2008 Supreme(SC) 949

2008(4) Supreme 10
SUPREME COURT OF INDIA
K.G. Balakrishnan, CJI.
S. Mohan — Appellant
versus
Central Bureau of Investigation — Respondent
Criminal Appeal No. 906, 910 of 1998
Decided on : 16-05-2008

IMPORTANT POINTS
The terms of the scheme framed by CBMF prohibiting the transfer of CANCIGO Units are not statutory rules but are purely contractual.
In the absence of any evidence of committing any criminal act by the appellants, the offence of conspiracy is not proved against them.

Headnote:(a) Indian Penal Code, 1860 – Section 406 – The terms of the scheme framed by CBMF prohibiting the transfer of CANCIGO Units are not statutory rules but are purely contractual – Further, neither the Andhra Bank nor the Andhra Bank Financial Services Limited filed any complaint alleging that the appellant Hiten P. Dalal acted contrary to their directions – Nor did CANFINA complain that appellant S. Mohan had committed criminal breach of trust in regard to these transactions of CANCIGO Units – Hence no offence of criminal breach of trust was made out. (Para 10)

        (2004) 8 SCC 355: 2004(7) Supreme 507 – Relied upon.

        (b) Indian Penal Code, 1860 – Section 406 – Appellant Hiten P. Dalal having paid the consideration for purchasing the CANCIGO Units in the names of Andhra Bank and Andhra Bank Financial Services Ltd., was the apparent owner of these units – When he transferred these units to CANFINA, and CBMF did not raise any objection in respect thereof, CANFINA had a just right to possess the CANCIGO Units to the exclusion of Appellant Hiten P. Dalal – Therefore, no offence of Criminal Breach of Trust is committed by the appellant Hiten P. Dalal. (Paras 10 and 11)

        (c) Indian Penal Code, 1860 – Sections 406 and 120B – Prosecution could only prove that the appellant S. Mohan was involved in the transaction but could not prove any illegality in these transactions – There was no inducement to CANFINA to purchase the units by any false representation – So long as the CANFINA has no grievance or complaint against the appellant S. Mohan that he acted contrary to their directions and accepted the CANCIGO Units and paid the money to the appellant Hiten P. Dalal, no offence is made out against the appellant S. Mohan either of Criminal Breach of Trust or conspiracy. (Paras 12 and 13)

        (d) Indian Penal Code, 1860 – Section 120B – In the absence of any evidence of committing any criminal act by the appellants, the offence of conspiracy is not proved against them. (Para 15)

        (e) Indian Penal Code, 1860 – Section 411 – Admittedly the CANCIGO Units worth Rs. 33 crores were purchased by the money owned by appellant Hiten P. Dalal, so they were not stolen property in his hands – Neither, the Andhra Bank nor the Andhra Bank Financial Services Limited made any such complaint – As the offence of Criminal Breach of Trust is also not made out, the conviction of the appellant under Section 411 is not sustainable – So also, the appellant S. Mohan is not liable for the conspiracy to commit offence under Section 411. (Para 16)

        (f) Prevention of Corruption Act, 1988 – Section 13(1) (c) and 13 (1) (d) r/w section 13(2) – The entire transaction already held to be not illegal – It is highly improbable to believe that appellant S. Mohan on his own decided to accept CANCIGO Units worth Rs. 33 crores without any instructions, so there must been proper authorization – In view of the CANFINA not filing any complaint alleging any unauthorized transaction carried out by him, appellant S. Mohan is not guilty of the offence punishable under Section 13(1)(c) and 13(1) (d) r/w section 13(2). (Para 17)

       Facts of the case:

        1. In the year 1992, certain irregularities were detected in various security transactions that had taken place between certain financial institutions. The Reserve Bank of India constituted a Committee known as “Janakiraman Committee” to look into the real nature of these transactions and to find out if any fraud or financial irregularities had taken place in these transactions.

        2. It was found that large scale irregularities and malpractices were noticed in transactions both in the Government and other securities, indulged in by some brokers in collusion with the employees of various banks and financial institutions. It was noticed that these irregularities and malpractices had led to the diversion of funds from banks and financial institutions to the individual accounts of certain brokers.

