The court affirmed that fraudulent intent at the inception is essential for conviction under IPC Sections 120B and 420, emphasizing that mere suspicion cannot substitute for proof.

CAV JUDGMENT

(PER: HON'BLE MR JUSTICE V SRISHANANDA)

Heard Sri S.P.Kulkarni, learned Senior Advocate for Sri K.Srikanth Patil, learned counsel for the appellants and Sri P.Prasanna Kumar, learned counsel for the respondent- Central Bureau of Investigation.

2. Present Criminal Appeal is filed by the accused Nos.2 and 3 in Spl. C.C. No.53/2003 challenging the judgment dated 29.01.2011 passed by the XXI Additional City Civil and Sessions Judge and Special Judge for CBI Cases, Bengaluru.

3. Essential facts for the purpose of consideration of the appeal on merits found in the charge sheet material would reveal as under: Inspector of Police, Central Bureau of Investigation, Bengaluru, (hereinafter referred to as ‘CBI’) has charge sheeted accused Nos.1 to 3 for the offence punishable under Section 120B read with Section 420 of the Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 .

4. Accused No.1-A.Sheshagiri Rao, during his tenure as Manager of Canara Bank, Basavanagudi Branch, Bengaluru, during the period 1998-2001, said to have conspired with accused No.2-N.S.Suhas and his father N.G.Subbaraya Setty-accused No.3 (hereinafter referred to as ‘appellants’) who are the proprietors of M/s Taranga Commercials of India (‘Taranga’ for short) and M/s N.G.Subbaraya Setty and Sons (‘NGSS’ for short) respectively. Pursuant to such conspiracy, various credit facilities were extended by Canara Bank resulting in wrongful loss to the tune of Rs.85,00,000/- and corresponding gain to appellants and accused No.1. Details of such credit facilities are found from the charge sheet whereunder, on 11.01.2000 accused No.1 sanctioned working capital of Rs.8,00,000/- with 25% margin as against stipulated margin of 30% to Taranga under Traders Scheme for marketing Agarabatti, Soaps, Chemicals, etc.,

5. Subsequently, accused No.1 enhanced the said limit to Rs.10,00,000/- on 02.05.2000, even though the cheques discounted earlier to said Taranga were returned unpaid and the outstanding balance in the account of Taranga exceeded the sanctioned limit. Accused No.1 further sanctioned working capital of Rs.7,00,000/- and term loan of Rs.3,00,000/- to NGSS and Sons on 11.07.2000 for manufacture of Agarbathis. It is found from records that said additional sanction was made even though account had the outstanding of Rs.19,93,932/- as against the sanctioned limit of Rs.10,00,000/- in the account of the firm. Again on 22.01.2001 accused No.1 enhanced the limit from Rs.7,00,000/- to Rs.15,00,000/- to NGSS account when the outstanding amount was Rs.15,23,249/-.

6. It is further alleged that accused NO.1 was aware that cheques which were presented by accused No.3 which were discounted by him stood returned unpaid. Despite such irregularity and outstanding in the accounts of accused Nos.2 and 3, accused No.1 fraudulently, in order to facilitate accused No.3 to misuse the credit facility provided by the bank went on further sanctioning the loan by ignoring the rules, regulations and norms of the Bank.

7. Further, accused No.1 failed to report the Controlling Authority vide F-637 and obtained approval before 35 cheques presented by accused No.2 and 14 cheques presented by accused No.3. In other w