And this j o i n t responsibi l i ty extends not

only to what is done by any of the conspi ra­

tors pursuant to the original agreement but

al$o to collateral acts incident to and

growing out of the original purpose . e

conspirator � IlQ.t responsible. however. f.Q.r.

188

SC . 5/93-J .

acts � QY. � co-conspirator. after termina­

.t:i.Q.o. Q!. ..t!m. cgnspiracy. T he j o i nder o f a

conspiracy by a new member does not create a

new consp:i. racy nor does i t change the status

of the other conspi rators , and the mere fact

that conspirators individually or in g roups

perform different tasks to a common end does

not s pl i t up a conspi racy into

d i f ferent conspiracies .

several

1 0 . A mar, may j o i n a conspi racy by word o r

by deed. Howeve r , c r i m i n a l responsi bi l i ty for

a conspi racy requires more than a merely

passi ve atti tude toward�> an existing

conspi racy. One who co1nmi ts an ove r act wi th

knowlad9E� o f the conspiracy is guil ty . an.d

Qllii � tacitly consents .:tQ � object Q.f. �

conspiracy .and � along !il.!Jl other consQir­

ators, actua lly standing Qy_ while � other

QY.t .th.ft conspiracv .io.t.Q effect. 1.§. guilty

tboygb illi intends !& � !lQ actiye Reil ill

.t.!::3§ crime. ' (Under l i ni ng i s mine)

I n the case o f � Agarwal � Uoion Q.f. India.

reoorted .ill (1993) ;i S.CcC,pa� 609.Front Offices

the Supreme Court pointed i n para 8 as unde r :

189

SC. 5/93 - J .

" _ . . . . . . . . . . _ . . . . I t is not necess;ary

that each conspi rator must know �11 the

details of the scheme nor be a pa rticipant a t

every stage. I t i s necessary that t hey

should agree for design o r object o f the

conspiracy. Conspiracy is conceived as

having three elements: ( 1 ) agreement, (2)

between two o r more persons by wholll the

agreement is effected ; and (3) a criminal

object , which may be ei ther the ul timate aim

of the agreement or may constitute the means,

or one of the means by which that a i m i s to

be accompl ished. it is immaterial whether

this is found in the ultimate objects. The

common law de finition of " c r i m i nal

conspiracy was stated f i rst by Lord Denman

i n Jones case that an indictment for

conspiracy must "charge a conspi racy to do an

unlawful act by unlawful means and was

elaborated by W i l l i es , J. on behalf of the

j udges while refe r r i ng the question to the

House of Lords in Mulcahy v . Reg and the

House of Lords in unanimous decision reiter­

ated i n Quinn v . Leathern:

l.90

J

SC . 5/93-J.

•A Conspi racy consists not merely

i n the i ntention of two o r more, but i n

the agreement of two or mo re . to do an

unlawful act , or to do a lawful act by

unlawful means . So long as such a design

rests i n intention only, i t is not in­

dictabl e . When two agr·ee to carry i t into

effect , the very plot is an act i n i t­

se l f , and the act of each o f the pa rties,

promise against promise , actus contra

actum. capable of being enforced, i f

lawful ; and punishable if for a c r i m i nal

object. or for the use of c r iminal

means " .

I n the sarne j udgme n t , i n para 1 1 the Supreme Court

further observed:

" J. 1 . The question then i s whether conspi racy

is a continuing of fence. Conspi racy to commit

a crime i tsel f is punishable as a substantive

offence and every individual o ffence comm it­

ted pursuant to the conspi. racy is separate

and distinct offence to which individual

o f fenders are l i able to punishment . i ndepend-

191

SC. 5/93-J .

ent o f the conspiracy. Ye t , .i.u QYL considared

vie�. 1.b.g agreement goes not come tQ. .fill � 11i.tb .it..§ m�kiog, J2.y,1 �oyld endure .t.iJJ.. i..t .!..§

accomplished QL abandoned QL prov�d 9bortivja.

§eJ.ag .2 continuing offence. ti � � ru:

omissions which constitute fill offence �

QQOS! in India or outside i ts te rri tory the

conspirators continuing to be parties to the

conspi racy and s i nce part of the acts were

done i n I ndia, t hey would obviate the need to

obtain sanction of the Central Government .

All o f them need not be present i n India nor

continue to remain i n Indi a . tt (Unde r l i ng is

rn:i. ne ) .

S i m i l a r l y i n the case of � Eal Mittal � State

of euoiab. reported i.n 0977) � s.c.c. ™ �

the Supreme Cou r t observed i n para 9 as unde r :

" 9 _ The o f fence of c r i m i nal conspi racy under

sec tion 120A is a d isti nct of fence i nt roduced

for the fi rst time in 1913 i n Chapter V-A o f

the Penal Code . The very agreement. concert

or league i s the ingredient of the of fence .

It is not necessary that all the conspi rators

192

SC . 5/93-J .

must know each and every deta i l of the

conspi racy as long as they are copa r t i c i pa-

tors i n the main object of the conspi racy.

There may be so many devices and techniques

adopted to achieve the common goal of the

conspi racy and the re may be division of

per· for·mances in the chaif'1 of actions w i t h one

object to achi eve the real end of which very

collaborator must be aware and i n which each

one o f them must be i nterested. There must

be unit� �f object o r p u r pose but there may

be pl ural i ty o f means some t i mes even unknown

to one anothe r . amongst the conspi rators. l.11

achieving !:.Wit ™1. sey�ral 9ttencas !llfll'.. �

<;(Q[lmitted � some o f .tll§ consQir§ators ID!fill

unknown to � other:s. Ing nnl..:x. releyant

'fc�c tor· i,a .t..bM a.U. means adopted fillQ i 11 egal

furtherance .Q.f the opiect Q..f. � conspiracy

™ thoqgh there � � sometime mis-fire QI:.

.Qver-shggtinq .l2Y � Q.f .t.bg_ cornspir�tors.�

Even i f some ste ps are resorted to by one or

two o f the conspirators wi thout the knowledge

of the others i t wi l l not affect the

culpabi l i ty of those others when they are

assoc iated w i t h the object of the conspi racy.

193

SC . 5/93-J .

The sign i f icance of criminal conspiracy under

section 120A i s brought out pi thily by this

Court in Major E . G . Barsay v . Tha State o f

Bombay, thus;

The gist of the of fence i s an agreement

to break the law. The parties to such

an agreement wi l l be gui lty of c r i m i nal

cons pt racy . though the i l legal act

agreed to be done has not been done . So

too , i t is not an i ngredient o f the

of fence that a l l the parties should

agree to do a s i ngle i l legal act . It

. may comprise the commi ssion o f a number

of acts . Under §§c;:tj.gn il Qf. ..t.Jlg Indien

Penal Code, sm .ru:;,,t would � illegal i.t

it.. .i.a, 2.0 <lffence Q.C .i.f. .i..t ,i.a prohiQited

� � Under the fi rst charge the

accused are charged w i t h having con-

· spi red to do three categories of i l legal

acts, and the mere fact that a l l of them

could not be convicted sepa rately in

respect of each of the of fences has no

rel evancy in consi de r i ng the question

whether the of fence o f cons pi racy has

been committed. They are a l l gui l ty of

194

..

SC . S /93-J .

the o f fence of conspiracy to do i l legal

acts, though for i ndividual o f fences a l l

o f them may not be l i able . "

I t would be worth whi l e to refer to secti on 10 of

the I ndian Evj.dence Act :

" l O . Thi ngs said o r done by conspirator

in re ference to common design. -

Wl"lere there i s reasonable� ground to believe

that two or more pe rsons have conspired

together- to cornmi t an of fence o r an action­

able w r o n g , anythying sa i d , done or w r i t te n

by any one of such persons i n reference to

their common intention, after the time when

such i ntent ion was f i rs t entertained by any

one of them. is a relevant fact as against

each of the persons beli eved to be so

conspi r i n g , as well for the purpose of prov­

ing the existence o f the conspiracy as for

the purpose o f showing that any such person

was a party to i t . ..

The material aspect i s that evidence aga i nst one

becomes relevant and admissible against the other

195

SC . S/93-J.

and can be used as i f i t is evidence agai nst him.

This aspect is d iscussed i n detail i n Nal ini ' s case

(supra) as wel l as other j udgments. I t was the

contention of M r . Dvleka r , learned Counsel for

accused No . 2 , that conspiracy as defined i n section

120-A IPC is -

" l20A. When two or more persons agree to do ,

o r cause to be done , -

( 1 ) an i l l egal act , o r

( 2 ) an act which i s not i l leg�l b y i l legal­

means, such a n agreement is des;.gna ted a

crim i na l conspiracy;

Provided that no agreement except an

agreement to comm i t an of fence shall amount

to a c r i minal conspi racy unless some act

besides the agreement i s done by one o r more

parties to such agreement i n pu rsua nce there­

o f .

Explanation , - I t is immaterial whether

the i l legal act is the u l t i mate object o f

such agreement , o r is merely incidental to

that object . "

According to the learned Counsel , at the mos t i t i $

a case o f legal act having been done by i l legal

196

SC . 5/93- J .

means for whi ch an overt act i s necessary and there

is no overt act i n thi s case. I t was also his

contention that as per the charge object of con-

spi racy was to obtain pecuniary advantage by means

o f ostensible transactions to accused No . 3 a nd

ul t i mately to accused No . 2 and once money was taken

out f rom the account of CBMF and credit was given

to accused No . 3 , the conspi racy • i f any , was over

and nothing remained to be done tl1ereafter . A l l

the further transactions and the evidence thereof

is tota l l y i r relevant and shou ld not have been

allowed to be led by the prosecution. I f the

evidence o f the transaction between BOK (ADN) and

CBMF above is considered , there is no crimi nal act

on the part of accused No . 1 much less accused

No . 2 . The argument i s i ngenious but fai ls to

convi nce . I t was clearly a n i l legal act inasmuch

as the t ransactions were not 9enuine transactions

of sale and purchase . At the cost of repet i tion , I

would l i ke to emphasi se that they are as is de­

scri bed i n the charge ostensible or make believe or

better said f i c t i t i ous t ransact i ons . Only docu­

ments were prepared to show that the securi ties are

being sold and purchased . But at no time there

were securi ti es w i t h tlie sel le r nor· was the sel ler

even expecti ng to get the secur i ties or i ntend i ri9

197

SC . 5/93-J .

to delive r them to ths buyer. To suppress these

factual aspects further t ransactions i n order to

continue the use of money i l legally si phoned,

were entered i nto spec i f i ca l l y by accused No . l by

j o i n i ng hands and with the active involvement and

he l p of acc used No . 2 . That i s why accused No . 1

could give back the SGLTFs to BOK a fte r they were

not honoured by RBI . Acc used No. 1 gave · up the

secur ity of val i d BRs i ri exchange of dishonoured

SGL . As discussed earl i e r . accused N . l was in-

cha rge of the back-up depa r tment. Even otherwise

having purchased securities of more than Rs . 103 and

odd cro res and having issued a cheque o f that

amount f rom the account of CBM F , i t was his duty to

see that what he has purchased is i n fact secured

by CBMF and that the amount is not lost to CBMF and

the interests o f CBMF a re not j eopardised. He c;an

not be hea rd to say that once deal s l i p was issued

his job was over . It would be hol ding that his

job was o f a clerk or a peon , when he was allowed

by the trus tees of the trust to deploy crores of

rupees .

