State of M.P. Vs.
Rameshwar & Ors.  INSC 694 (6 April 2009)
IN THE SUPREME COURT
OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.647 OF 2009
(Arising out of S.L.P.(Crl.)NO.5937 of 2007) State of Madhya Pradesh
...Appellant Rameshwar & Ors. ...Respondents WITH Criminal Appeal No.648 of
2009 (Arising out of S.L.P.(Crl.)NO.6929 of 2007)
granted in both the special leave petitions which are taken up for hearing and
final disposal together.
respondents were Directors of the Indore Premier Co-operative Bank Limited and
were also members of the Loan Committee for sanctioning loans. One Harish Patil
and Kanhaiyalal Yadav lodged a complaint with the Special Establishment of the
Lokayukt, 2 Madhya Pradesh at Indore, alleging that the respondents had
sanctioned loans amounting to Rs.56,50,000/- in favour of 35 persons without
verifying their eligibility to receive such loans or the end-use of such loans
and had intentionally acted in an illegal manner to enable the said borrowers
to avail of the loans. On receiving the complaint, the Special Establishment
Lokayukt, Indore, registered Crime No.133/99 and after investigation filed a
charge-sheet against the respondents under Sections 409, 420 and 120-B of the
Indian Penal Code (`IPC' for short) together with Sections 13(1)(d) read with
Section 13(2) of the Prevention of Corruption Act, 1988 (hereinafter referred
to as the `P.C. Act'). The Trial Court on due consideration of the
charge-sheet, found a prima facie case against the respondents and by its order
dated 4.11.2006 directed framing of charges as suggested in the charge-sheet.
aggrieved by the said order dated 4.11.2006, directing framing of charges, the
respondents moved in revision before the Indore Bench of the Madhya Pradesh
High Court for setting aside the aforesaid order passed by the Special Judge,
Indore, in Special Case No.1 of 2006 and for their discharge from the
the case made out by the respective parties, the High Court came to the
conclusion that admittedly the respondents were members of the Loan Committee
and as such members they are only required to consider the loan cases which are
put up to them by the concerned Bank Manager for the grant of loan and it was
for the Branch Managers to verify the facts regarding entitlement for grant of
loan before submitting the same to the Loan Committee. Furthermore, it is only
after 4 the Executive Officer had also verified the applications for loan that
the loan cases were put up before the Loan Committee for its sanction. In view
of the aforesaid procedure, the High Court held that it could not be said that
the Members of the Loan Committee (the respondents herein) had acted illegally
and had wrongly sanctioned loans to the concerned borrowers. The High Court
also took into consideration the fact that out of the total amount of loan
which had been sanctioned by the Loan Committee amounting to Rs.56,50,000/- a
total sum of Rs.64,69,000/- had already been deposited by the concerned
depositors in the Bank and hence it could not be contended that by sanctioning
the loans to the concerned borrowers the Bank had suffered any monetary loss
since the full amount of loan, together with interest, had already been
deposited by the borrowers in the Bank.
the question of status of the respondents as "public servants" for
the purpose of prosecution under the provisions of the Prevention of Corruption
Act, 1988, the High Court relying on the judgment of this Court in State of
Maharashtra vs. Laljit Rajshi Shah and others [(2000) 2 SCC 699] held that the
respondents could not be treated as public servants and could not, therefore,
be punishable either under the provisions of the Prevention of Corruption Act,
1988, or under Section 409 IPC.
such finding, the High Court by its order dated 17th March, 2007, allowed the
Revision Petition and set aside the order of the Trial Court dated 4.11.2006
framing charges against the respondents and discharged them from the said
charges under Sections 409, 418, 420 and 120-B IPC and 6 Section 13(1)(d) read
with Section 13(2) of the P.C. Act.
present appeals have been filed by the State of Madhya Pradesh against the said
order of the High Court.
for the appellant State of Madhya Pradesh, Mr. Ravindra Srivastava, learned
Senior Counsel submitted that the High Court had erred both as to the role
played by the respondents and also on the question of the status of the said
respondents as "public servants" for the purpose of prosecution under
the provision of the P.C. Act. Mr. Srivastava also submitted that the High
Court had travelled beyond its jurisdiction under Sections 397 read with
Section 401 Criminal Procedure Code in re- assessing the factual position in
order to arrive at the conclusion that the provisions, under which they had
been 7 charged, were not supported by the materials in the charge-sheet.
to the inquiry report dated 21st January, 1999, submitted by the District
Vigilance Committee, Indore, on the complaint of Shri Kanhaiyalal Yadav, Mr. Srivastava
submitted that it had come to light during the inquiry that the quotation of
Indore Motor and Agro Machinery, having its registered office at 535 Scheme
No.54, Indore, loans were advanced by the Banks to the persons named in the
report for purchase of different kinds of vehicles.
