Prevention of Corruption Act, 1988 – s.13(2) r/w s.13(1)(d) – Penal Code, 1860 – ss.409, 420, 477A – Criminal breach of trust by public servant or Banker – Strong suspicion short of conclusive proof – Case of prosecution that accused no.3-brother-in-law of appellant-Branch Manager opened an account of the Academy of which he was Treasurer – Allegedly, appellant and the other coaccused also working in the Bank conspired with accused no.3 by allowing withdrawal of amounts from the said account, despite insufficient funds – Appellant was further accused of pre-maturely encashing two FDRs belonging to a customer which amount was transferred to the aforesaid account – Co-accused acquitted by Trial Court – Appellant held guilty concurrently – On appeal, held: Material on record does not disclose conspiracy between the accused persons – Further, there were sufficient funds in the account for passing the three cheques in question – Mere issuance of the aforesaid loose cheques, not sufficient to conclude that the appellant acted unlawfully or committed criminal misconduct – There is also serious dispute on the factum of whether or not the customer had sought the premature withdrawal and subsequent transfer of the proceeds of FDRs to the account of Academy – He was the best person to throw light on the said fact, but he was not examined which is materially fatal to the prosecution’s case – On facts, no financial loss was caused to the Bank/customer – Direct and relevant evidence being withheld, benefit of doubt extended to appellant – Prosecution failed to prove charges u/ss.409, 420 & 477A, IPC against the appellant beyond reasonable doubt – Conviction u/s.13(2) r/w s.13(1)(d), PC Act also cannot be sustained. Criminal Law – Mixed questions of law and facts – Concurrent view taken by Courts below – Scope of interference – Discussed. Penal Code, 1860 – ss.409, 420 and 477A – Charges under – Necessary ingredients to prove – Discussed. Criminal Law – Mens rea – Held: Crucial word used in s.405, IPC is ‘dishonestly’ – It pre-supposes the existence of mens rea – Penal Code, 1860 – s.405.
Penal Code, 1860 – s.405 – ‘Entrustment of property’ – Burden to prove – Initial burden; shifting of burden – Discussed. Banking/Banks – Conventional bank transactions – Relationship between the Bank and the Customer – Discussed.
Criminal Law – Standard of proof – Domestic enquiry vis-àvis criminal charge – Discussed. Words & Phrases– ‘intent to defraud’ u/s.477-A – Elements of – Discussed – Penal Code, 1860 – s.477-A.
Disposing of the appeal, the Court
1. Section 409 IPC pertains to criminal breach of trust by a public servant or a banker, in respect of the property entrusted to him. The onus is on the prosecution to prove that the accused, a public servant or a banker was entrusted with the property which he is duly bound to account for and that he has committed criminal breach of trust. The 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. The crucial word used in Section 405 IPC is ‘dishonestly’ and therefore, it pre-supposes the existence of mens rea. The second significant expression is ‘mis-appropriates’ which means improperly setting apart for ones use and to the exclusion of the owner. Unless it is proved that the accused, a public servant or a banker etc. was ‘entrusted’ with the 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 the initial onus lies on the prosecution to show that the property in question was ‘entrusted’ to the accused, it is not necessary to prove further, the actual mode of entrustment of the property or misappropriation thereof. Where the ‘entrustment’ is admitted by the accused or has been established by the prosecution, the burden then shifts on the accused to prove that the obligation vis-aÌ-vis the entrusted property was carried out in a legally and contractually acceptable manner. [Paras 41-43, 45][81-D-F; 82-C-D, G-H; 83-A-B]
Sadupati Nageswara Rao v. State of Andhra Pradesh (2012) 8 SCC 547 : [2012] (6) SCR 1143 – relied on.
2. In order to attract the provisions of Section 420 IPC, the prosecution has to not only prove that the accused has cheated someone but also that by doing so, he has dishonestly induced the person who is cheated to deliver property. There are, thus, three components of this offence, i.e., (i) deception of any person,
(ii) fraudulently or dishonestly inducing that person to deliver any property to any person, and (iii) mens rea of the accused at the time of making the inducement. For the offence of cheating, fraudulent and dishonest intention must exist from the inception when the promise or representation was made. The phrase ‘dishonestly’ emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, the offence becomes punishable under Section 420 IPC. For the purpose of holding a person guilty under Section 420, the evidence adduced must establish beyond reasonable doubt, mens rea on his part. Unless the complaint showed that the accused had dishonest or fraudulent intention ‘at the time the complainant parted with the monies’, it would not amount to an offence under Section 420 IPC and it may only amount to breach of contract. [Paras 47, 48][83-D-H]
3. In an accusation under Section 477A IPC, the prosecution must prove- (a) that the accused destroyed, altered, mutilated or falsified the books, electronic records, papers, writing, valuable security or account in question; (b) the accused did so in his capacity as a clerk, officer or servant of the employer; (c) the 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) the accused did it wilfully and with intent to defraud. [Para 50] [84-D-E]