122 . The f ur the r act o f accused No . l i n

parting w i t h one o f the BRs o f PSU Bond in favour

of accused No . 2 shows t hat he was knowi ng the

198

SC . 5/93 - J .

invo lvement o f acc used No . 2 and accused No . 3 . Even

the statement of accused No . 2 is to the effect that

he claimed the amount because accused No . 3 was

l i able to pay to him. When he was claiming such

h uge amount and was ask i ng for a cheque i n the name

of his bank to l::>e c redi ted to his acco unt , accused

No . l in the normal cour�e would ask h i m , why he is

ask:i n�.1 for a cheque i.11 the name o f his ban i< which

is not the counter-party speci a l l y . when the other·

cheques of s i m i l a r transactions i n respect o f

reversal were claimed and i ssued i n favour o f BOK .

Accused No . 2 was cl ai mi ng one cheque in favour o f

Andhra Bank on the ground that more than Rs . 25

c rores were due to him f rom accused No . 3 then i n

normal course o f business accused No . 2 would dis­

c l ose to accused No . 1 that there i s l iabi l i ty

against accused No . 3 and that acc used No . 3 has

either consented or would not object to the issu­

ance o f cheque i n the name of Andhra Bank. Accused

No . 3 not onl y did not take any objec t i on but sub­

s t i tuted the BRs of other transactions by claiming

delivery " f ree"' from BOK . Even assuming in favour

of accused No . 2 that there was some amount receiva­

ble f rom accused Na . 3 , he coul d not have asked

accused No . 1 to issue c heque i n the name o f Andhra

Bank unless accused No . l was f u l ly awa re that

199

SC . 5/93-J .

transaction is not o f BOK but of accused No . 3-·ADN.

It is a case in which all the four accused were

acting w i t h one mind and their mi nds and heads had

come toge ther and i t was decided to s i phon of money

from CBMF by hook o r crook. There fore , the argument

tl1at accused No . J. is a victim i s on the face of i t

ridiculous. In fact l1e is resporis ible for si phon-

ing o f money from CBMF. His total inacti on even

a f ter realising that hi s own SGL transfer forms

based on BOK ' s SGL transfer forms were dishonoured4

C(:incl udes his active involvement i n the cons pi racy.

I n fact M r . Gupte, learnedf'{>Publ i c Prosecuto r i n

'1 c)-reply aptly put i t that coming together of a l l the

four accused, thei r act i ng w i t h one mind for one

purpose was absolutely necessa r y . I t was the

si ne -quo- non for completi on o f the c ha i n but for·

which conspiracy could not have been committed and

i ts purpose could not have been achieved. I f

accused No . 4 was. not i nvolved he would not have

issued SGL trans fe r forms when he was f u l l y aware

that there a re no secu r i ti es . More over he would

not have given di recti on to the ministerial staff

not to take en t ries in the accounts books. The

lame excuses given by him fo r " not to pos t "

d i rection i n sta t6ment under sec ti on 313 are not

a t a l l acceptabl e . The di rec t i on not t o

200

post

SC . 5/93 - J .

entries was given as h e d i d no t want to show the

tra nsactions in the books of account of BOK and he

r e l i ed a n the promise o f accused No . 3 that accused

No . 2 was to bring back t he SGLs which were i n fact

b rough t and since SGLs were brought back , no entry

whatsoeve r was taken a t any time in t he account

books of BOK even i.n the secur·i ty ledger maintained

for the cons t i t uents. Accused No . 4 did suppress

the fact that real t r ansaction i s o f AON but this

suppression was not from accused No . 1 . T h i s fact

was suppressed from CBMF and conseque ntly the legal

owners of the t rust property. It is interesting to

point out the contradiction i n the repl ies o f the

accused i n statement under section 3 1 3 . I n rep l y

to q ues t ion No . 50 3 , accused No . 3 stated that i t was

a simul taneous transaction of accused No . 2 . As the

t ransactions wen: cif high value and accused No . 2

did not deliver the SGLs to be de l i vered by other

bank whereas accused No . 4 replied that accused No . 3

told him t hat he was to purchase secur i t i es f rom

S C B . It i n fact gets corroboration fr·om the

statement o f accused No . 2 i n his a f f i davi t Exh. 250

that the SGLs of BOK are backed by SGLs of SCB in

favour o f BOK and the demand o f SCB on CBMF is not

i n order as i t i s against the i r own SGLs. I t ap-

pears t hat this plan of sec u r i ng SGL of SCB fai l e d .

201.

SC . S/9.3-J .

He has also stated i n para 3 o f the a f f i dav i t that

SGLs of BOK returned by RBI (PDOJ on account of

insufficient balance were handed over to BOK. The

involvement o f a l l the four accused even i n br i ng-

ing back the dishonou red SGLs of BOK is thus fully established.

123 . I t is really unfortunate that a highly

placed officer of CBMF was himself involved in t h i s

fraud o n the t r ustees representing the t rust

prope r t y . The facts and ci rcumstances clea r l y show

h i s involvement . I f accused No . 2 and accused No . 1

were n(Jt i nvolved, i t was not possi bl e to suppress

the fact of dishonour of SGLTFs for a long time by

i ndulgi ng into repeated t ransactions i n same

securities w i t h di fferent i ns t i t utions. Had there

been no involvement of acc used No. 2�CB which i s Ln--���"u ·f J'\nli.N) -o�"""'�

an i nst i t u t ion � his w r i t runs and he can over--" d--

ride even the dealer and the General Manager would

not have accepted bounced SGL t ransfer forms by

giving valid BRs. Accused No . 3 on his part was

practica l l y managing a l l t he matters a t BOK l evel .

He is not only a constituent but also a d i recto r .

His i nfl uence i s to such an extent that for h i m the

bank and i ts agent hav taken l oan by way of cal l

money and c redi ted to his account .

202

I t is not even

SC . 5/93-J .

shown as loan and no reason is disclosed as to why

i t was credited to the O . D . Account of accused No . 3 .

I t is fa r above his overdraft l i m i t . The moot

questi on i s whether de l i bera te act of accused No . 4

i n i ssuing SGL t ransfer forms without there bei ng

bac king o f sec ur ity i n the account can absolve him

of the of fences of cheat i ng and cons p i r acy on the

ground that he was acting as per di rect i ons of

accused No . 3 , d i rector of BOK , the answer to which

i s an emphati c " no ·· .

1 2 4 . There·fore, pur pose o f cons pi racy could

not have been achieved in the absence of involve-

ment of all t he four accused. I t i s t r ue that

there is very high probabi l i ty o f some more per-

sons being i nvolved. Therefore , the charge is to

the e f fect that conspi racy was also w i t h some

o t liers unknown. The prosec u t i o n may not have been

able to nab them o r to collect evidence against

them. That does not in any way affect t he case of

the prosecu t ion against the persons who are put to

t r ial . I f the evi dence on record satisfies the

Court rega rdi ng their involvement and the legal

requi rements of proof are f u l f i l led then the fact

that some others l i k ely to be pa r ty to the conspir­

acy are not prosecuted i s i r re l evant.

203

SC . 5/93-J.

125. Cheating was thus commi tted by making

false representation to CBMF that SGL transfer

forms are issued with the backi ng of secur i t ies and

accused No . 1 dealing with the transaction on behalf

of CBMF issued a cheque of huge amount of Rs . 103

and odd crores which amount was ul timately lost i n

the process. It is not material whether full

amount of Rs . 103 c rores w�s l o s t or a lesse r amount

was lost permane n t l y . The fact remains that C8MF

had to suffer l i tigation and decrees. Had accused

No. l not been actively i nvolved i n this, the �BMF

would not have lost the money even for a day. Not

only the transactions of 27 . 5 . 1991 but fur t he r

transacti ons entered into by accused No . l were

w i t hout backing o f securities. The t ransactions of

GO! secu ri t i es between BOK and CBMF are of the same

type i . e . creating docume nts i n o rde r to make a

show that there is sale o r purchase when secu r i ties

wet·e not thc-?re and there was also no l i kel ihood of

securities coming and therefore, PSU Bonds transac -

tior1s ware a n basis o f BRlwhich we re returned back �

and transactions we re shown to have been reversed

and GOI securities t ransactions were rolled over .

When SGL was dishonoured a n attempt was made to

bi furcate and divide it to partly satisfy the

204

SC . 5/93-J.

requirement of the counter party. A l l this i s

actively done by respnsible person l i ke accused

No . 1 who is now claiming to be innocent victim of

f raud a t t he hands of accused No . 4 . The en ti re

s t rategy was wel l pl anned . I t was a modus operandi

to si phon money i l legal l y in which the involvement

of a l l the four accused was necessary in order to

achieve the purpose. The mohey so obtai ned was

further used for the i r own ends by accused Nos . 2

and 3 . I t is not material for the Court to know as

to who received what pecuniary advantage and i t may

not be that u l timate advantage was only to accused

No . 2 . Accused Nos . 2 and 3 are sh rewed broke r s .

