VERY IMPORTANT POINT
In this land mark judgment, the Apex Court has upheld the conviction of prominent financial broker Late Shri Harshad Mehta 1992 Securities Scam under various sections of Indian Penal Code by majority of 2 : 1 only.

Headnote:(i) Indian Penal Code, 1860-Sections 120B, 420, 409, 467 and 471- Offences of criminal conspiracy, cheating, criminal breach of trust, forgery by using forged documents-Prevention of Corruption Act, 1988-Sections 13(1)(c) read with 13(2)-Offence of abuse of public offices and dishonest misappropriation of the public funds-Five accused were tried by Special Court-(Trial of Offences Relating to Transactions in Securities) Act, 1992-Special Court acquitted A2 but convicted A1, A3, A4 and A5-Appeal against acquittal of A2 by State, and appeals against convictions by A1, A3, A4 and A5-A5 died but his appeal is also heard on merits on application of his wife-Five transactions entered into by Maruti Udyog Ltd. regarding units of TI through UCO Bank who issued bank receipts in which A5 was payee-A1 and A2 were senior employees of MUL and A3, A4 Bank officials and A5 was prominent financial Broker (Shri Harshad Mehta)-Appeals were heard by three learned Judges-Justice Shah found entire investigation has been dishonest (See paras 33 to 37) PW 23 granted pardon who supported the allegations of A5 against Shri Narasimha Rao, the then Prime Minister-Prosecution failing to prove conspiracy (see paras 183 to 185)-Jurisdiction of Special Court under SCAM Act found-Limited only to two transactions (see para 189)-Majority of Pasayat and Agarwal, JJ. disagreeing to role of A1, A3 and A5 (see para 293)-Case law discussed.
       Held : Per M.B. Shah, J.
       There are several salient features of the instant prosecution which clearly show that the entire investigation has been dishonest. (Para 33)
       All the above circumstances reveal the non-application of mind which the investigating agency displayed in filing the FIR. (Para 37)
       In this set of circumstances, it would be difficult to hold that prosecution has proved the charge of criminal conspiracy under Section 120-B of IPC against the accused. (Para 183)
       Held consequently : Once we arrive at the conclusion that the prosecution has failed to prove the criminal conspiracy, the conviction of the accused under Section 120-B of IPC requires to be set aside. (Para 185)
       Held : Per Majority of Arijit Pasayat and B.N. Agrawal, JJ.
       Notwithstanding my great respect for learned Brother Shah s wisdom and erudition. I am unable to agree that some of the appellants i.e. A-1, A-3 and A-5 deserve to be acquitted. My reasons with which Brother Agrawal also agrees, are as follows. (Para 293)
       After appraisal of evidence and law held:-
       The conviction of accused 1, 3 and 5 are in order and are maintained. (Para 399)
       We respectfully agree with conclusions of learned Brother Shah though not with the reasoning in their entirety regarding dismissal of the appeals against acquittal of A-2, and setting aside the conviction of A-4. (Paras 399)
       (ii) Indian Penal Code, 1860-Sections 120B, 420, 409, 467 and 471-Offences under-Prevention of Corruption Act, 1988-Sections 13(1)(c) r/w 13(2)-Five accused tried by Special Court under Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992-A2 acquitted-Remaining four accused appealed to Supreme Court-A4 acquitted by Supreme Court-A1, A3 and A5 s conviction was found in order by Majority of 2 : 1-Question of sentence-Whether be modified to the period already undergone? (Yes).
       Held : Per majority of Arijit Pasayat and B.N. Agarwal, JJ.
       The convictions of accused 1, 3 and 5 are in order and are maintained. A question about the sentence was raised. Normally, in cases involving offences which corrode the economic stability are to be dealt with sternly. It is, however, noticed that A-5 has died during the pendency of the appeal. A-1 and A-3 were small flies who appear to have been caught in the web of A-5 s machinations. Apparent reason for their involvement is greed and avarice. There may be substance in the plea raised by the learned counsel for the accused-appellants that higher ups of MUL and Banks can not certainly be unaware of the goings on, and have not been proceeded with and given clear chit. Though this is certainly a matter of concern, yet that cannot be a ground for taking a sympathetic view of A-1 and A-3 s conduct. Considering the fact that the occurrence took place a decade back, and the trial has spread over a few years, and the death of A-5, we feel custodial sentence for the period already undergone (which we are told was for a number of months) would meet the ends of the justice. While fixing the quantum of sentence, we have duly considered the fact that in the instant case the amounts have been paid back, which as noted above, learned counsel for the prosecution conceded was a factor for fixing the quantum of sentence. (Para 399)
       (iii) Indian Penal Code, 1860-Sections 120B, 420, 409, 467 and 471-Prevention of Corruption Act, 1908-Section 13(1)(c) r/w 13(2)-Offences under-Five accused tried for securities scam of May 1992 involving Harshad Mehta-Special Court convicted A1, A3, A4, A5 but acquitted A2-Five criminal appeals filed to Supreme Court-Three Judges Heard-State s appeal against acquittal of A2 was dismissed by all, conviction of A4 Ram Narayan Poply set aside by all, but conviction of A1, A3 and A5 was upheld by Majority of 2 : 1 with modification in sentence-Ordered accordingly by the Court.
       Held as per order of the Court (M.B. Shah, B.N. Agarwal and Arijit Pasayat, JJ.)
       In the result it is held that:-
       (1) Criminal Appeal No. 521 of 2000 filed by the State against A2 Ambuj Sushil Kumar Jain is dismissed.
       (2) Criminal Appeal No. 1097 of 1999 filed by A-4 Ram Narayan Popli is allowed and he is acquitted of all the offences alleged against him.
       (3) Further, in view of the judgment rendered by the Majority, Criminal Appeal Nos. 1117 of 1999, 1141 of 1999 and 1150 of 1999 filed by A1 Pramod Kumar Pritam Lal Manocha, A-3 Vinayak Narayan Deosthali and deceased A-5 Harshad Shantilal Mehta respectively are partly allowed. The order of conviction awarded by the Special Court in respect of A1, A3 and A5 is confirmed. However, sentence of A1 and A3 is reduced to the period already undergone.
       Ordered accordingly. (Paras 400 and 401)