4. 1 The High Court held that the actions of the Appellant were not to his benefit, but to the advantage of his brother-inlaw, i.e., Accused No. 3. The Brother-in-law of the Appellant was, however, acquitted by the Trial Court and no appeal was preferred by the State against his acquittal. The findings in respect to his innocence have attained finality. There is no doubt that amongst the three accused persons, the Appellant being the Branch Manager, had the sole authority to issue and pass the three loose cheques. Since no explicit prohibition on issuing of loose cheques has been proved, the mere fact that the Appellant issued those loose cheques, is not sufficient to conclude that he acted unlawfully or committed a ‘criminal misconduct’. The case of the Prosecution rested heavily on the premise that the three cheques in question, i.e., Ex. P25 to P27, were passed even though there weren’t adequate funds in account No. 282. On perusal of the Current Account Ledger for account No. 282 (Ex P23) it appears that there were sufficient funds in account No. 282 for passing all the three cheques in question. So far as this part of the transaction is concerned, the Bank did not suffer any loss. In order to substantiate the charge under Section 477-A IPC, the primary contention of the Prosecution is that despite passing the three cheques, the Appellant did not make the relevant entries into the Current Account Ledger (Ex P23) of account No. 282. This was allegedly done to conceal the withdrawals as there were insufficient funds in the account of the Academy. The expression ‘intent to defraud’ as given under Section of 477-A, contains two elements, deceit and injury. So far as the second element is concerned, as already noted no financial injury was caused to the Bank. With respect to the question of ‘deceit’, the depositions of PW-2 (the Auditor) and PW-6 (an Accountant at the Branch) unveil that though the relevant entries were missing in the Current Account Ledger, they do find a mention in the other ledger sheets maintained by the Bank, namely, the Officer’s Cash Scroll and the Cashier Payment Register. PW-6 has further deposed that the entry relating to Ex P25, has been mentioned in the Current Account Ledger. The ledger- Ex P23 does reveal that there is some truth in the deposition of PW-6. There is an entry made with a pencil for an amount of Rs. 2.5 lakhs and the relevant cheque number of Ex P25 has also been recorded. Two other entries marked as Ex D3 and Ex D4, pertaining to the other amounts of Rs. 4 Lakhs and Rs. 3.5 Lakhs have also been inserted, but here the relevant cheque numbers have not been recorded. When this is viewed in the light of the deposition of PW-2, non-production of the other relevant ledgers cannot be overlooked. Since the direct and relevant evidence has been withheld, the benefit of doubt for such failure ought to be accorded to the Appellant. [Paras 38, 55-59][81-A-B; 85-G, H; 86-A, B-H; 87-A-E]
4.2 To prove the charge under Section 409 IPC, the prosecution need not prove the exact manner of misappropriation. Once the ‘entrustment’ is admitted or proved, as has been done in the present case, the onus lies on the Accused to prove that the entrusted property was dealt by him in an acceptable manner. Thus, misappropriation with this dishonest intention is one of the most important ingredients of proof of ‘criminal breach of trust’. There is a serious dispute on the factum of whether or not the customer had sought the premature withdrawal and the subsequent transfer of the proceeds of FDRs to the account of Academy. The best person to clear the air would have been the customer himself, but neither was he associated during the course of inquiry/audit or the investigation nor was he examined as a prosecution witness in the trial. Further, there is also no written or oral complaint made by the customer against the Appellant or other officials of the Bank accusing them of misusing his FDRs or causing any financial loss to him. On the contrary, the Appellant has produced on record two letters (ExP6 and ExP7) purportedly written by the customer for premature encashment of his FDRs and to deposit the amount in the account of the Academy. These written requests have gone unrebutted. The prosecution has surely proved payment of interest on those FDRs to the customer even after pre-mature closure thereof, but that payment was made by the Appellant from his personal account and no public fund has been divested for such payment. There is indeed no quarrel that no financial loss was caused to the customer. [Paras 62, 64 and 65][88-D-E; 89-D-F; G-H; 90-C-D]
4.3 The non-examination of the customer has been materially fatal to the case of the prosecution. Some of the proven facts, like deposit of interest amount from the account of the appellant to that of the customer, do create a strong suspicion against the Appellant, but suspicion cannot take the place of proof, howsoever, strong. The best and the only person who could throw light on whether or not he had voluntarily agreed to transfer his FDR amount in the account of the Academy or there was an element of inducement, cheating or a false promise, was the customer himself who has chosen not to enter the witness box. Though there is a strong suspicion of criminal breach of trust, cheating and/or fabrication of the Bank records against the Appellant, but such suspicion falls short of a conclusive proof to hold him guilty of the criminal charges. The best evidence having been withheld by the prosecution, the benefit of doubt must be extended to the Appellant. Non-production of the records of the Bank also adversely comments on the fairness and independence of the investigation conducted in the instant case. [Paras 66, 67 and 70][90-F-G; 91-A-B; 92-C-D]
4.4 The record does not indicate that any pecuniary loss was caused to ‘BSR’-the customer or to any other customer of the Bank. The material does not disclose any conspiracy between the accused persons. In the absence of any reliable evidence that could unfold a prior meeting of minds, the High Court erred in holding that Appellant and other accused orchestrated the transactions in question to extend an undue benefit to Accused No.3. The prosecution has failed to prove the charges under Sections 409, 420 and 477A IPC against the Appellant beyond reasonable doubt. As a necessary corollary, his conviction under Section 13(2) read with Section 13(1)(d) of the PC Act can also not be sustained. The Appellant is guilty of gross departmental misconduct, for which the punishment of dismissal from service was adequately awarded. [Paras 71, 72][92-E-G; 93-A-C] Prabhat & Ors v. State of Maharashtra (2013) 10 SCC 391; Mahak Chand & Ors v. State of U.P. (2019) SCC OnLine All 4044; Hari Sao & Anr v. State of Bihar (1969) 3 SCC 107 : [1970] 2 SCR 823; Mohd. Ibrahim & Ors v. State of Bihar & Anr (2009) 8 SCC 751 : [2009] 13 SCR 1254; Samsul Haque v. State of Assam (2019) 18 SCC 161; N.V. Subbarao v. State (2013) 2 SCC 162 : [2012] 12 SCR 701; Vinayak Narayan
Deosthali v. Central Bureau of Investigation (2015) 2 SCC 553 : [2014] 12 SCR 308; Neera Yadav v. Central Bureau of Investigation (2017) 8 SCC 757 : [2017] 8 SCR 498 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.