They keep accounts o f each pi e . Accused No . 3 is

maintaining accounts books. Accused No . 2 is also

maintaining record on computer regarding all the

transactions and i t is hard to be lieve that he does

not remember for what he i ssued cheques when t he

amounts are i n crores . He has not even attempted

to point out t he reason why he i ssued the c heques

which SCB t reated as i n terest on securi ties and

passed on to other banks . Nobody would pay such a

huge amount not knowing why i t is paid and keep

quite thereafter for eve r . Had he rea l l y suffered

loss , he would not keep quie t . There is not even a

word from him that at any time he cl aimed that

205

SC . 5/93-J .

amount from SCB on the ground that it was wrongly

paid. Why he made payment to SCB i s w i t h i n his

exclusive knowled�e. He was the best person to

explai n i t properly and could have shown f r-om his

account books as to why he made the payment to see

and why he cla imed Rs . 25 c rores di rectly f rom

accused No. 1 by securing the lette r to Andhra Bank

to give him credi t of that amount. He has not given

any explanation which can be accepted as plausible

even primafacie and cannot be said to have made

out a probable case i n defence. I am also not at

a l l impressed by the argument that s i nce lodgment

letter of CBMF was signed by Bipin Divecha and not

by accused No. l , Bipin Divecha was the real culpr i t

and not accused No . 1 .

1 2 6 . Another aspect of the argument of

M r . Ovlekar was that object of conspi racy as stated

in the charge is that accused No . 3 and ultimately

accused No . 2 were tc> obtain pecuniary advantage.

This i s not s tated ei ther i n the F I R or i n the

charge sheet and i s not supported by any material

on record and therefore. question a rises as to who

i nvented this concept o f conspiracy ? I t is obvious

that somebody i n CBI was i nte rested i n involving

accused No . 2 . I t was his spec i f i c contention that

206

SC. 5/93-J .

evidence of fur ther t ransact ions o f sale o r

purchase o f GOI seci ur·i ties o r even the

transactions of PSU Bonds are total ly i r relevant

for conside r i ng the charge of conspi racy as the

charge is st rictly restric ted to the transactions

dated 27 . 5 . 1991 between BOK and CBMF. These trans­

actions are brought i n evidence to i nvolve accused

No . l and accused Ho . 2 . There i s no evidence o f

accu�ed Nos . l , 2 . 3 & 4 havi ng ever come together

and there does not appear even a possi bi l i ty o f

their having come togethe r . The offence of c r i m i ­

nal conspi racy between al l the four accused i s out

o f question . There is no evidence of meeting o f

four mi nds

M r . Ovalekar

or putting t he i r heads

further contended that even

together .

i f there

was agreement and subsequently accused N o . 4 had

not delivered the SGLs or SGLs were not accepted by

accused No. I , whether the Court would convict

accused for conspirasy? This is hypothe tical . I f

i t i s proved t hat there was an agreement for s i -

phoning of money from the bank by issui11g

SGLs i n such make believe t ransactions ,

false

then

obviously the Court would hold the concerned

persons gui l ty of o f fence punishable under section

1208 of IPC.

207

S C . 5/93-J.

1 2 7 . Anot he r aspect of tl1e argument o f

M r . Ovalekar was t ha t conspiracy was complete o n

credi t i ng money t o the account of accused No . 3-ADN.

Therefore evidence of further transaction becomes

i r relevant and inadmiss i bl e . T o accept t h i s is t a

ignore the reality. This is a case of conspiracy

having been conti nued even af ter siphoning of fund.

Accused Nos . 1 to 4 were fully conscious of the fact

that the socal led transactions are o f non-existent

secur i t ies and as such fake in nature. They were

merely creating documents to �how sales and

purchases which were mere. nomenclature. so far as

the t ransactions between C8MF and BOK i n GOI

securi ties are concerned. The accused were eag�r to

suppress the t ruth and the further acts are done

with this purpose. P recausion was taken f rom the

very beginning by accused No . 4 di recting

ministeri al staff of BOK not to post the entries in

the concerned accoun ts. Accused No . 4 issued SGL

knowing ful ly well that there were no securities in

the account and was also conscious that the secur i ­

ties would not coma and SGls would never be cleared

and d i scharged. He was �lso aware that the SGLs

are to be broL1ght back and shown as discharged and

therefore , f rom beginning he took necessary precau­

sion and saw to i t that the entries are not taken

208

SC . 5/93-J .

i n the account books of 80K. Accused Nos . l and 2

roll ed on the transactions o f GOI securi t i e s , so

that i n the account o f CBMF also the secu r i t ies

credi ted were shown to have debited on the $ame day

by sale i n favour o f C i ti and this transaction w i t h

the C i t i was entered into by accused No . 1 . Accused

No . 3 on his part gave delivery order to BOK for

free delivery. The further t ransac tions of GOI

securi ties are al ready disc ussed in the earl i e r

paragraphs. It was planned that the SGLs would be

brought back to BOK . where BOK w i l l show them as

discharQed by crossing them so that the acts of

accused Nos . 2 and 3 of using the amount further

continue and acccused Nos . 2 and 3 could use the

amount as per the i r free w i l l . Accused Nos . 3 and 4

spec i f ic a l l y admitted that the SGLs were returned

by accused No . 2 . It is true that there is no oral

evidence of the SGls having been returned by ac­

cused No . 2 . Howev e r . i n his af fidav i t accused No . 2

has clea r l y stated that SG I.. t ransfer forms i n

respect at sec u r i t ies origi11al ly issued by BOK in

favou r of CBMF and returned by RBI on account of

i nsufficient funds were handed ove r to BOK. I t is

also stated by accused No . 1 i n his information note

by stati ng that dtJring the f i rst week of July 1991

SGLs issued by BOK i n favour of CBMF were r e t u r ned

209

SC . 5/93- J .

by RSI f o r want o f balance and the SGLs were . hand-'

ed over to accused No �HPD for rect i f i cation as

per the telephonic advice o f BOK. I t is therefore

not poss i b l e to accept the contention t h a t the

conspi racy came to an end and the evidence of other

transactions of GO! secu ri t ies and the transaction

of PSU Bonds is not relevant and should not be

considered. Accused Nos . l and 2 are empha t i cal ly

denying the knowled9e regard i ng return of SGLs to

BOK which is contrary to t he i r own statement i n

w r iting and the denial i s obviously false to the i r

knowledge . Thus the i nvolvement of a l l the accused

i n the conspi racy is clea r .

128 . Even assuming for the sake of arg'ument

that the conspi racy was complete the moment monies

are si phoned of f rom the CBMF and transfer red to

the account o f acc•.Jsed No . 3 , the evidence Even

rega r d i ng further conduct o f accused, specia l l y of

accused Nos . 1 and 2 tn conceal i ng the facts and

entering into furthcf f transactions for that pur pose

is relevant and is required to be taken into con-

side ration per the law explaine4and - �

c ussed by the Supreme Collrt i n Nalini • s case .

even as

210

dis-

SC . 5 /93-J.

129 . As regards the PSU bonds transac tion.

the contention t hat they are tota l l y i r relevant is

required to be rejected out-right for the simple

reason that the money generated by the fraudulent

act was used on the same day for pur·chasa o f bonds

of face value o f Rs . 100 c rores . The ·fact that the

amount givet'l to accused No . 3 was partly used by h i m

and pa r t l y by accused No . 2 proves the object of

conspi racy although there may not be evi dence that

it was for the ul timate bene f i t o f accused No . 2 -

HPO . I t i s also not necessary to prove as even

from the facts proved, i t is clear that bene f i t was

taken by accused Nos . 2 and 3 . The Cour t is not

interested i n knowing what was the i nternal a r ­

rangement between accused Nos . 2 and 3, and how they

were s ha r i ng the booty acquired by this fraud. The

Court is not concerned with as to how much has gone

to whom and is shared by accused Nos . 2 and 3 i n

w h a t propo rtion. I n many cases which have come to

this Court , i t is found t ha t huge amounts si phoned

o f from the banks and financ ial institutions were

after a short period returned and in some cases

even with interes t . Even then that was an i l legal

act , and in violation of rules and guidel i nes . I n

t he present case liowever evidence on record shows

that the amounts were po$ i t ively used by accused

2 1 1.

S C . 5/93-J .

and the chain o f t ransac t i ons started with the

purchase of PSU Bonds continued further and i t is

not known as to ul timately how long i t went o n .

D u r i ng the course of a rguments M r . Mohi te, lea r ned

Counsel for accused No . 3 . even contended that the

c ha i n cont i nued and there we re fur ther transactions

but the i nves tigation stopped a5 the period was

ove r . However, there is nothing on record to take

note of this argumen t .

130 . I n a case of conspi racy, norma l l y di rect

evidence is no t available and i nfe rences have to be

drawn from the ci rcumstances. Conspi racy i s

hatched in secrecy. I n some exceptional cases or

i n case where one of the accused turns approve r ,

di rect evi nce o f conspiracy i s avai lable. I n this

case, the ci rcumstantial evidence is backed by

documentary evidence . Ci rcumstantial ev idance is

o f conduc t of di f fe re nt accused a t

stages .

di f fe re nt

1 -3 1 . The conspiracy i s hatched and executed

i n this case so cleverly that amount misappropri­

ated by t he fraudulent act is allowed to be uti­

lised by accused Nos . 2 and 3 as per thair free

wi 1 1 . Accused have no pl ausible explanation o f

212

SC . 5/93-J .

the i r conduc t . Howeve r , emphatically accused

No . 2 may deny his connection with accused No . 3 , i t

has become obvious by c l i nching evidence o f his

taking money of PSU Bonds which money according to

him was due to him from acc used No . 3-AON and his

payment of i n te rest in respect of GOI securities

for which there is docume n t a r y evidence to show

that he paid i t a s i n terest o n account of accused

No . 3 -ADN Exh . 67 7 ( 1 ) and Exh . 677 (2) .

1.32 . Let us now consider what accused No. 3

means when he claims that his account was used by

accused No . 2 . He has contended that there were

transactions of c rores o f rupees and he has

r e f e r red to some of the entries which were proved

by P . W . 2 to show simul taneous tr·ansactions.