Judgement Key Points

Based on the provided legal document, here are the key points regarding the case of Ram Narain Poply vs. Central Bureau of Investigation:

Case Overview and Verdict * The Supreme Court upheld the conviction of prominent financial broker Harshad Mehta and others regarding the 1992 Securities Scam by a majority of 2:1. * The conviction was under various sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1988. * The Special Court had convicted four accused (A1, A3, A4, A5) and acquitted one (A2). * The Supreme Court dismissed the appeal against the acquittal of A2 but allowed the appeals against the convictions of A1, A3, A4, and A5. * The conviction of A4 (Ram Narayan Popli) was set aside by all judges, resulting in his acquittal. * The convictions of A1, A3, and A5 were confirmed by the majority (Pasayat and Agrawal, JJ.), though the sentence for A1 and A3 was reduced to the period already undergone.

Jurisdiction of the Special Court * The jurisdiction of the Special Court under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 (SCAM Act), is limited to offences relating to transactions in securities occurring between April 1, 1991, and June 6, 1992. * Consequently, the transactions dated January 24, 1991, March 13, 1991, and March 18, 1991, fell outside the jurisdiction of the Special Court. * Only the transactions dated April 24, 1991, and May 2, 1991, were within the Special Court's jurisdiction.

Key Findings on Conspiracy * The prosecution failed to prove the charge of criminal conspiracy under Section 120-B of the IPC against the accused. * The alleged conspiracy was based primarily on the evidence of an approver (PW23, Mohan Khandelwal), whose veracity was destroyed in cross-examination and whose testimony regarding a meeting in April/May 1989 was found to be concocted and unsupported. * Other employees of Maruti Udyog Ltd. (MUL) who would have witnessed a meeting in the office did not corroborate the presence of the accused in the alleged meeting. * The prosecution introduced a new story regarding a conspiracy hatched in 1989, which adversely affected the prosecution case.

Analysis of Transactions and Offences * Nature of Transactions: The transactions were found to be loan transactions where funds were lent to Harshad Mehta against security (UTI units) and repaid with interest on due dates. There was no loss to MUL or the banks involved. * Banking Practices: The practice of routing transactions and crediting pay orders to broker accounts (instead of the named payee bank account) was a known market practice at the time, though later criticized by the RBI. * Forgery Charges: The charges of forgery against A3 (Vinayak Narayan Deosthali) were set aside. The Bank Receipts (BRs) issued by UCO Bank were found to be backed by securities, and the bank was authorized to act as an agent for its broker clients before the specific RBI circular in July 1991. * Misappropriation: Since the funds were returned with interest and no loss was caused, there was no dishonest misappropriation or criminal breach of trust.

Specific Accused Findings * A1 (Pramod Kumar Manocha) and A2 (Ambuj Sushil Kumar Jain): While A1 was convicted by the Special Court, the Supreme Court acquitted him (along with A2) due to the failure to prove conspiracy and the lack of dishonest intent. A2 was already acquitted by the Special Court. * A3 (Vinayak Narayan Deosthali): Convicted by the Special Court for forgery and abuse of public office; acquitted by the Supreme Court majority as the forgery charges were misconceived and the conspiracy was not proved. * A4 (Ram Narayan Popli): Convicted by the Special Court for criminal breach of trust; acquitted by the Supreme Court as there was no evidence proving he directed the crediting of funds to A5's account. * A5 (Harshad Shantilal Mehta): The mastermind of the scam; convicted by the Special Court; conviction upheld by the Supreme Court majority. He died during the pendency of the appeal, but the appeal was heard on merits.