However, the said
firm was not available at the address indicated. It also transpired that the
firm was managed by one Shri Himanshu Joshi, son of Shri Hem Joshi, Public
Contact Officer working in the Indore Premier Co-operative Bank and the Current
Account of the firm was with the Kila Maidan Branch, Indore and the various 8
Demand Drafts were deposited in the said account and the cash was subsequently
withdrawn. It was also reported that the loans were sanctioned with the
connivance of the Bank administration for the purchase of vehicles, but were
not used for the said purpose and the Demand Drafts were encashed with the
intention of cheating the Bank.
submitted that the tenor of the Inquiry Report was that Shri Hem Joshi had, in
his capacity as the Public Contact Officer of the Bank, in connivance with the
other respondents, set up a fictitious firm in the name of his son Shri
Himanshu Joshi for the purpose of encashing the Bank Drafts which were all deposited
in the account of the purported firm in the Kila Maidan Branch, Indore.
Srivastava pointed out that from the statements made by the Managers of the
different Branches of the Bank a prima 9 facie case was made out that not only
were the rules relating to sanctioning of loans not followed, but the grant of
such loans revealed lack of awareness and application on the part of the
respondents. He also submitted that the officers of the National Bank for
Agricultural and Rural Development (hereinafter referred as `NABARD') conducted
an inspection of the Indore Premier Co-operative Bank in June, 1998 and in
their Report they also raised objections with regard to the loans which formed
the subject matter of the present appeals.
Srivastava submitted that the finding of the District Vigilance Committee was
that while the Branch Managers of the different Branches of the Bank had not
complied with the directions given with regard to the policy of sanctioning
loans, the Chairman, and the Chief Executive Officer of the Bank, who are the
Respondent 10 Nos. 1 and 3 herein, failed to take any action despite the
Inspection Report of NABARD, which gave rise to the conclusion that they had
also played a decisive role in defrauding the Bank. Mr. Srivastava submitted
that since the said Inquiry Report indicted all the respondents, along with
several others, it had recommended that a case be registered under Section 420
read with Section 120-B IPC against all the persons named. A further
recommendation was made to register a case against the officers of the Bank,
including the respondents herein, under Section 406, 409, 419 and 420 read with
Section 120-B IPC.
was also recommended against the Members of the Loan Committee of which the Respondent
No.1, Rameshwar, was the President, while the other respondents, who were all
Directors of the Bank, were members.
Srivastava urged that the High Court had erred in completely absolving the
respondents of any responsibility in connection with the sanctioning of the
loans and placing the entire burden of the fraud perpetrated on the Branch
Managers and the Executive Officer for inadequate or improper verification of
the entitlement of the borrowers for grant of such loans.
Learned counsel also
urged that the High Court had erred in observing that the members of the Loan
Committee had a limited role to play for the purpose of sanctioning loans,
since the ground work had already been prepared upto the level of the Branch
Managers who had recommended the grant of such loans.
Srivastava submitted that in going into factual aspects of the matter, the High
Court had travelled beyond its revisional powers in coming to findings of fact,
which were yet to be established on evidence.
support his submission, Mr. Srivastava firstly referred to a decision of this
Court in Stree Atyachar Virodhi Parishad vs. Dilip Nathumal Chordia & Anr.
[(1989) 1 SCC 715], wherein, while considering the question relating to
discharge of or framing of charges against an accused, it was held that when
the Trial Court, finding a prima facie case prefers to frame charges against
the accused, the High Court should not interfere by probing into the
sufficiency of grounds for conviction of the accused and ordering his
Srivastava then referred to another decision of this Court in Om Wati (Smt)
& Anr. vs. State, through Delhi Admn. & Ors. [(2001) 4 SCC 333],
wherein also, while considering the provisions of Sections 227, 13 228 and 401
of the Criminal Procedure Code, 1973, this Court, inter alia, observed that the
High Court should not ordinarily interfere with the Trial Court's order for
framing of charge unless there is glaring injustice.