M r . Mo h i t e , learned Counsel for accused No . 5 , drew

my attention to the evidence of P . W . 2 Mukund Kher

rega rdi ng simu1 taneous t ransact ). ons and al so

refer red to evidence of P . W . 30 Santosh Mulgaonkar

(Vol . 7 page 1 1 42 ) . He also pointed out part o f

w r i t ten statement of accused No . 3 . I t i s admitted

by P . W . 30 that whi le working with SCB he had

noticed on several occasions that even SGL t ransfer

forms were not l odged imme�t e l y w i t h RBI PDO i t i s poss ible t� i'1) ��GL t ra n s f e r

213

and

forms

SC . S/93-J.

issued by SCB to counter party_ Sometimes reasons

for not presenting SGL t ransfer forms quickly was

that there were simul taneous tranwactions and

because of some d i f f i culty balance was not

avai lable w i t h RBI PDO and request was made by

counter party not to lodge SGL transfer form w i t h

RBI POO and even i n respect o f sale by SCB

considering such si tuation SCB might have also

issued inst ructions to counter pa r ty not to lodge

SGL t rans fer form. It is d i f f icul t to appreciate

how this evidence would help the defence. I t on ly

shows that i t was a period when al l the rules ,

regulations and procedural no r·ms were given a go-by

as argued by M r . Ovleka r . Huge amounts were

si pho1ied out of banl<.s and fi nanci.al ins t i tut ions

for which such legal ly impermissible ways were

used. Banks were accommodat i ng each other·.

Higher officers of the banks were accommodating

each other and may not be lodging the SGL

forms knowing fully we l l that there

t rans fer

were no

secur i ties in the account of the se l l i ng bank.

Such practices may have developed dur·i ng that

period. That such practice ha.<l developed can be

of no assistance to the accused . I n fact due to

such practice brokers were able to get undue

advantage_ Crores of rupe�s were l os t and some

214

SC . 5/93-J .

sma l l banks went i n to l iquidation. The cons i s tency

w i t h which such i l legal and prohibi ted acts were

done suppo r t s the prosecu t i on case and shows why

and how the brokers and officers had become bo l d

and even started t h i n k i ng that there i s nothing

wrong i n i t . Accused No . 3 is a n expe r i -

enced stock broker and has been a member o f the

Stock Exchange for a l ong p e r :i. o d . He started his

career as a c l e r k and became d i rector of BOK . He

was himse l f operating a l l h i s accounts . He was

cons t i tuent broker of a bank . I f he was a l l owing

others to carry out transactions through h i s

account . he must be g e t t i ng bene f i t o f i t .

Ul timately he is requi r ed to produce h i s account

books and bank accou nts before the Income Tax

authori ties . Is i t poss i b l e f o r him to tel l the

tax autho r i t i es that he has no concern w i t h the

money coming to h i s account . Can he c l a i m to be a

v i c t i m o n l y a nd some others to be the bene f i c i a r i e s

o f the transactions. even f raudulent t r a nsactions

entered i n his books and in his accoun t w i t h BOK.

To say the least i t is a l l a f t e r thought and

untenabl e .

1 3 3 . M r . R . D . Ov l e k a r as we l l as M r . ThakLlr

seriously contended that the charge under section

2 1 5

SC. S/93-J.

409 a l t hough framed as an a l te r nat ive charge and

has been gi ven up by the prosecution at fag end of

the t r i a l has caused se rious prej udice to the

accused . No pa rticular aspect was pointed out to

shaw and as to what prej ud ice is caused by framing

of alternative charge under· section 409 I P C .

M r . Ovalekar no doubt stated that since charge under

sect i on 409 was t here , he had to fix the wi tness i n

c ross-examination and to do the c ross-examination

accordingly and therefore, w i t nesses could not be

e ffectively cross-examined. Howeve r , exac t l y what

prejudice caused i s not specifically shown. I am

not at a l l impressed by the a rgume nt . A l l the facts

are stated i n the charge shee t . Copi es o f al l

documents and statements are supplied i n advance .

Matter was a rgued at l ength before cha rge . The

charge has not i n any manner put t he accused in an

awkwa,..d pos i t i on whi le corss-exami ning the prosecu­

ti on w i tnessesft

1 34 . This takes me to consider e f fect of the

statements of accused i n examination und�r section

313 C r . P . C . Provisions of section 3 1 3 c l e a r l y �how

tl1at i t is mandatory for the Court to exami ne· the

accused before he is cal led on to enter into his

defence and al though accused is not liable to

2J.6

S C . 5/93-J .

punishment for refusing to answe r any quest i o n or

for g i v i ng false answer s , the same be taken into

consideration for or agai n st him at t he t r i a l .

Accused N o . 3 has tried to pass on the buck to

accused No . 2 claiming himse l f to be a victim. Even

accused Nos . 1 and 2 whose defence is simi la r have i n

particular i nstances taken contradictory stand.

Such contradi c t o r y statements by the accused i n

the i r exami nation under section 313 C r . P . C . have

great relevance . I t is no doubt primary object o f

examination under section 3 1 3 c r . P . C . t o give the

accused opportunity to expl a i n the ci rcumstances

and evidence against h i m . Howeve r , the sec tion

i tsel f makes i t c l ear that the statement can be

used even agai ns t h i m . The Speci al Publ i c

Prosecutor M r . Thakare r·el i ed o n t he case of State

o f u.p. v/s . t,.akhmL reported in A1..B ..1.22.§. Supreme

Cou rt, !007 . I n paras 7 and 9 t he Supreme Court has

pointed out thus :

" 7 . As a legal proposition we cannot

agree w i th the High Cour t that statement of

an accused recorded unde r section 3 1 3 of the

Code does not deserve any value of ut i l i ty i f

i t conta i ns inculpatory admissions. The need

o f law for exami n i ng t he acc used wi th

217

SC . 5/93-J.

reference to incriminating c i rcumstances

appearing against him i n prosecution evidence

is not for observance o f a r i t ual in a t rial ,

nor i s i t a mere formal i ty . I t has a

salutary purpose. It enables the Cou r t to be

apprised o f what the i ndicated persons has to

say about the ci rcumstances pitted against

him by the prosecution. Answers to the

questions may some times be f l a t denial o r

outright repudiation of these ci rcumstances .

I n certain cases accused would of fer some

explanations to i nc r i menative ci rcumstances.

In very rare i nstances accused may even adm i t

o r own incriminating ci rcumstances adduced

aga i nst him , perhaps for the purpose of

adopting legally recognised defences . I n all

such cases the Cou r t gets the advantage of

knowing his version about those aspects and

it helps the Cc>urt to e f fectively appt·eciate

and evaluate the evidence in the case. I f an

accused admits any i ncriminating c i rcumstances

appearing i n evidence against him there i s no

wa rrant that these admissions sliould

al together be ignored merely on the ground

that such adm i ssions were advanced as a

defence st rategy . "

2 1 8

" 9 . Time and aga i n ,

SC . 5 /93-J.

this Cour t has ·

pointed out that such answers of the accused

can wel l be taken i nto consideration i n

decidi ng whether the prosecut ion evidence can

be relied on, a nd whether· the accused is

l i able to be convicted of the o ffence c harged

agai nst him; vide: Sampat h Singh v/s . State

of. Rajasthan ( 1969) 1 SCC 367 (AIR 1969 SC

956 ) ; Je thama l Pi thaj i v . Assistant Collector

of Customs , Bombay ( 1 974)3 SCC 393; (AIR 1974

SC 699 ) ; Rattan Singh v/s . S tate of Himachal

Pradesh ( 1997 ) 4 sec 1 61 ; ( 1997) AIR sew 587 ) . ··

In the case o f §sJ.i &am Prasq,d Y..i.Ji.:_ State o f �

sore. reported in 81.B 1973 � 506 . the Supreme

Court has pointed out t hat even failure of an

accused to ment ion a part icul ar fact i n his

s tatement under section 342 (old Code) would go to

show that i t is an a f te r thought .

135. It must be borne in mind t hat the aim of

any i nvestigation o r trial is ul t imatel y to find

out the t ruth though there are certain lega l

co nst raints . The valuable rights of the acc used to

maintain s i lence during the t rial , presumption o f

i nnocence and proof beyond reasonable doubt can not

219

SC . 5/93-J.

be compromised o r overlooked . Howeve r , the doubt

must be a doubt a r i sing in a reasonabl e m i nd and

not i n a fensiful mind. I f o ne starts looking a t

the prosec u t i on evidence ora l o r docume ntary w i t h a

jaundiced eye then suspicion can be raised i n

respect of any wi tness , any fac t , any documen t .

The co11d1.1ct o f the wi tnesses as wel l as the acct..1sed

has to be judged f rom the poi n t of vi ew of probable

conduct o f a reasonable and prudent man placed i n

s i mi la r si tuatio n . I f there a re two views poss ible

or two i n fe rences possible to be d rawn from a set

of facts , then the one favourable to the defence

has to be accepted . I n the present case facts have

been d i scussed a t leng t h . The Cou r t i s a l so

conscious of the fact that only because one o f

accused makes a s ta tement against the other that

should not be the sole ground for holding the other

gui l t y o f charge . However , when statement of one

accused corroborates the case o f prosecution. then

i t l e nds assurance to the t r u t h thereof and assists

the Gou r t . I t i s spec i fically so when the charge

is that a l l t h e accused agreed together to do

ce rtain ac t . I n the ea r l i e r pa r t o f the judgment I

have referred to t he answers given by the accused

to d i f ferent questions with this back ground .

the accused give contradictory repl i as the Court

220

SC . 5/93-J .

has to find out Nhich o f those con f i r ms w i t h the

t r u t h . I f

i nten ti onal l y

a n acc used i s taki ng

to i nvolve the other

a stand

and ge t

exonerated, the C o u r t i s bound to take note of i t

and ignore i t altoge t he r .

1 3 6 . I t i s also necessary to consider what

other o f fences are made out from the facts proved.

From the above discussion i t is cl ea r that a l l the

four accused have comm i t ted c r i m i n a l conspi racy,

the object of which was toobta i n pecuniary advan­

tage to accused No . 2 and .3 by means of ostensible

o r fake secu r i ty transaction by cheating CSMF . I n

the process accused Nos . 1 to 4 a l l committed the

o f fence of cheating as pointed out e a r l i e r .

1.37 . So f a r as charge under section 4 1 1 is

concerned, i t i s only against accused Nos . 2 and 3 .

