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SUPREME COURT OF INDIA
SUDHANSU JYOTI MUKHOPADHAYA, ADARSH KUMAR GOEL, JJ.
VINAYAK NARAYAN DEOSTHALI – APPELLANT
VERSUS
C.B.I. – RESPONDENT
CRIMINAL APPEAL NO.346 OF 2004
Decided on: 2 – 12-2014
(2003) 3 SCC 641 – Relied upon
(b) Prevention of Corruption Act, 1988 – Section 13(1) and 13(2) – Diversion of public funds by conspiring and conniving with the third party beneficiary for his benefit and by committing forgery/use of forged documents – Provisions of Section 13(1) and 13(2) apply – Refund of money immaterial – Offences of conspiracy, forgery, misappropriation and corruption stand established. (Para 15, 16)
(2003) 3 SCC 641 – Relied upon
Facts of the case:
The appellant was Assistant Manager of the UCO Bank, Hamam Street Branch who was jointly tried with Harshad M. Mehta on the allegation that during the period 12th March, 1991 to 24th April, 1991, he diverted funds of the Engineering Export Promotion Council amounting to Rs.7.75 crores to the private account of Harshad S. Mehta. Though the said funds were transferred back to the EEPC, conduct of the appellant amounted to offences under Sections 120-B, 409, 467, 471 of the Indian Penal Code and Sections 13(1)(c) and (d) of the Prevention of Corruption Act, 1988.
The charge has been held proved by the Special Court.
The appellant’s conviction by the Special Court for abusing his official position in relation to five other transactions involving diversion of funds to the account of late Mehta, has been earlier upheld by Supreme Court. Reference is also made to the conviction of the appellant by the Special Court in two other cases giving rise to the filing of Criminal Appeal No.687 of 2006 and Criminal Appeal No.335 of 2005 in this Court.
The Special Court rejected the defence of the accused and held that transfer of funds to private account of late Mehta was without any authorization by the EEPC.
Finding of the Court:
Conviction by the Special Court does not need interference.
Result: Appeal disposed of.
Key Points: - The judgment holds that diversion of public funds by conspiring with a third party and using forged documents attracts PC Act sections 13(1) and 13(2) (diversion of public funds by conspiring and conniving with third party; use/forgery) (!) (!) . - It establishes that offences of conspiracy, forgery, misappropriation, and corruption were proven against the appellant for diverting EEPC funds to Harshad Mehta’s account, despite lack of EEPC authorization (!) (!) (!) . - It discusses burden of proof for forgery (BRs issued without backing securities) and notes that repayments do not exonerate but may be considered for sentencing (!) (!) . - It reiterates that public practices cannot substitute statutory/regulatory obligations and that market practices cannot justify illegality (!) . - The Court affirms conviction and reduces sentence to period already undergone, indicating ends of justice were served by commensurate punishment (!) (!) . - The EEPC’s function and the nature of funds (IPRS scheme) and the unauthorized transfer to HSM are summarized to show misutilization of public funds (!) (!) . - It confirms that a public servant’s abuse of official position to obtain undue pecuniary advantage constitutes offence under 120-B IPC with 13(2) PC Act, among others (!) (!) . - The judgment clarifies that repayment of diverted funds does not negate the offence and may influence sentencing (!) . - It notes the burden of proving absence of securities backing BRs and that negative proof rests on prosecution; non-existence of securities established (!) .
Judgment
ADARSH KUMAR GOEL, J.
1. This appeal has been preferred under Section 10 of the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 (for short “the Special Court”) against the Judgment and Order dated 20th January, 2004 passed by the Special Court constituted under the said Act in Special Case No.1 of 1997 in R.C. No.9 (BSC)/94/BOM.
2. In the wake of report of enquiry committee constituted by the Reserve Bank of India under the Chairmanship of Shri Janki Raman to enquire into the allegation of unauthorized diversion of public funds belonging to certain public sector banks and financial institutions by employees of such banks and institutions in collusion with some brokers, the Act was enacted for constitution of a Special Court for trial of criminal offences in respect of transactions during the period 1st April, 1991 to 6th June, 1992 as provided under the Act. The object of the Act was speedy recovery of public money allegedly diverted in security transactions and to punish the guilty and to restore confidence and credibility of the banks and the financial institutions.
3. The Special Court was to try notified persons jointly with other connected persons. One of such named persons was the broker-Harshad S. Mehta who died during the trial. The appellant was Assistant Manager of the UCO Bank, Hamam Street Branch who was jointly tried with Mehta on the allegation that during the period 12th March, 1991 to 24th April, 1991, he diverted funds of the Engineering Export Promotion Council (for short “EEPC”) amounting to Rs.7.75 crores to the private account of Harshad S. Mehta. Though the said funds were transferred back to the EEPC, conduct of the appellant amounted to offences under Sections 120-B, 409, 467, 471 of the Indian Penal Code and Sections 13(1)(c) and (d) of the Prevention of Corruption Act, 1988.
4. The charge has been held proved by the Special Court. It may be noted that the appellant’s conviction by the Special Court for abusing his official position in relation to five other transactions involving diversion of funds to the account of late Mehta, has been earlier upheld by this Court in Criminal Appeal No.1141 of 1999 decided on 14th January, 2003 reported in Ram Narayan Popli vs. Central Bureau of Investigation, (2003) 3 SCC 641. We also find reference to the conviction of the appellant by the Special Court in two other cases giving rise to the filing of Criminal Appeal No.687 of 2006 and Criminal Appeal No.335 of 2005 in this Court.
5. In the present case, charges against the appellant as framed by the Special Court are as follows :
“FIRSTLY: That during the period from August, 1990 to April 1991, you the accused abovenamed, working as Assistant Manager, UCO Bank, Hamam Street Branch, Mumbai did enter into a criminal conspiracy with Harshad Shantilal Mehta, original accused No.1 (since deceased), a Share, Stock and Securities Broker, Mumbai, the object whereof was to illegally divert the funds of Engineering Export Promotion Council (EEPC) to the extent of Rs.7.75 crores to the Current Account No.1028 of the aforesaid Harshad Shantilal Mehta (since deceased), maintained with UCO Bank, Hamam Street Branch, Mumbai, in the name of M/s Harshad S. Mehta, and thereby to obtain undue pecuniary advantage to the said Harshad Shantilal Mehta (since deceased), by you the accused abovenamed misusing your official position as a Public Servant by corrupt or illegal means, under the garb of Securities transactions, camouflaging the same as if the transactions were of UCO Bank, while knowing or having reason to believe that the transactions were in fact of the said Harshad Shantilal Mehta and that you thereby committed an offence punishable under Section 120-B of the Indian Penal Code and within my cognizance.
SECONDLY: That in pursuance of the said criminal conspiracy and in the course of the same transaction, on or about 123, 1991, the said Harshad Shantilal Mehta (since deceased), while purporti
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