R. K. Dalmia Vs. Delhi Administration
[1962] INSC 124 (5 April 1962)
05/04/1962 DAYAL, RAGHUBAR
DAYAL, RAGHUBAR DAS, S.K.
SUBBARAO, K.
CITATION: 1962 AIR 1821 1963 SCR (1) 253
CITATOR INFO:
R 1973 SC 330 (10) R 1980 SC 439 (5,12)
ACT:
Criminal Trial-Transactions to divert money
of Insurance Company to losses incurred by Chairman in share speculationChairman
and Agent, if guilty of criminal breach of trustCharge, if legal-Confession
before Investigator, if voluntary-'Agent' --"In the way of his business"--Meaning-Falsification
of account-ConspiracyAccomplice-Corroboration-Indian Penal Code 1860 (XLV of
1860), ss. 120B, 409, 405, 477 A --Code of Criminal Procedure, 1898 (Act 5 of
1898), s. 233--Insurance Act, 1938 (4 of 1938), 8. 33.
HEADNOTE:
Appellant Dalmia was the Chairman of the
Board of Directors and Principal Officer of the Bharat Insurance company and
appellant Chokhani its agent in Bombay. Appellant Vishnu Prasad, nephew of
Chokhani, was the nominal owner of Bhagwati Trading Company but its business
was entirely conducted by Chokhani. Gurha, the other appellant, was a Director
of Bharat Union Agencies, a company dealing in forward transactions of
speculation in shares, and owned for all practical purposes by Dalmia. This
Company suffered heavy losses in its business during the period August, 1954,
to September, 1955. The prosecution case against the appellants in substance
was that in order to provide funds for the payment of those losses in due time,
they entered into a conspiracy, along with five others, to divert the funds of
the Insurance company to the Union Agencies through the Bhagwati Trading
Company and to cover up such unauthorised transfer of funds, the various steps
for such transfer and the falsification of accounts of the Insurance Company
and the Union Agencies and its allied concern and committed offences under s.
120B read with s. 409 of the Indian Penal Code. Dalmia made a confession before
Mr. Annadhanam, a Chartered Accountant, who was appointed Investigator under s.33(1)
of the Insurance Act, 1938, which was as follows:"I have misappropriated
securities of the order of Rs. 2,20,00,000 of the Bharat Instirance Company
Ltd. I have lost this money in speculation." 254 "At any cost, I want
to pay full amount by requesting by relatives or myself in the interest of the
policy holders".
The prosecution primarily depended upon the
evidence of Raghunath Rai, the Secretary-cum-Accountant of the Insurance Company,
and it was contended on behalf of the appellants that he was an accomplice.
The Sessions judge convicted all the
appellants under s. 120B read with s. 409 of the Indian Penal Code, and further
convicted Dalmia and Chokhani for substantive offences under s. 409, Chokhani
under s. 477A read with s. 110 and Gurha under s. 477A of the Indian Penal
Code. He however acquitted the others.
The High Court in substance agreed with the
findings of the Sessions judge, except that it did not rely on the confession
of Dalmia.
Held, that the Delhi Court had jurisdiction
to try Chokhani for the offence under s. 409 of the Indian Penal Code,
committed beyond its jurisdiction in pursuance of the alleged conspiracy with
which he and the other co-accused were charged.
Purushottam Das Dalmia v. State of West Bengal, [1962] 2 S. C. R. 101, followed.
The charge against Dalmia under s. 409 of the
Indian Penal Code was not hit by s. 233 of the Code of Criminal Procedure. The
charge framed was not for four distinct offences. It was really with respect to
one offence though the mode of committing it was not precisely stated. Any
objection as to the vagueness of the charge on the score could not invalidate
the trial since no prejudice had been caused to the accused nor any contention
raised to that effect.
The word property used in s. 405 of the
Indian Penal Code could not be confined to movable property since the section
itself did not so qualify it. The word 'property' was much wider than the
expression In-lovable property' defined in s. 22 of the Code. The question
whether a particular offence could be committed in respect of any property
depended not on the meaning of the word 'property' but on whether that property
could be subjected to that offence. 'Property' in a particular section could,
therefore, mean only such kind of property with respect to which that offence
could be committed, The funds of the Bharat Insurance Company referred to in
the charge amounted to property within the meaning of s. 405 of the Indian Penal
Code.