I n view o f the above f i nd i ngs that accused Nos . 2

and 3 a re gui l t y o f cheating as well as conspiracy

for che<?.ting, they cannot be he l d gui l t y a.s

rece ivers o f s t o l e n property which i s secured as a

result o f the aforesaid fraudulent act . I t is

clear f r o m the comme ntary of Rata n l a l & Dhi raj l a l

on section 4 1 1 I P C . Chapter 1 7 , Edition 28 :

221

SC . S/93 .

" section 4 1 0 explains what comes under the

wo rds ' s tolen property • . T h i ngs which have

been st<Jlen, extorted , o r robbed. or which

have been obtained by crimi nal

misappropriation o r criminal breach of trust

come under the extended signi f i cance given to

these words. The essence of the o f fence of

receiving stolen property under sec . 41 1

consists i n the receipt o r retention. with

f u l l knowledge at the time of rece i pt or

retent io n that the property was obtained i n

one of the ways speci fied i n s . 4 1 0 . i t is

immaterial whether the receiver knows or not

whose stole i t . Tl.,e section � !.lQ.t. ru:mJ.x .!&

.t.b.e. � tbief. � class Q.f.. persgn�

against � .i.1 1..§. directed � � class !&

!!.hQ.m these calternatiye �Q(g§ apply .=. �wing

QL bavi ng �m to pelieve th� sarne .:t.Q. �

stQlen propecty" . Unless the right o f pos­

session i n the property was lost to the owner·

by the commission of any of the offences

enumerated i n s . 4 1 0 , the property could not

be said to be stolen prope rty. Thus property

obtained by cheati ng would not be stolen

pr·ope r ty . " (Emphasis added ) .

222

SC.5/93.

Therefore. accused No . 2 and accused No . 3 have not

commi tted offence punishable under sec t i on 4 1 1 IPC.

138. The other charge is o f forgery and the

offences connected with f raud punishable under

sections 467, 468. 4 7 1 IPC. I f forgery is proved

then alone question arises for considering other

sections. Forgery is defi ned in section 463 and 464

I PC which read as under:

463. Forgery. Whoever makes any false

document o r part of a document w i t h i n tent to

cause damage or i n j u r y , to the publ ic o r to

any perso n , or to support any claim or t i t l e ,

o r to cause any person t o part w i t h property,

or t o ente r into any express or implied

contract, or w i t h intent to commit fraud or

that fraud may be comm i t ted , commits forgery.

464 . Making a false documen t . - A pe rson is

said to make a false document -

Fi r s t . - Who dishonestly o r fraudulently

makes, signs, seals or executes a document or

part of a docume n t . or makes any mark

denoting the execution o f a docume n t , w i t h

the i ntent ion o f caus i ng i t to be believed

that such document o r part of a docume 11 t was

223

SC . 5/93.

made, signed, sea led or executed by or by the

authority of a person by whom or by whose

autho r i ty he knows that i t was not made ,

signed , sea led or executed. or at a time at

which he knows that it was not made , signed,

sealed or executed; o r

Second l y ;

T h i r d l y ;

What is material to point out is that whoever

dishonestly or fraudu lently makes, signs, seals o r

executes a document o r pa r t of a document �

intentic>n of ca1,1sj,ng il ,tQ � bel ieyed 1..bfil §.Y£.h dqcumen:t Q.t. pa r t fil .e. ®cymeot � made. s:i,gned.

sealed QL �xecuted � � autho rity Q.f. s person

whose authorj,ty bi! knows .t.b.s.t il � IlQ.t

2§aled QL e:?;Secu.lru!.,. The SGLs Exh . 33 and Exh . 37

which were prepared by accused N . 4 without there

being securi ties i n the account of BOK o·r ADN

knowi ng that t here were no sec•.iri t i es , ac·e no doubt

false documen ts . A l l forged documents are false

documen t s , but the converse is not t rue and a false

document would be a forged document o n l y i'f i t is

covered by sect i on 464 of I P C . This section refers

to maki ng , signing. seal i ng and execution of

document by the authority of person by whom or on

224

SC . 5/93.

whose beha l f he knew i t was not so made , s igned .

sealed or executed . I n the present case so far as

accused No . 4 is concerned, he had the authority to

issue SGL t ransfer forms on behalf o f BOK or the

const i tuent of BOK . Accused No . 4 was also given

power of attorney by BOK to execute any SGL

t ransfer forms and the documents pertaining to that

transaction . Mr . Thaka r·e, lea r ned Special Public

Prosecutor cont€mded that accused No . 4 could not

enter i nto a t ransaction of such a huge a�ount and

for such a huge transactio1i he requi red permission -r<'· .\L_

from the higher autho r i t i e s . Mo�oeeve r author i ty to

sign is di fferent than autho rity to enter i nto

transaction and i n case the t ransaction is of

cons t i tuent, there is no question o f any pecuniary

l i mi t

woul d

for ent.�1,i nto the t ransac tion.

be fc>r ba�k ' s transactions.

The

There

l i m i t

is no

evidence to show that even i n case of BOK ' s

transaction beyond a particular l imit anybody else

than accused No . 4 was requi red to sign the SGLTF.

Secondly there wa.s authority to enter into

transac t i o n ev(.=m on behalf o f BOK, so long as the

head of fice does not object. There is therefore no

question of accused No . 4 entering

t ransaction w i t ho u t autho r i ty . Howeve r .

into the

that i s

also besides the poi n t . Question is whether the

225

SC.5/93.

act of signing SGL by accused NO·. 4 was wi thout

autho r i ty as is refer red to in section 464. The

word "autho ri ty" i n section 464 refers to the! act

of maki n g , signi ng , sealing o r exec u t i ng by J;,.bg

authority Qf. a person 12'.'l .fillQ.m. Q..C. !ID whose authority

b.§. knows t!:lfil il � .OQ1 made. signed. �qg QL

executed. The word "autho r i ty" refers to the person

by whose autho r i ty the person s i nging seal ing or

making or executing does said act. Here accused

No . 4 was not c l aiming to si gn , seal or execute the

SGL by the authority of some other person. Accused

No . 4-Raje cannot be said to have made signed,

sealed . or executed the SGL t rans fe r forms w i t hout

the authority o f some other person who i s shown to

have signed, sealed or executed and therefore . the

SGLTFs are false, but not forged documents .

1.39 . M r . Ovleka r , learned Counsel for accused

No . 2 , d rew my attention to the j udgment of Gujarat

High Cou r t in the case of Motisioh Ga,mbhirsinh �

� State. reported in .e..I.B l.2fU. Gyj�rat ™

.!.12..._Head note ( b ) reads thus:

" ( b) Penal Code ( 1860 ) , Ss . 46 7 • 464

False recitals or false s tatement i n document

is not forgery - Attes t i ng forged signa t u re

is not forgery . "

226

SC.S/93.

S i m i l a r l y in Be : Venkatas1.ir-v2naras;imha B..aQ repgrtad

in .eJ..B 1955 B.!1.9.J:lr..9 Pragesb. Jl...�� §2..... i t i s held i n

head note ( a ) as unde r :

( a ) Under �ection 464 what is essential

is that the accused person must make a

document with the i ntention of making i t to

ba bel ieved that i t was signed by or � .tlJ..g,

§.Uthori t.Y. Q..f. someone else. while 1J§ knows

tha t ti was � fil2 made or authorised .bY tha t

Q.SC§OD,

Where the accused d i d not make the

bi l ls purporting to be made by o r authorised

by some person al though h i s intention i n

issuing the bi l ls may be fraudulent and he

may be punishable fo r some other offence, no

of fence unde S . 465 can be sa id to have been

comm i t ted. (Unde r l i ni ng is mine)

Thus the two SGL t rans fe r forms s i g ned and issued

by accused No . 4 a r·e no doubt false documents ,

canno t be said to be forged document and i f

are not fo rged documents, the offence

sections 467. 468, 471 cannot be said t o have

commit ted by any of the accused.

227

but

they

under

been

SC. 5/93.

140. There is charge o f of fence under

section 1 3 ( 1 ) (d ) read w i th section 1 3 ( 2 ) of the

Prevention o f Corruption Act against accused No . 1 .

The basic question is whether accused No . 1 is a

public servant . Definition of publ ic servant · i n

the P reventi on of Co r rupt ion Act is materia l . I t is

a lengthy def i nition and only the relevant

is produced. which is clause ( c ) sub-clause

o f section 2 o f the P . C . Ac t . I t reads:

portion

(ii i ) ,

(c )

( i )

( i i. )

( i i i )

" pu b l i c servant"" means -

any p.srson i n the service o r p�y o f

.a Co1·poration established by o r under

a Ce n t r a l , Provincial or Sta te Act ,

o r fill authority QL � � awned QL

Qootrol.l�d nr:. aided .12.Y the Government�

QL a Government compapy as defi ned i n

section 617 o f the Companies Act , 1956

( l o f l.956) . " (Emphasis added ) .

I n t he earlier pa r t of the discussio n , I have

al ready referred to the 'fact that CBMF i s a private

trus t . T r ust is not a j uristic person and i s a n

obligation a11nexed to the ownership o f the property

228

SC. 5/93.

for the bene ficial enjoyvment o f the person for

whose bene f i t the confidence is acce pted by the

t rustee . I t is t r ustees who a re i n law the owners

of the t r ust property w h i c h vests in them as the

author of the trus t reposes o r declares his

con fi dence in the trustees and they accept i t . I n

t he very nature o f this relationship the subject

mat ter- of the t rus t , which i s called the t rust

property is transfer red to the j o i n t owne rs h i p of

the t r ustees and i t does not belong t o any one o f

them. Therefore trust is neithe r a legal e n t i ty

n o r a body o f pe rso ns and i s only a n obligation

annexed to the ownership o f the prope r ty . The

concept of t r ust is unique. The legal ownership

vests i n the trustees, but the t r ustees have to use

i t f o r the bene f i t of the bene ficiaries as per the

di 1·ections of the sett ler . This is a very pec u l i a r

si tuation i n which the persons i r. whom the

ownership vests i n law cannot u��"" t h1.:� property as

per t he i r -free wi l l an<.!/or for t he i r own bene f i t

and i t i s t:.o be used for· the bene fi t <Jf the

bene f ic i � ries s t r i c t l y i n accordance w i t h the

terms.

