2021 Supreme(SC) 814

SUPREME COURT OF INDIA
(From the High Court of Andhra Pradesh at Hyderabad)
N.V. RAMANA, CJI., SURYA KANT, HIMA KOHLI, JJ.
N. Raghavender - Appellant
Versus
State of Andhra Pradesh, CBI - Respondent
Criminal Appeal No. 5 of 2010
Decided on : 13-12-2021

IMPORTANT POINTS
(1) Misappropriation with dishonest intention is one of the most important ingredients of proof of ‘criminal breach of trust’.
(2) Best evidence having been withheld by prosecution, benefit of doubt must be extended to Appellant, for no conviction can be sustained on the basis of conjectures and surmises.
(3) While initial onus lies on prosecution to show that property in question was ‘entrusted’ to accused, it is not necessary to prove further, actual mode of entrustment of property or misappropriation thereof.

Headnote:

(A) Indian Penal Code, 1860 – Sections 409 and 420 read with Section 405 – Criminal breach of trust and cheating by Bank Officer – Conviction and sentence – Entrustment of public property and dishonest misappropriation or use thereof in the manner illustrated under Section 405 are a sine qua non for making an offence punishable under Section 409 IPC – Mere retention of property entrusted to a person without any misappropriation cannot fall within ambit of criminal breach of trust – Unless there is some actual use by accused in violation of law or contract, coupled with dishonest intention, there is no criminal breach of trust – Unless it is proved that accused, a public servant or a banker etc. was ‘entrusted’ with property which he is duty bound to account for and that such a person has committed criminal breach of trust, Section 409 IPC may not be attracted – ‘Entrustment of property’ is a wide and generic expression – While initial onus lies on prosecution to show that property in question was ‘entrusted’ to accused, it is not necessary to prove further, actual mode of entrustment of property or misappropriation thereof – Where ‘entrustment’ is admitted by accused or has been established by prosecution, burden then shifts on accused to prove that obligation vis-à-vis entrusted property was carried out in a legally and contractually acceptable manner. (Paras 42, 43 and 45)

(B) Indian Penal Code, 1860 – Sections 420 and 477A – Cheating and falsification of accounts – Phrase ‘dishonestly’ emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, offence becomes punishable under Section 420 IPC – Contrarily, mere breach of contract cannot give rise to criminal prosecution under Section 420 unless fraudulent or dishonest intention is shown right at beginning of transaction – It is equally important that for the purpose of holding a person guilty under Section 420, evidence adduced must establish beyond reasonable doubt, mens rea on his part – Unless complaint showed that accused had dishonest or fraudulent intention ‘at the time complainant parted with monies’, it would not amount to an offence under Section 420 IPC and it may only amount to breach of contract – In an accusation under Section 477A IPC, prosecution must prove (a) that accused destroyed, altered, mutilated or falsified books, electronic records, papers, writing, valuable security or account in question; (b) accused did so in his capacity as a clerk, officer or servant of employer; (c) books, papers, etc. belong to or are in possession of his employer or had been received by him for or on behalf of his employer; (d) accused did it willfully and with intent to defraud. (Paras 48 and 49)

(C) Prevention of Corruption Act, 1988 – Section 13(2) read with Section 13(1)(d) – Indian Penal Code, 1860 – Sections 409, 420, and 477A read with Section 405 – Criminal breach of trust and cheating by Bank Officer – Conviction and sentence – Appellant being Branch Manager was in-charge and responsible for deposits made by Bank customers – Appellant being Branch Manager, had sole authority to issue and pass loose cheques – Issuance of a loose cheque was a departure from standard operating procedure followed at Bank, but no evidence has been led that it was an illegal practice – Prosecution has adduced no other evidence that would indicate a prior meeting of minds between Appellant and his co-accused – Since no explicit prohibition on issuing of loose cheques has been proved, mere fact that Appellant issued those loose cheques, is not sufficient to conclude that he acted unlawfully or committed a criminal misconduct – No financial injury was caused to Bank – Money that a customer deposits in a bank is not held by latter on trust for him – It becomes a part of banker’s funds who is under a contractual obligation to pay sum deposited by a customer to him on demand with agreed rate of interest – Such a relationship between customer and Bank is one of a creditor and a debtor – Bank is liable to pay money back to customers when called upon, but until it’s called upon to pay it, Bank is entitled to utilize money in any manner for earning profit – In this case CBI has either adopted a casual and callous approach or there was some hidden pressure to derail a fair investigation – Though there is strong suspicion of criminal breach of trust, cheating and/or fabrication of Bank records against Appellant, but such suspicion falls short of a conclusive proof to hold him guilty of criminal charges – Best evidence having been withheld by prosecution, benefit of doubt must be extended to Appellant, for no conviction can be sustained on the basis of conjectures and surmises – Non-production of records of Bank also adversely comments on fairness and independence of investigation conducted in instant case – Prosecution has failed to prove charges under Sections 409, 420 and 477A IPC against Appellant beyond reasonable doubt – As a necessary corollary thereto, his conviction under Section 13(2) read with Section 13(1)(d) of PC Act can also not be sustained – However, benefit of doubt being extended to him on account of a thin margin between ‘strong suspicion’ and ‘conclusive proof’, shall not entitle him to initiate a second round of lis to seek his reinstatement or to claim other service benefits from Bank – Appellant is deemed to be guilty of gross departmental misconduct, for which punishment of dismissal from service has been adequately awarded. (Paras 54, 55, 56, 57, 58, 62, 70 and 72)

Facts of the case:

Appellant is aggrieved by judgment dated 18th June, 2009 passed by Andhra Pradesh High Court, dismissing his criminal appeal against the judgment and order dated 28th March, 2002 of the Special Judge, CBI Cases, Hyderabad whereby he was held guilty of the offences under Sections 409, 420, and 477A of Indian Penal Code and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 and sentenced to a total of five years of rigorous imprisonment with various fines for each offence. Accused Nos. 2 and 3 who were also tried along with the appellant, were, however, acquitted of all the charges.

Findings of Court:

Appellant acted brazenly contrary to the norms and internal instructions of the Bank. Although he was clever enough to not trespass into the prohibited area(s) of Sections 409, 420 and 477-A IPC, he ran the risk of causing financial loss to the Bank. Despite his subsequent act of depositing the interest accrued upon the FDRs of B. Satyajit Reddy, from his personal account, and thereby absolving the Bank from such liability, the actions of the Appellant constitute gross departmental misconduct and are unbecoming of a senior Bank Officer.

Result : Appeal allowed.