was lastly made to the decision of this Court in Munna Devi vs. State of
Rajasthan & Anr. [(2001) 9 SCC 631], wherein it was held that the
revisional powers of the High Court could not be exercised in a routine and
casual manner for quashing the charges framed against an accused, except where
there was a legal bar or where no offence is made out against an accused in the
Srivastava submitted that apart from the above, the finding of the High Court
that the respondents were not public servants was erroneous, as they had been
14 elected as Office Bearers of the Co- operative Bank. He submitted that the
High Court had wrongly relied upon the decision of this Court in State of
Maharashtra vs. Laljit Rajshi Shah & Ors. (supra), in which the definition
of "public servant" as contained in section 2 of the Prevention of
Corruption Act, 1947 was under consideration. In the said Act, "public
servant" has been defined in Section 2 to mean "public servant"
as defined in Section 21 of the Indian Penal Code. Mr. Srivastava urged that
the definition of "public servant" in the Prevention of Corruption
Act, 1988 has been given a much wider connotation and the limited
interpretation of the said expression in Laljit Rajshi Shah & Ors.'s case
(supra) would not, therefore, be applicable to the facts of this case.
Srivastava submitted that on account of being an Office Bearer of a registered
Co- operative Society engaged in banking, the respondents came within the
definition of "public servant" under Section 2(c)(ix) of the 1988
Act. He also submitted that the High Court had failed to take note of Section
87 of the M.P. Co-operative Societies Act, 1960, which provides that the
Registrar and other officers, as well as employees of a Co-operative Bank or a
Co-operative Society, would be deemed to be "public servants" within
the meaning of Section 21 of the Indian Penal Code.
this regard, Mr. Srivastava referred to the decision of this Court in Govt. of
[(2002) 7 SCC 631], where reference was made to the decision in Laljit Rajshi
Shah & Ors.'s case (supra) and it was observed that the same was
distinguishable as it was 16 based on an interpretation of the definition of
"public servant", as defined in the 1947 Act, which restricted such
definition to cover only such "public servants" as were included in
Section 21 of the Indian Penal Code. Reference was also made to another
decision of this Court in State of Maharashtra & Anr. vs. Prabhakarrao
& Anr. [(2002) 7 SCC 636], in which the wider definition of the expression
"public servant" under Section 2 (c) of the Prevention of Corruption
Act, 1988 was held to be applicable and not the narrow definition under Section
21 of the Indian Penal Code.
Srivastava submitted that as far as the State of Madhya Pradesh was concerned,
the same submissions would also be relevant in SLP(Crl.)No.6929/07.
to the submissions made on behalf of the appellant, Mr. Vivek Tankha, learned
Senior Counsel, firstly, took us to the Charge framed against the respondents
under Section 13(1)(d) read with Section 13(2) of the Prevention of Corruption
Act, 1988 and Sections 409, 418, 420 and 120-B of the Indian Penal Code. Mr.
Tankha pointed out that the Charge was framed against the Respondent No.1 in
his capacity as Chairman/Manager of the Indore Premier Co- operative Bank and
as a Member of the Loan Sanctioning Committee during the period from 4th March,
1997 to 4th May, 1998, when he was a public servant. The charge against the
Respondent No.1 was that in connivance with the other accused persons and on
the basis of forged documents relating to "Indore Motor and Agro
Machinery", he had, without verification of the loan applications filed
for the purpose of purchasing of vehicles by the other co- 18 accused, without
ensuring that the margin money was deposited as per the rules and without
obtaining security, sanctioned the loans in contravention of the Bank Rules and
issued the cheque/drafts of such loans to the applicants directly who withdrew
the amount without purchasing the vehicles, resulting in misappropriation of
Rs.56,50,000/-. Accordingly, the Respondent No.1 was purported to have
committed the offence punishable under the above-mentioned provisions of the
Prevention of Corruption Act, 1988 and the Indian Penal code. Similar charges
were framed against the other respondents.
Tankha submitted that from the Inquiry Report of the District Vigilance Committee
it would be quite apparent that it was the Branch Managers of the different
Branches of the Bank who had failed to comply with the procedure relating to
grant and 19 sanction of loans and that all the lapses which were attempted to
be foisted on the respondents by Mr. Srivastava during the course of his
submissions, were required to be fulfilled at the Branches before proposals
were put up for sanctioning of the loans. Mr. Tankha submitted that the Loan
Sanctioning Committee had to deal with innumerable loan applications and it was
not possible for the said Committee to scrutinize each application to ensure
whether all the conditions for grant of loan had been satisfied. Mr. Tankha, in
fact, urged that in the Inquiry Report, the only allegation made against the
respondents herein was that they had not taken any action despite the
Inspection Report of NABARD and it was only a presumption that as a result
thereof a conclusion must be drawn that the Chairman of the Bank and the Chief
Executive Officer 20 had also played a main role in the fraud committed upon
Tankha submitted that apart from the above, the only other allegation against
the respondents in the Inquiry Report was that the members of the Loan
Committee had failed to perform their duties efficiently.