1 4 1 . Howeve r . the question that a rises i s

whether accused No . 1 can claim that he is not a

229

SC . 5/93.

publ i c serva n t . Cor respondence between Canara Bank

and RBI (Exh . 562 col l ective l y ) c l ea r l y shows Canara

Bank i s a t r ustee and it requested t he RBI to de

scribe Ca na ra Bank i n the books of PDQ as t r·ustec�

o f CBMF. Even the bank receipts for the

transacti.ons between CBMF and BOK a re al 1 i ssued by

the Ca na ra Bank as a t r ustee o f CBMF. I n case of a

t r u st prope r ty l e t out . the t r ust i s not the

l a ndlord i n the eye of l a w . The landlor ds are

T r ustees . Simi l a r l y empl oyees are to be appoi nted

by the t r us tees and are also removable by the t r us

tees. The order of dismissal may not be passed by

the trustees but the decision has to be taken by

them. T h us t r ustees not only own but also

control the t r ust and trust property . What is

contemplated by sub-cl ause ( i i i ) of c l a use (c) of

section 2 o f the P revention of Corruption Ac t ,

1988 , is a person i n service of a corporation etc .

or au authprity or bodv owneg QL controlled gr·

aided Qy_ the Gover nment QL .9. Goyernmeot compa ny.

Canara Bank is §. Government company which cannot

and has not been disputed. In my view therefore the

employees of CBMF are public servants as CBMF is

owned and control led by trustees which incl ude

Canara Bank .

230

...

I

SC . 5/93.

1 4 2 . On behalf of accused No " l rel iance was

placed on the j udgment of the Supreme Court i n

Civil Appeal Nps.710.3 .9.illJ. 2J..QA. Qf. � decided on

December .5 , 2000, wherein the S u p reme C o u r t ob-

serve�d at page 6 tha t Canara Bank i s a Trustee and

the t rustee of a trust cons t :i tuted by Canara Bank as

se t t l e r of numerous u n i t holde r·s cannot be termed

a1,d styled as Gove rnment. £QID.Qa ny i;ic public ?•ec tqr

undertaking. Property of CBMF cannot be said to be

the prope r t y o f Canara Bank and Canara Bank i tsel f

cannot transfer any monies out o f CBMF to the

account of Cana ra Bank because th.at would be i n

breach of t rus t . I t is true that the t r ustees

cannot t rans·fer any t r ust proper-ty to t he i r· own

accoun t . They a r e owne rs in the eye of law and have

an obligation to use the prope r t y i n a particular

manner as laid down in the trust deed. The re fo re ,

a l t hough Ca na ra Bank cannot t rans'fer the money o'f

CBMF to its own accou n t . i t does remain i n the eye

o f law as owner of the t r ust property having con-

t r o l over i t . To hol d that Canara Bank had no

control over the trust and the t rust property would

be contrary to the concept of Canara Bank being the

trustee. Canara Bank cannot t r a n s f e r the property

to i tsel f because it has to use i t for the bene f i t \,it. �Av><-

o f the bene f i c i a r i es and not t;� t i t does not own \,.

231

SC. S/93.

the t rust proper·ty as trustee. Accused No . 1 was

employee

o f the

of CBMF which i n law means was employee

trustees. Any action on the part of the

CBMF i n a c i v i l Court ca n be taken by a l l the

T r ustees j o i ntly as the t rustees are in control o f

the a f fai r·s of the trust. The sta tement i n the above

stated j udgment of the Supreme Court that i t is not

a Government company is in d i f fe rent contex t .

also not holding i t as a Government company.

I am

I t i s

owned and controlled by a Government company which

aspect bri ngs the accused w i t hin the defini t ion of

p1.1blic servant .

143. Accused No . 1 being a public servant

committed criminal misconduct when he accepted the

false SGLs which he knew to be false and not backed

by securit ies and issued a cheque signed by him and

P . W . 5 B i p i n Divecha. Accused No . 1 was the dealer

respo11s ible for ente 1· ing i n t o transactions . He was

in-charge o f the money market and by abuse of his

pos i t i o n as a public servant he obtai ned pecuniary

advantage for accused Nos . 2 and 3 and thereby

committed of fence under section 1 3 ( 1 ) (d) read w i th

1 3 (2 ) of the Prevention o f Corruption Act . The

othe r three accused abetted i ts commi ss ion by

conspiracy.

232

SC . 5/93.

144 . Accused No . 4 was having domi ni on ove r

the property of BOK. He was holding power of

a t t o r ney from BOK . He was ent rusted with the

property. The cheque issued by CBMF for Rs . 103 and

odd crores was i n the name of BOK . The accused

claims and i t i s also not i n dispute that i t was a

t ransaction o f accused No . 3 -ADN . Howeve r , what

accused No . 4 has done was wi th f u l l knowledge that

it is the transaction of a6cused No. 3-ADN on the

documents prepar·ed i t was shown to be of B O K . I t

was with a pur pose . The purpose was to see that

the money comes to BOK and when it comes accused

No . 4-Raje can transfer i t to the account o f accused

No . 3-ADN . I f he had descr i bed i t as a t ransaction

of AON the cheque received wo1.Jld be in t he name

" BOK a /c . ADN" . All the fou r �ccused having joined

hands , i t became possible to get the cheque in

BOK ' s name and then give credi t to AON. Thereafter

when the money came. he transfer red it to the

account of accused No . 3 , al lowed him to use that

money and some of i t was used for purchase of PSU

bonds and fo1- this purpose accused No. 4 not only

issued SGL t ransfer forms without showing that i t

is issued o n account of AON, but also took care to

see that e n t r i es of the tr·ansactions as wel l as

2:53

SC . 5 /93.

ent ries of the delivery o f the sa.me " free" to AON

are not taken i n account books of BOK. By

suppressing and not disclosing the name of AON i n

t he material documen t and by di recting the staff

members spec i f i cally P . W . 1 4 Meena A r bune not to

take ent r i es i n the record, accused No . 4 has com­

m i t ted not only c r i m i na l breach of trust punishable

under sec: tio n 409 IPC but al.so f a l s i f ication of

accounts , punishable under section 477 (A) I PC .

C r iminal breach of t r ust is qua BOK comm i t ted

principally by accused No . 4 -Raje and the other

accused abetted the commission by conspi racy.

1 4 5 . I t was contended o n behalf of accused

No . 4 that mere i nte r nal t rans·fer does not amount to

misappropriation. Howeve r , M r . T hakur. learned

Counsel for . accused No . 4 also conceded that if i t

is held to be misappropr i. 3. t i o n then accused No . 4

has no ansNe r .

result o f fraud.

In the present case i t was the

The i n te ntio n was to have

wrongful gai n to accused No. 3-ADN and accused No . 2-

H PD and to cause consequent wrongful loss to BOK .

Therefore the internal t rans fer from the account of

BOK to the O , D , Account No. 201 of Accused No. 3-ADN

amounts to misapprop r i a t i o n .

SC . 5 /93.

1 46 . The remar ks i n the ent i re judgment as

fake. bogus o r make believe nature o f tranl!;actions

are restricted to the t ransactions o f BOK and CBMF

i ncluding the sales effected by CBMF to other· banks

and do not apply to the transactions at the end of

C i t i or SCB .

J.4 7 . The o f fence o f c rimi nal conspi racy for

cheating is comm i t ted by a l l the fouraccused. In

pursuance o f the conspiracy accused No . .1 commi tted

o f fence o f cr imi na l misconduct punishable unde r

section 1 3 ( 1 ) ( d ) read w i t h 1 3 ( 2 ) of the Prevention

of Corruption Ac t . 1988, and accused No . 4 com-

m i t ted of fences punishable under section 409, 477A

of the I P C .

Accused Nos . 2 , 3 , and 4 abe t ted by

conspi racy i n the commissi on o f o f fence unde r

section 1 3 ( l ) (d ) and 13(2) of the P revention of

Corruptiorr Act , 1988, by accused No . 1 a.nd accused

Nos . ! , 2 , and 3 abetted by conspiracy commission o'f

offence committed by accused No . 4 under sec tion 409

and 477A o f IPC r/w. 109 ! P C .

1 4 8 . ( a ) Accused Nos . l to 4 are convicted of

of fence under section 1208 read w i t h sect ion 420

IPC r I w • sec t ion l 3 ( 1 ) ( d ) and 1 3 ( 2) o f

235

the

SC . 5/9.3-J . .

Prevention o f Co r r uption Ac t , 1988, and section 409

and 477A I P C . Accused Nos . 1 t o 4 a re also convicted

of o f fence under section 420 I P C .

( b ) Accused No . 1 i s convicted o f o f fence

under section 1 3 ( 1 ) ( d ) r / w . 1 3 ( 2 ) of the Prevention

of Co r r upt io n Ac t , 1988 .

( c ) Acc used No . 4 i s convicted o f of fence

punishable under section 409 and 4 7 7 A o f IPC .

( d ) Accused No . 3 and 4 a r e acquitted o f

o f fence under sec . 4 1 1 IPC. A l l the accused a r e

acquitted the various offences connected w i t h

forgery v i z . • o ffences under- se?c . 467 , 468, 4 7 1 I P C .

149. Having passed the o rde r o f co nvi c t i o n

o f the accused for t h e aforesaid d i f fe r e n t

o f fences , I proceed to hear- each o f the accused on

the Point of sentence.

c..L'-- ------

�" .

1 50 . Heard l e a r ned Counsel for the accused and the

lear·ned Special Public Pro.c;:;ec uto r M r _ V . C . Gupte f o r

C " B . I . On behal f of accused No . 1 i t was contended

t h a t accused No . l i s a n aged perso n . i s ou t o f j o b

for l a s t 7 t o 8 years and is not a d i rect bene f i c i -

a r y and has not secured any monetary gain and

236

SC . 5/93···J .

therefore, a lenient v:i.ew be take n .

1 5 1 . O n behalf o f accused No . 2 M r . Suni l Ka l e ,

l e a r ned Advocate , pointed out t h a t so far accused

No . 2 has been convicted i n s i m i l. a 1· type of o f f e nces

arising o ut o f sec u r i ty t ransactions i n f o u r cases

and i n three of them sentence is about 7 years R . I .

