IMPORTANT POINT
Authority competent to remove from the office which was abused is competent to grant sanction.

JUDGMENT

Jagdish Singh Khehar, J.

1. Investigation into the affairs of the Madhya Pradesh Industrial Development Corporation (renamed as Madhya Pradesh State Industrial Development Corporation, hereinafter referred to as the ‘MPSIDC’) was ordered with effect from 3.1.1996, by the State Government. Thereupon, a first information report bearing no. 25 of 2004 was registered under Sections 409, 406, 467, 468 and 120B of the Indian Penal Code, 1860 (hereinafter referred to as the ‘IPC’) and Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to as the ‘PC Act’). The allegations levelled in the first information report generally were, that the functionaries of the MPSIDC had permitted investment by way of inter corporate deposits (hereinafter referred to as the ‘ICD’s’) through a resolution of the Board of Directors (of the MPSIDC) dated 19.4.1995. By the instant resolution, the Board (of the MPSIDC) authorized its Managing Director, to extend short term loans (including ICD’s) out of the surplus funds with the MPSIDC, on suitable terms and conditions. The gravamen of the accusation was, that the Board of Directors’ resolution dated 19.4.1995 was passed in disregard of an earlier decision taken in the Cabinet Review Meeting held on 28.1.1994, wherein a decision was taken that the MPSIDC would not extend financial assistance to industries. The petitioner herein had admittedly attended the said meeting held on 28.1.1994. The accusation also included the insinuation, that after the decision of the Cabinet Review Committee dated 28.1.1994, the Board of Directors (of the MPSIDC) had passed an endorsing resolution dated 31.1.1994, wherein it was resolved by the MPSIDC to stop financing industries, from out of its surplus funds. The petitioner herein had even participated in the instant proceedings held on 31.1.1994. Based on the aforesaid factual position, it was sought to be suggested, that undeterred by the decision during the Cabinet Review Meeting dated 28.1.1994, and the resolution of the Board dated 31.1.1994 (which had prohibited extension of financial assistance to industries), the Board of Directors’ resolution dated 19.4.1995, authorized its Managing Director to extend short term loans (including ICD’s) to industries, out of surplus funds with the MPSIDC, on suitable terms and conditions. It was also alleged, that the above controversial Board resolution dated 19.4.1995 was passed in complete disregard to the mandate contained in Section 292 of the Companies Act, 1965. After the aforesaid Board resolution dated 19.4.1995, it was alleged, that the MPSIDC had extended ICD’s to a large number of companies, out of which 42 companies had committed default in repayments. In the abovementioned first information report, it was also alleged, that the abovementioned transactions executed by the MPSIDC were illegal and in violation of law.

2. The ICD’s referred to in the foregoing paragraph were executed during the period between 1995 and 2004. It was alleged, that four senior functionaries of the MPSIDC who were then members of the Board of Directors of the MPSIDC had deliberately supported the resolution of the Board of Directors dated 19.4.1995, despite the fact that they were aware of the Cabinet Review Meeting decision dated 28.1.1994, as well as, the earlier resolution of the Board of Directors of the MPSIDC dated 31.1.1994. Without their participation and support, it was alleged, that the controversial Board resolution dated 19.4.1995 could not have been passed.

3. It would also be relevant to mention, that allegations were also levelled against 42 defaulting companies in the first information report dated 24.7.2004. The said 42 companies had defaulted by not making repayments of the ICD’s released to them, in terms of their contractual obligations. The said first information