He submitted that the
allegations pointed out by Mr. Srivastava had really been directed at the
Branch Managers of the various Branches and the concerned officers of the said
Tankha submitted that there was no justification whatsoever for framing of
charges against the respondents herein, either under the provisions of the
Indian Penal Code or under the provisions of the Prevention of Corruption Act,
1988. He urged that if any irregularity had been committed by the Respondents
in sanctioning the loans, there was sufficient scope for 21 action to have
been taken against them under the M.P. Co-operative Societies Act instead of
taking recourse to the criminal process to apply pressure in respect of a
dispute, which was basically civil in nature. Referring to the decision of this
Court in Indian Oil Corpn. vs. NEPC India Ltd. 7 Ors. [(2006) 6 SCC 736], Mr.
Tankha relied on the observations made by this Court in holding that it was
necessary to take notice of a growing tendency in business circles to convert
purely civil disputes into criminal cases and at the stage of an application
under Section 482 Cr.P.C. all that was required to be seen was whether
necessary allegations existed in the complaint to make out an offence as
reference was made to the decision of this Court in Nikhil Merchant vs. Central
Bureau of Investigation & Anr. 22 [2008 (11) SCALE 379], where, while
taking recourse to Article 142 of the Constitution, it was observed that the
dispute involved in the case had overtones of a civil dispute with certain
criminal facets. Mr. Tankha submitted that similar was the position in the
present case, where the dispute was mainly of a civil nature, which had been
given a criminal twist to bring it within the scope of the Indian Penal code
and also the Prevention of Corruption Act, 1988.
Tankha also referred to the decision of this Court in Manoj Sharma vs. State
& Ors. (MANU/SC/8122/2008), where the question which fell for determination
was whether the First Information Report for offences which were not
compoundable, could be quashed either under Section 482 Cr.P.C. or under
Article 226 of the Constitution when the accused and the complainant had 23
compromised and settled the matter between themselves. Mr. Tankha submitted
that this Court had set aside the order upon holding that once a dispute of a
civil nature between private parties, had been settled, the more pragmatic view
would be to exercise powers under Section 482 Cr.P.C. or Article 226 of the
Constitution to bring and end to such litigation.
to the question whether the respondents were public servants or not, Mr. Tankha
submitted that in a series of decisions this Court had held that certain
officers discharging public functions had been held not to be public servants,
except for purposes confined to the enactments under which they perform their
functions. In this regard, Mr. Tankha also referred to the decision in Laljit
Rajshi Shah & Ors., which had been referred to by Mr. Srivastava, wherein
it had been held that 24 the Chairman and Members of the Managing Committee
were not public servants but were deemed to be public servants under the M.P. Co-operative
Societies Act, but not for any other purpose.
Tankha took us through the M.P. Co- operative Societies Act, 1960, in support
of his submissions. He submitted that the said Act was a complete
self-contained Code by itself and provided for different eventualities relating
to the administration of Co-operative Societies.
Referring to Section
74 of the Act, Mr. Tankha submitted that Clause (d) thereof is the remedy
contemplated in respect of an offence alleged to have been committed of the
instant type. Further- more, Section 75 provided for penalties to be inflicted
in case of a proven offence and Section 76 also provided that offences under
the Act 25 were triable by a Magistrate of the Ist Class.
to the definition of "public servant" in Section 2(c)(ix) of the
Prevention of Corruption Act, 1988, it was submitted that the same should be
read in two parts and that the definition of "public servant" in the
said provision in respect of a Co- operative Society would be covered by the
first part and not by the second part.
Tankha submitted that the charges against the respondents were without any
foundation, as would be clear from the Inquiry Report of the District Vigilance
Committee which laid the responsibility for grant of the loans to the 35
persons at the door of the Branch offices and had only included the respondents
within the scope of the charge for their alleged failure of not having taken
action on the report of 26 NABARD and also in not having discharged their
duties efficiently. Mr. Tankha submitted that the same were not sufficient to
maintain the charges against the respondents under Sections 409, 418, 420 and
120-B IPC read with Sections 13(1)(d) and 13(2) of the Prevention of Corruption
Act, 1988 and the High Court had quite rightly quashed the charges against the
to SLP(Crl.)No.6929/07, Mr. Tankha submitted that the same was in regard to a
hospital loan of Rs.2 lacs, which had been advanced and had also been repaid
with interest on 10th July, 2008. Mr. Tankha submitted that in both the cases,
the principal amount of the several loans together with interest had been
repaid and consequently, the very foundation of the charges were nonest and the
prosecution was liable to be quashed.