I n one case he was sentenced under the Negotiable

Instrument Act f o r R . I . fo r one yea r , he has under­

gone the sentence a f t e r judgment of this Court was

confi rmed by the Apex Cou r t . T h e learned Advocate

s t rongly contended that i n all these cases t ri a l s

were prol onged and accused No . 2 had to unde rgo

ordeal o f t r i B l and i n the present case also there

was a prolonged t r i a l . F o r last 1 1 years he has

been continuously attending the Cou r t . He i s the

only b read earner of the family and therefore.

keeping i n mind the e n t i re bacJ<g round, sentence o f

one year would meet the ends o f j us t ice .

1 52 . M r . M . S . Mohite, learned Advocate fo r

accused No . 3 . contended t ha t accused No . 3 i s above

70 years of age and is s u f fe r i ng from loss o f

vision a nd is also hard o f hea r i n g due to o l d a9e.

He has no source of i ncome a l t hough he is a noti-

fied person. The Court is not i n a posi tion to

2..37

r

SC . .S/93-·J .

decide even from the evidence as to who is the

ultimate beneficiary. Today accused No . 3 has no

money even to e ngage a lawye r . He has al ready been

convi c ted o f 7 yea rs R . I . i n Special Case No . 7 of

1994 and the learned Advocate i nvoked the provi­

si ons of section 427 of C r . P . C . w i t h request to

ma ke this sentence concurrent wi th the sentence i n

the e a r l i e r cases .

153 . On be ha l f of accused No . 4 learned Advo­

cate Mr . N . K . Thakore pointed out that accused No . 4

has also been co nvicted i n one special case by this

Court a n d sentence o f 7 years R. I . (Special Case

No . 7 o f 1 993) . He is aged 62 y e a r s . He was an

employee and was used as a tool by the higher-ups

special l y by accused No . 3 who was Di recto r- o·f BOK

and he was also act i ng as per the di rections o f

accused No . 3 and othe r higher-ups.

154 . Per contra M r . Gupte. learned Special

P . P . se r i ousl y contended that this i s no t a case

ca l l i ng for any leniency to any o f the accused . He

referred to t he observation of the Supreme Court in

Criminal Appeal No . 1 097 o f 1999 (Ram Narain Poply

v/e . . C . B . I . ) decided by the Supt·eme Cotfft recently.

This was an appeal against the judgment of this

238

r

Court i n s�c u r i ty scam matter whe r e i n Harshad Mehta,

was one of the accused . M r . Gupte pointed out that

i t is t nJe that in that case. the Supreme Court has

taken lenient view i n v:i.ew o f the pec u l i a r facts

and c i rcumstances of the case. spec i a l l y that the

main c u l p r i t Harshad Mehta was no more and t h e

money i nvolved had been brought back w i t h i nte r··

es t . Howeve r , i n the same j udgment the Supreme

Court has pointi3d i n last portion as under·:

"The case of the communi ty deserves

better· treatment at the hands of the Court i n

the discharge o f :i. ts j ud i c i a l fur1c t i o n s . The

Community (Jr the State is not a persona non

g r a t a whose cause may be treated w i t h dis-

d<3.i n . The enti re commuriity i s aggrieved i f

economic of fenders who r u i n the economy of

the S t a t e are not brought t o boo k . A murder

may be (":ommi t tE:ld i n t h e heat o f moment upon

passions being aroused. An economic o f fence

is comm i t ted w i t h cool calculation and de l i b­

er·ate design wi t h a n eye on personal pro f i t

regardless o f the consequence to the communi ­

t y . A dis regard for the interest o f t h e

Comm u n i t y can be mani fested o n l y at t h e cost

o f f o r f e i t i n g the t r ust and fai t h o f the

239

155.

SC . 5/93-J.

community i n the syste?m to administer j ustice

i n an even handed manner wi thout fear o f

criticism from the quarters which vie� whi te

co l l a r c r imes with a permissi ve eye , unmind-

ful o f the damage ; done to the Nat i onal

Economy and Na tiona l I n te res t . as was apt l y

stated i n State o f Guj ara t v/s. Mohanlal

Ji tama l j i Porwal and Anr . (AIR 1987 S . C . J.321 ) .

Unfo rttma.tely i n the last: few

years, the country has seen an alarmi ng r i se

i n white-collar crimes which has af fected the

f i be r o f the country •s economic st ructure.

These cases a.l"e nothi ng but pri va.te gain at

the cost of publ ic , and lead to economic

disaste r . "

M r . Gupte then r e l i ed on a numbe r of

j udgments in suppor t of his contention and pressed

for highest possi b l e se ntence that can bf= a.L-.a rded

for the o f fence punishable u nde r section 409 I P C .

as i. 11 view o f the conspi racy and conviction under­

section 120-B IPC a l l acc used are gui l ty of the

charge a l though i ndividual l y that cha rge was only

against acc used No . 4 . In the case o f Ravji Alias

Ram Chand ra v/s . State of Rajastha n , re por ted i n

( 1996) 2 SCC 1 7 5 , the Supreme Cou r t pointed out in

240

SC. 5/93-J .

the last paragraph that i t is the nature and g ravity

o f t he c r ime b u t not the c r i m i nal , w h i c h are ger­

mane for· consideration of appropriate punishmen t i n

a c r imi na l t rial . The Cou rt wi l l be fai l i ng i n i ts

duty i f appropriate punis hmen t i s not awarded for a

c r· ime which has been com m i t ted not only against the

individual victims but also agai ns t the society to

which the c r i m i na l and v:i.cti rns belong. T he punish­

men t to be awarded for a c r i me must not be i r rele­

vant but it sholl1d conform to and be consi�;tent

w i t h the at rocity and brut a l i ty with which the

c rime has been perpe t rated.

1 56 . I n the case o f B a l k r ishna Chhaganlal Sen

v/s . State of West Bengal , repo r"Led i n 1974 SCC

( C r i ) 4 5 , i n para 13 the Sup reme Court sai d :

" G ui l t being est<:lbl ished, the ·f i ft h e>.ct

of the t ragedy is reached. Social and econom­

ic of fences stand on a graver footing a

respect

advocate

of punishment . The

pleads i n e l i m i na t i on

appe.l Lant " s

of the

imprisonment that gold of considerable val ue

has been confiscated, that his cl i e nt has

gone out of busi ness ( hi s l icence havi ng been

cancel l e d ) a.nd the pass i b i l i ty o f ·further

rnischief is a.bsent, seven yea.rs o f c r i m i na l

24 1

157 .

SC. 5/93-J .

proceedings have been a long o rdeal deterrent

e no ug h to inhibit f u t u re anti-social adven-

t u r e s , and some j ai l te rm he has a l ready

•.J nde rgo ne _ Cow1sel submi t.::. that �'i.s c l ient

w i l l now t u r n a new leaf i f he is not re-

t u rned to p r i s o n . �Je decl :i ne t o be moved by

this dubious pros pec t _ "

The sum and substance o f these j ud�ments

of the Supreme Cou r t is tha t white-collar o f fences

are on the i nc rease . They a re being commi t ted w i t h

impuni ty . The accus�� carry an impression that

1nos t l y the c r i mE:. wi 11 not be de tected. I f detec ted

th� trial would take long time and i n course o f

t � i a l the accused ca n resort to i n ter·locutory

applications as many as possible to protract it to

the maximum and i f u l timately gui l t is established,

he can pray the Court for l eni e ncy and get away

some t i mes w i t h sho r t term and at t i mes w i t h nominal

I t is the interest o f the community a t

large which deserves equal treatment _ The Cou r t by

taking l e n i e n t view i n such cold and calculated

c r i mes for personal aggrandisement would be sending

a w r ong messagf-� to the community at large which i s

the v i c t i m o f such offences. It i s the unspec i f ied

and unde fe nded common man who i s the u l t imate

242

SC . 5/93-J .

l(t)lser i11 a l l these cases a r i s i ng out of sec u r i ty

� scam. Monies of banks a nd fi nancial i n s t i t utes

were s i phoned o f by the o f fenders for t he i r person-

al ga i ns . I n some cases monies were u t i l i sed for

some period arid re t u r ned w i t h i nte rest and it is

not pos s i b l e to p r ove in what manner that money was

u t i l ised and probably i n some cases i t was used by

the accused i n s toc k market . I n this case the

accused are mostly brokers and bank o f f i c i a l s .

C r i m e could be commi tted because o f t h e nexus

between t h e brokers a nd the t�nk o f f i c i a l s . Had

the bank o f f i c i a l s been t r ue to t he i r s a l t and had

t he i r conscio us pinched s l ig h t l y , the scam would

not have taken place and such huge amo u n1¥ would not

Cit>-, have been lost by the public i ns t i t u t i o n . When a

t r ial i s over and conviction pronounced, t he o n l y

person be for·e t h e Court i s <:1ccused and i t i s easy

for h i m to pray for le ni ency . The Court however

cannot b'=l o b l i vious o f the undefended members o f

the society, at whose cost t h e accused have enjoyed

ve. r·ious bene f i ts disproportiona tf'J to the sa la ry and

perks the bank employees were g e t t i ng from the i r

mastE� r . The brokers f e l t no compu ction i n c;;; i phon-

ing bank funds and using them even i n stock market

for m u l t i p l y i n g t he i r weal tl1 .

243

SC . 5/93-J .