        3. The CBI after investigation of the case filed a report against four accused before the Special Court alleging that these accused were responsible for causing loss of Rs. 33 crores to Canara Bank and various other allegations were also made against these accused. Accused No. 1 was the Executive Vice President and Chief Dealer, Accused No. 2 was the Asst. Vice President and Accused No. 3 was the Asstt. Vice President and Dealer, of Canbank Financial Services Ltd. at the relevant point of time. Accused No. 4 was a Share and Securities Broker.

        4. On August 28, 1991, Accused No. 4 wrote to Andhra Bank enclosing an application form for CANCIGO Units worth Rs. 11 crores requesting the Bank to sign the application on his behalf. On August 29, 1991, Andhra Bank Ltd. applied to the Canbank Mutual Fund, at the request of the appellant Hiten P. Dalal, for the purchase of CANCIGO Units of the face value of Rs. 11 crores. A cheque drawn by the appellant Hiten P. Dalal for the sum of Rs. 11 crores was sent alongwith the application. The application was signed by one Dhankumar on behalf of Andhra Bank Ltd.

        5. Similarly, on Sepetember 14, 1991, the same appellant Hiten P. Dalal through Andhra Bank Financial Services Limited requested for purchase of CANCIGO Units of the face value of Rs. 22 crores along with the application and a cheque drawn by appellant Hiten P. Dalal for Rs. 22 crores on his account with Andhra Bank. On the basis of these two applications, Canbank Mutual Fund issued two credit sheets of the units of CANCIGO one in the name of Andhra Bank for Rs. 11 crores and the other in the name of Andhra Bank Financial Services Limited for Rs. 22 crores. Though these two credit sheets were issued on the basis of the cheques drawn by the appellant Hiten P. Dalal, the credit sheets were issued in the name of Andhra Bank and Andhra Bank Financial Services Limited, respectively as they had signed the application forms.

        6. The appellant Hiten P. Dalal who was a stocks and securities broker was indebted to CANFINA in a sum of Rs. 25,01,67,129/-. He offered to sell the CANCIGO Units of the face value of Rs. 33 crores to CANFINA to square up his dues in the sum of Rs. 25,01,67,129/-. Accused 1 to 3 entered into a transaction with the appellant Hiten P. Dalal who was the fourth accused, to purchase the CANCIGO Units of the face value of Rs. 33 crores standing in the name of Andhra Bank and Andhra Bank Financial Services Limited though there was no letter of authority or consent for such sale from either Andhra Bank or Andhra Bank Financial Services Limited. These transactions were entered into by accused 1 to 3 on behalf of CANFINA knowing fully well that these CANCIGO Units were not transferable and the appellant Hiten P. Dalal was not competent to deal with them. After adjusting the amount due from the appellant Hiten P. Dalal, a cheque was issued for the balance amount of Rs. 7,98,32,871/- drawn in the name of Andhra Bank with a letter to the Andhra Bank to credit the proceeds of the cheque to the account of Hiten P. Dalal. By this method the appellant Hiten P. Dalal thus got his debt to the tune of Rs. 25,01,67,129/- due to CANFINA wiped out and got a sum of Rs. 7,98,32,871/- from CANFINA, even though CANCIGO Units were not transferable and could not be transferred to the name of CANFINA.

        7. It is in this background all the four accused were charged with having entered into a criminal conspiracy for committing the offence of cheating and criminal breach of trust and falsification of accounts and the offences under Section 13(1)(c) and 13(1)(d) read with 13(2) of the Prevention of the Corruption Act.

        8. These two appellants were found guilty by the Special Court mainly on the ground that the CANCIGO Units issued by CBMF of the face value of Rs. 33 crores stood in the name of the Andhra Bank and Andhra Bank Financial Services Limited and the appellant Hiten P. Dalal was not entitled to get transfer of these CANCIGO Units and that the appellant S. Mohan (in Criminal Appeal No. 906 of 1998) was instrumental in such transaction and thus entered into a conspiracy with the accused no. 4. Both the appellants have been found guilty of offences punishable under Section 406 namely, Criminal Breach of Trust.

       Findings of the Court :

        The appellants are not guilty of any of the offences with which they were charged.

       Result : Appeals allowed.