255 Reg. Girdhar Dharamdas (1869) 6 Bom. High
Ct. Rep. (Crown Cases) 33, and Jugdown Sinha v. Queen Empress (1895) 1. L. R.
23 Cal. 372, disapproved.
Emperor v. Bishan Prasad, (1914' I.L.R. 37
All. 128, Ram Chand Gurvala v. King Emperor A. 1. R. 1926 Lah. 385, Manchersha
Ardeshir v. Ismail Ibrahim, (1935) I.L.R. 60 Bom.
706, Daud Khan v. Emperor A. I. R. 1925 All.
672 and The Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh, [1955] 2 S.
C. R. 402, referred to.
The relevant articles and bye-laws of the
Insurance Company and the resolutions passed by its Board of Directors
established that both Dalmia and Chokhani were entrusted with dominion over the
funds of the company in the Banks within the meaning of s. 409 of the Indian
Penal Code.
Peoples Bank v. Harkishan Lal, A. I. R. 1936
Lah. 408, G. E, Ry. Co. v. Turner, L. R. (1872) 8 Ch. App. 149 and Re.
Forest of Dean Etc. Co., L. R. (1878) 10 Ch. D. 450 referred to.
The offence of Criminal breach of trust could
be committed by Chokhani even though he alone could not operate the Bank
account and could do so jointly with another. Bindeshwari v. King Emperor
(1947) I.L.R. 26 Pat. 703, held inapplicable.
Nrigendro Lall Chatterjee v. Okhoy Coomar
Shaw, (1874) (Cr.
Rulings) 59 and Emperor v. Jagannath
Ragunathdas, (1931) 33 Bom. L. R. 1518, referred to.
The expression 'in the way of business as
agent' occurring in s. 409 of the Indian Penal Code meant that the property
must have been entrusted to such agent in the ordinary course of his duty or
habitual occupation or profession or trade. He should get the entrustment or
dominion in his capacity as agent and the requirements of the section would be
satisfied if the person was an agent of another and that person entrusted him
with the property or with dominion over the property in the course of his
duties as an agent. A person might be an agent of another for some purpose and
if he was entrusted with property not in connection with that purpose but for
another purpose, that would not be entrustment within the meaning of s. 409 of
the Code.
Mahumarakalage Edward Andrew Cooray v. Queen.
[1953] A. C. 407 and Reg. v. Portugal, [1885] 16 Q. B. D 487, considered.
256 Both Dalmia and Chokhani were agents of
the Bharat Insurance Company within the meaning of s. 409 of the Code.
Gulab Singh v. Punjab Zamindara Bank, A. I.
R. 1942 Lah. 47, referred to.
Raghunath Rai was not an accomplice as he did
not participate in the commission of tile actual crime charged against the
accused. An accomplice must be a particeps criminal, except where he was a
receiver of stolen property or an accomplice in a previous similar offence
committed by the accused when evidence of the accused having committed crimes
of identical type on other occasions was admissible to prove the system and
intent of the accused committing the offence charged.
Davies v. Director of Public Prosecutions,
[1954] A.C. 378 referred to.
Chokhani was a servant of the Insurance
Company within the meaning of s. 477A of the Indian Penal Code. He was a paid
Agent of the company and as such was its servant even though he was a full-time
servant of the Bharat Union Agencies.
Each transaction to meet the losses of the
United Agencies, was not an independent conspiracy by itself. There was
identity of method in all the transactions and they must be held to originate
from the one and same conspiracy.
Since the confession made by Dalmia had not
been shown to have been made under any threat or inducement or promise from a
person in authority, it could not be anything but voluntary even though it
might have been made for the purpose of screening the scheme of the conspiracy
and the High Court was in error in holding that it was otherwise.
A person appointed an Investigator under s.
33(1) of the Insurance Act did not ipso facto become a public servant within
the meaning of s. 21, Ninth, of the Indian Penal Code and s. 176 of the Indian
Penal Code could have no application to an examination held under s. 33(3) of
the Act.
The confession of Dalmia was not hit by Art.
20(3) of the Constitution since it was not made by him at a time when he was
accused of an offence.
State of Bombay v. Kathi Kalu Oghad, R.
[1962] 3 S.C.R. 10, referred to.
The expression 'with intent to defraud' in s.
477A of the Indian Penal Code did not mean intention to defraud someone in the
future and could relate to an attempt to cover up what had already happened.