addition to Mr. Tankha's submissions, Mr. Sushil Kumar Jain, who appeared for
some of the respondents, submitted that unless there was a criminal intent
disclosed in the charge-sheet, no charge either under Section 406 or Section
409 would lie. He also urged that in order to invoke the provisions of the
Prevention of Corruption Act the accused would have to be a public servant and
the property alleged to have been misappropriated, must have been entrusted to
him while he was a public servant. He urged that the charge-sheet did not
contain any allegation that the loan advanced by the Society was out of any
fund or contribution received from the State. Accordingly, the question of
misappropriation of any amount received by the public servant in his capacity
as a public servant did not arise.
Jain reiterated the other submissions made by Mr. Tankha that the respondents
had no conscious knowledge of the ineligibility of the borrowers to apply for
and receive the loans and that the loans had been sanctioned on the basis of
the recommendations and proposals put up by the Branch office.
Jain also submitted that the allegations against the respondents were
misconceived and the remedy in respect of the lapses, if any, lay not under the
general criminal process, but under the provisions of the M.P. Co-Operative
Societies Act, 1960, itself.
considered the submissions made on behalf of the respective parties and the
various decisions cited in support thereof, we are unable to agree with the
views 29 expressed by the High Court in the order impugned in these appeals.
it is no doubt true that in the Inquiry Report of the District Vigilance
Committee the role attributed to the respondents in sanctioning loans was shown
to be purely managerial where the groundwork had been completed by the Branch
offices and that as members of the Loan Sanctioning Committee, they had acted
inefficiently, it has also been suggested that the Chairman and the Executive
Officer of the Bank had connived with the other accused in defrauding the Bank.
In the Inquiry Report it was stated that the respondents had in conspiracy with
Shri Hem Joshi, the Public Contact Officer of the Bank, whose son, Himanshu
Joshi, maintained a current account of a fictitious firm - Indore Motor and
Agro Machinery in the Kila Maidan Branch of the Bank at Indore 30 encashed the
various Demand Drafts issued on account of the loans, by using the said account
without purchase of any vehicle for which the loans had been sanctioned.
High Court also did not, while considering the definition of the expression
"public servant", take into account the fact that the decision in
Laljit Rajshi Shah & Ors.'s case (supra) was no longer applicable in view
of the amended provisions of Section 2(c) of the Prevention of Corruption Act,
1988, defining the said expression. Prima facie, it appears to us that the
Respondent Nos.1 and 3, in their capacity as the Chairman and Executive Officer
of the Bank, come within the definition of "public servant"
2(c)(ix) of the 1988 Act, which reads as follows :- "public servant"
means - any person who is the President, Secretary or other 31 office-bearer
of a registered co- operative society engaged in agriculture, industry, trade
or banking, receiving or having received any financial aid from the Central
Government or a State Government or from any corporation established by or
under a Central, Provincial or State Act, or any authority or body owned or
controlled or aided by the Government or a Government Company as defined in
Section 617 of the Companies Act, 1956 (1 of 1956)."
Tankha's submissions, which were echoed by Mr. Jain, that the M.P. Co-operative
Societies Act, 1960 was a complete Code in itself and the remedy of the
prosecuting agency lay not under the criminal process but within the ambit of
Sections 74 to 76 thereof, cannot also be accepted, in view of the fact that
there is no bar under the M.P. Co-operative Societies Act, 1960, to take resort
to the provisions of the general criminal law, particularly when charges under
the Prevention of Corruption Act, 1988, are involved.
judgments referred to by Mr. Tankha regarding the tendency to convert civil
disputes into criminal cases to pressurize the accused, are unimpeachable, but
the same will not apply to the facts of this case where a conspiracy to cheat
the Bank is alleged.
are, therefore, inclined to accept Mr. Srivastava's submissions that the High
Court had in revision erroneously quashed the charges framed against the
orders dated 17th March, 2007, passed by the High Court in Crl. Revision
No.1303 of 2006 and Crl. Revision No.36 of 2007, impugned in these two appeals
are set aside and the charges framed by the Trial Court against the respondents
are restored. The appeals are, accordingly, disposed of with a direction to the
Trial Court to proceed with the trial. We make it clear that the views 33
expressed in this judgment are prima facie in nature for the disposal of these
appeals only and should not influence the trial in any way.