Sentencing * The majority opinion held that while economic offences corroding stability should be dealt with sternly, the fact that amounts were paid back and the occurrence was a decade old warranted reducing the custodial sentences for A1 and A3 to the period already undergone.

JUDGMENT

Shah, J.-The entire prosecution version is around the following five transactions entered into by Maruti Udyog Limited (hereinafter referred to as "MUL"), through United Commercial Bank (hereinafter referred to as UCO Bank ) wherein Harshad S. Mehta A-5 is payee or recipient of the amount, which are mentioned hereunder:-

Trans. No. A-5 Dates Days Rate of Amount Interest Amount From To Rs. Rs. Repaid (Rs.)

01. Lent 24.01.91 25.02.91 32 12.75 4,99,45,000 5,58,250 5,05,03,250 to MUL

Remarks -MUL delivered 35 lacs Units of UTI to A5.

02. Borrowed 13.03.91 25.03.91 12 16.75 10,11,50,000 5,56,995 10,17,06,200

Remarks-UCO gave BR to MUL for 70 lacs Units.

03. Borrowed 18.03.91 22.03.91 5 21.00 10,83,75,000 3,11,775 10,86,86,775

Remarks-UCO gave BR to MUL for 75 lacs Units.

04. Borrowed 24.04.91 26.04.91 2 26.25 7,62,45,000 1,09,650 7,63,54,650

Remarks-UCO gave BR to MUL for 51 lacs Units.

05. Borrowed 02.05.91 07.05.91 5 25.00 10,39,50,000 2,99,090 10,42,49,090

Remarks-Number of Units not known but only value stated in chargesheet.

Undisputedly, (a) the receipt and the payment of amount was for a fixed period; (b) interest rate was fixed and was received or paid as agreed; (c) for the first transaction, before receiving the money, MUL gave UTI units as a security; for 2nd, 3rd and 4th transactions UCO bank issued Banks Receipts (BRs); (d) the transactions are squared-up on fixed date i.e. the amount is repaid on date fixed; (e) commission, brokerage is received and credited by the UCO Bank for which there are credit entries in the account books; (f) there is no loss to the MUL and the UCO Bank; (g) accounts of UCO Bank are audited, no objection is raised by internal or external auditors; and (h) accounts of MUL are also audited and there is no objection raised by the internal or external auditors to such transactions; (i) no suggestion that any accused gained by such transactions except that A-5 got loan.

2. On the basis of the aforesaid special features of the prosecution story, the Special Court, Bombay under Special Court (Trial of Offences Relating to Transactions In Securities) Act, 1992, (hereinafter referred to as "the SCAM Act") in Special Case No.6 of 1994 RC.2(A)/93-ACU-VII] tried five accused for the offences of cheating, criminal breach of trust, forgery by using forged documents, abuse of public offices and dishonest misappropriation of the public funds under Section 120B read with Sections 420, 409, 467 and 471 of the Indian Penal Code (IPC) and Section 13(1)(c) read with Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as "the PC Act"). A-1 Pramod Kumar Pritam Lal Manocha, A-2 Ambuj Sushil Kumar Jain and A-3 Vinayak Narayan Deosthali were separately charged under Section 13(1)(c) read with Section 13(2) of the PC Act as also under Section 409 of IPC. For being a Bank employee, A-4 Ram Narayan Popli was also charged under Section 409 of IPC. A-3 in addition was charged for the offence punishable under Section 420 IPC for cheating MUL and was also charged under Section 471 read with Sections 467 and 468 of IPC for fradulently and dishonestly using letter-heads and BRs of UCO Bank, Hamam Street Branch, Bombay knowing the same to be false and forged documents as also forging certain documents to be used as valuable securities. A-5 Harshad Shantilal Mehta was also charged for the offence punishable under Section 403 of IPC.

3. By judgment and order dated 27th/28th September, 1999, the learned Special Judge acquitted accused No.2 and convicted accused Nos.1, 3, 4 and 5 as under:-

1. "A-1 Pramod Kumar Pritam Lal Manocha. A-3 Vinayak Narayan Deosthali, A-4 Ram Narayan Popli and A-5 Harshad Shantilal Mehta are convicted being the parties to criminal conspiracy alongwith Mr. Mohan D. Khandelwal (PW23) between the period of April -- May, 1989 to May, 1991 in Bombay and Delhi, the object of which was to divert the surplus funds of MUL lying with its account in Canara Bank, Sansad Marg, N

Click Here to Read the rest of this document

2003 Supreme(SC) 28

VERY IMPORTANT POINT In this land mark judgment, the Apex Court has upheld the conviction of prominent financial broker Late Shri Harshad Mehta 1992 Securities Scam under various sections of Indian Penal Code by majority of 2 : 1 only.

Cases Referred (13)

VERY IMPORTANT POINT
In this land mark judgment, the Apex Court has upheld the conviction of prominent financial broker Late Shri Harshad Mehta 1992 Securities Scam under various sections of Indian Penal Code by majority of 2 : 1 only.