1 5 8 . I n the prese nt case , I have d i s c u ssed

the e n t i r e evidence and pointed out that u l timately

Rs . 1 03 and odd crores were lost by CBMF . Some part

o f i t was taken by accused No . 2 and some pa r t by

accused No . 3 . I n what propo rtion they sha red the

booty is a mat·ter· w i t h i n t hei r personal knowledgt:

and is not a matter whi ch was required to be i nves ­

t i gated :i n to o r w h i c h is required t o be decided by

the Cour· t . The fact remains that they are the

di rect beneficiari.es. I n fact this crime i s mo re

s e r i o us than a bank r·obbe ry . I t i s com m i t ted with

a pe r fec t. des ig n , after t hi nk i ng over the roodus­

operandi and the plan was successful ly implemented

and at tempts were made to see tha t the c r ime i s

suppressed and for that reason the money was kept

rol l i ng so that ent r ies deb i t and credit are

recorded and no thing becomes appa ren t from the

account bool<.s a nd documents. I n case of BOK

accused No . 4 -Raje gave d i rection no� to

e ritr·ies i n the account books . T h i s i n my v i ew was

an act which shows how bold the acc1Jsed had becorna

du r i ng the r e l evant pe r i od . , Once the e nt ri es a re

not taken i n the account boo ks , evo:?n auditors o r

higher o fficers would not know u n l ess there i s some

i nvestigation and the plan of bringing back the

SGLs w i t hout even mentioning the t ransact io n i n the

244

SC . 5/93-J .

books o f account was s k i l f u l l y implemented and

carried to t he logical end but for the complai nt

on the pa r t o f the CBMF t hi s fraud would not have

seen the 1 ight o·f the day . Canara Bank as t rustee

of CBMF was u l t imately required to face court

decree of crores. The refore, there is l oss to

Canara Bank representing CBMF and merely by pass-

i ng a se n tence o f heavy fi. ne that loss cannot be

compensated. When prayer for leniency was made on

beha l f of accused Nos . 2 and 3 , I asked one questi on

to the learned Advoca te whether accused No . 2 is

going to bri ng back Rs . 25 c rores which he has taken

without even semblance ofany a u thor i ty which ac-

cused No . ! authorised him to g e t credited i n his

personal accoun t , the lea rned Advoca te pointed out

that the amount was due to h i m from accused No . 3

which the Cour t has not believed. I do not f i nd

t h a t this argument. has· any substanc€:1 and i s worth

considering. In fact accused No . 2 h.3.S denied any

connection w i t h accused No . 3 i n the tra nsact i o n out

of which that amount came and he has the audacity

toclaim as a � of. eiet1lt. due from accused No . 3 .

tr

159 . On beha l f of accused No . 3 i t was urged

that this C o u r t should i nvo ke the prov i s i o ns of

section 427 C r . P . C . A mere perusal o f sec t i on 427

245

S C . 5 /93-·J.

shows tl1at i t i s n<:>t applicable to the case of a.

person who i s not unde rgo i ng sentence of imprison-

me n t . The section applies to a n o f fender who is

s e n t e nced when he is al ready unde rgo i ng the se n­

tence of impri sonmen t .

J.60. M r . Mohite however bro ug ht t.o my no t i ce a

j udgment of Bombay H i g h Court ( D i v i s i o n Bench) i n

the case of Sadashiv Chhokha Sable v/s . S tate o f

Maharash tra . repor·ted i n 1993 C r i . l. . J . page 1469 ,

w he re i n the expression " undergo:i.ng a sentence of

i m p r i sonment" has been i nterpre ted by the Division

Bench. The Division Bench observed -

" 'A person sentenced to i m p r· i so nme n t

m us t , for the p u r pose o'f S . 42 7 , be deemed to

be unde rgo i ng that sentence f rom the very

moment the sentence is passed . The accused

may be on be. i l or i n custody i n the ea r l i e r·

case at t he time o'f passing of the subseqL1ent

sentence . L i t e r a l construction o n the t e r m i -

nolo9y " under·going a se n tence o f imprison-

ment" would l ead to absurd results speci a l l y

where to separate sentences are a�arded one

afteir the other on one day in two d i f ferent

t r i a l s . Either the l e a r ned Judge would not

246

SC . 5 /9.3-.J .

exercise the d isc re t i on only becau�e i n the

earl i e r case convict had not gone i nsi de the

j a i l by that tirne or be w i l l have to actually

send the convict i nside the jai l for some

time, and call him back i mmedi a tely to pro-

nounce j udgment in the second case . Such

absurd and tar<:ical s i tuation coul d not be

said to have been i nte nded by the le9isla-

tu re . "

This being a D i v i s i on Bench judgmen t t-4 .k.�

of � Court I"'

has a binding e f fect and no d i f f e re nt view i s

permis�:. i b l e . Howeve r , I do not. t hi nk t h a t t h i s is

a · case i n whi ch disc ret'ion should be exercised i n

favour o f acc used . I n rny view the facts and ci rcum-

stances clearly s how that this is not a case i n

which sentence of i m p r isonment should be made to

r un concurrent w i t h the sentence passed i n any cf

the ea r l ie r case and therefore , that request is

rejected.

-

161 . Coming to t he a rgument o f lea r ned Spe-

c i a l P . P . t ha t maximum punishment for offence unde r

sect ion 409 i . e . l i f e i mprisonment shou ld be award-

ed . I f i nd that i t i s not possible to concede to

t h i s reque:;t o f t he learned Special P . P . al though I

247

SC. 5/93-J.

agree with him that it is a case for a deterrent

punishment.

years o f age ,

Accused Nos . 2 ,

o ther cases .

tJ thE3r t r i a l s .

Accused Nos . l , and 4 a r e above 60

accused No . 3 i s aged 72 years.

3 and 4 are a l ready sent e nced i n

I t i s t r ue that they had to undergo

I t was the consequence of t he i r own

acts of om ission and commi ssion . That i s not a

ground for taking lenient view . Therefore , con-

sideration that the re were e a r l i e r t rial or t r i a l s

are pending i s tota l l y i r relevant . l n fact t h e

fact t h a t they a re i nvolved in other simi lar of-

fence should be a gro und to be considered against

them and in no case in thei r favour_ Howeve r .

conside r i ng the ages of accused Nos . I. , 3 and 4 and

the facts and ci rcumstances of this case , I am o f

the view that sentence of R . I . for 7 years being

thte maximum sentence prescribed f o r o f f e nce puni-

t i ve under· section 420 of IPC whic:h is ·the princ i -

pal charge i n this case , would meet the ends o f

justice . Sentence w i l l have to be passed f o r each

of the of fence for which each cf the accused i s

convicted . I therefore proceed to pass the fol l ow-

:i.r1g o r d e r :

( a ) Accused Nos . 1 -Anil Mohanlal Narichania,

accused No . 2-Hiten Prasan Dalal . accused No . 3-Abhay

Dharamsey Narottam, and accused No . 4 -Chandrashekhar

248

SC . S/93-.J.

S i ta ram Raje are se n tenced for o f fence punishable

unde r section 120-B read with 420 IPC read w i t h

section 13 ( 1 ) ( d ) r/w . 1 3 ( 2 ) o f the Prevention o f

CornJption Ac t , read w i t h $Elcticms 409 and 477A of

t he I P C , to s u f f e r R . I . ·for 7 ye�ns a nd to pay f i ne

o f Rs . �'S0, 000/- each, i n default R. I . fo r one yea r .

(b) Accused No . 1-Anil Mohanlal Narichania is

sen tenced fo r offence punishable u nde r section

1 3 ( 1 ) ( d ) and 1 3 ( 2 ) of the Prevention of Corruption

Ac t , to su f fe r R . I . for one year and to pay f i ne o·f

Rs. 2000 / - , in default R . I . for two months .

( c ) Accused No . � - Chandrashekhar S i tarm Raje

i s sentenced fo r o f fence under sec t i o n 409 IPC to

s u f f e r R . I . for 7 years and to pay f i ne o f

Rs.2000/-, i n default R . I . for two months.

( d ) Accused No . 4 -Chandrashekhar S i taram Raje

i s sentenced fo r o f fence punishable under section

477-A o f ! P C to suffer R . I . fo r one year and to pay

f i ne o f Rs . 1000/ - . i n default o f R . I . for two

months.

( e ) Substantive sentences to r u n

concurren t l y .

( f ) No separate sentence i s passed for

o f fence under section 420 IPC individually against

any of the accused i ti v i ew of the sentence · passed

i n the f i rs t paragraph o f t h i s o r de r .

2"19

SC . 5/93--J .

1 6 2 . A f t e r pronoLincing thE:? sentence a l l the

learned Advocates appearing for the accused prayed

for suspension o f the sen tence . Mr· . v . c . Gupta ,

l e a r ned Special Publ i c Prosecutor st rongly opposed

this request . S i m i l a r request WC.l.'3 made befon3

,J ustice Ra.ne in S peci c.� 1 Case No. 7 o f 1993 and

j udgment o f Variava J . 1-11as ci ted before h i m . I t

appears that Justice Rane was n o t himse l f ful l y

convinced that there i s any legal provi s i o n f o r

r el ease o f t h e co nv i c ted accused on bai 1 i n order·

to enable him to a ppr oach the Supreme Cou r t . Howev­

e r , i r1 para l l a t page 495 o"f the j udgment the

learned Judge obse rved. '" j ud i c i a l discipline and

c o m i t y requi re the Court whi ch i s o f coo r· di na. te

j u r i s d i c t i o n , t o follow the same course as done by

rny bro ther· ,J udge Va. r i ava . ..

16.3. I do not think that I should take a

d i f ferent view than o ne w h i c h i s consistently

taken by d i f ferent judges of this Court as it would

amount to v i o l a t i o n of j u d i c i a l disc i pl i ne and

prop r i e t y . Afte r a l : o n e cannot forget t h a t t h i s

i s the f i rs t court and the accused have o n l y one

right o f appeal which i s to the Supreme Court o f

I ndia . The f i ndi ngs o f t h i s Court are requi red to

be tested i n appeal and the a.ccused must get a

250

SC _ 5 /93-·J _

chance of presenting his case to the Apex Cou r t .

To call upon hj.m to sur render as against the con-

sis tent · po l i cy adopted by this Court is therefore

agai n s t propr iety . Thus keeping i n l i ne w i t h the

practice fol l owed i n the ear l i e r j udgments of this

Cou r t . I am i nc l i ned to gra nt four weeks t i me to

the accused to surrender w i t h further direction

that having disposed of this matter today , this

Court w i l l have no j urisdiction to entertain any

request for extens ion and any f u r t her request w i l l

have to be made on l y to the Court where appeal i s

t.o be preferred. Hence accused No _ l to 4 a r e

d i rected to be released on bai l 'for four we1:�ks on

the same te rms on which bail was granted d u r i ng

t r i a. l , but wi t h fresh bonds_ F i ne• to be depos i ted

i n t h ree weeks. Accused Nos . l , 3 & 4 were not i n

custody i n this case. No question of set o f f _

Accused No . 2 was i n custody i n C r i m i nal Appeal

No . 688 o f 1 995 of Supreme Court of India from

,3 0 . 8 . 2001 to 24 . 5 - 2002 and ent i t led for set o·f f o r

the said period.

--A . B . Palka r _ ,J .

*******

251.