257 Emperor v. Ragho Ram, I. L. R. (1933) 55
All. 783, approved,
CRIMINAL APPELLATE JURISDICTION: Criminal
Delhi Appeal Nos.
7 to 9 of 1961.
Appeals by special leave from the judgment
and order dated January 2, 1961, of the Punjab High Court (Circuit Bench) at
Delhi in Criminal Appeals Nos. 464-C, 465-C and 463--D of 1959.
Dingle Foot, D. R. Prem, S. M. Sikri, G.
H.Jauhari and A. N. Goyal, for the appellant (in Cr. A. No. 7 of 61).
R. L. Kohli and A. N. Goyal, for the
appellant (in Cr. A. No. 8 of 1961).
Prem Nath Chadha, Madan Gopal Gupta and R.
Choudhri, for appellant No. 2 (in Cr. A. No. 9 of 1961).
C. K. Daphtary, Solicitor General of India,
R. L. Mehta and R. H. Dhebar, for the respondents.
1962. April 5. The Judgment of the Court was
delivered by RAGHUBAR DAYAL, J.-These three appeals are by special leave.
Appeal No. 7 of 1961 is by R. K. Dalmia. Appeal No. 8 of 1961 is by R.P.Gurha.
Appeal No. 9 of 1961 is by G.L.Chokhani and Vishnu Prasad. All the appellants
were convicted of the offence under s. 120 read with s.409 I.P.C., and all of
them, except Vishnu Prasad, were also convicted of certain offences arising out
of the overt acts committed by them. Dalmia and Chokhani were convicted under
s. 409 I.P.C. Chokhani was also convicted under s. 477A read with s. 110, I. P.
C. Gurha was convicted under s. 477A I. P. C.
To appreciate the case against the
appellants, we may first state generally the facts leading to the case. Bharat
Insuirance Company was incorporated 258 in 1896. In 1936, Dalmia purchased
certain shares of the company and became a Director and Chairman of the
company.
He resigned from these offices in 1942 and
was succeeded by his brother J. Dalmia. The head office of the Bharat Insurance
Company was shifted from Lahore to 10, Daryaganj, Delhi. in 1947. Dalmia was
co-opted a Director on March 1.0, 1949 and was again elected Chairman of the
company on March 19, 1949 when his brother J. Dalmia resigned.
R. L. Chordia, a relation of Dalmia and
principal Officer of the Insurance Company, was appointed Managing Director on
February 27, 1950. Dalmia was appointed Principal Officer of the company with
effect from August 20, 1954. He remained the Chairman and Principal Officer of
the Company till September 22, 1955. The period of criminal conspiracy charged
against the appellant is from August 1954 to September 1955. Dalmia was
therefore, during the relevant period, both Chairman and Principal Officer of
the Insurance Company.
During this relevant period, this company had
its current account in the Chartered Bank of India, Australia and China Ltd.
(hereinafter called the Chartered Bank) at Bombay. The Company also had an
account with this bank for the safe custody of its securities the company also
had a separate current account with the Punjab National Bank, Bombay.
At Delhi, where the head office was, the
company had an account for the safe custody of securities with the Imperial
Bank of India, New Delhi.
Exhibit P-785 consists of the Memorandum of
Association and the Articles of Association of the Bharat Insurance Company.
Articles 116 and 117 deal with the powers of
the Directors.
Exhibit P-786 is said to be the original
Byelaws passed by the Directors on September 8, 1951.
259 The pages are signed by K.L. Gupta, who
was the General Manager of the company during, the relevant period, and not by
Dalmia the Chairman, as De should have been the case in view of the resolution
dated May 8, 1951. The genuineness of this document is not, however, admitted.
Exhibits P-15 and P-897 are said to be copies
of these Byelaws which were sent to Shri K. Annadhanam (Chartered Accountant,
appointed by the Government of India on September 19, 1955, to investigate into
the affairs of the Bharat Insurance Company under s. 33(1) of the Insurance Act)
and to the Imperial Bank of India, Now Delhi, respectively, and the evidence
about their genuineness is questioned.
Bye-law 12 deals with the powers of the
Chairman. Clause (b)) thereof empowers the Chairman to grant loans to persons
with or without security, but from August 30, 1954, the power was restricted to
grant of loans on mortgages. Clause (e) empowers the Chairman to negotiate
transfer buy and sell Government Securities and to pledge, indorse, withdraw or
otherwise deal with them.
On January 31, 1951, the Board of Directors
of the Insurance Company passed resolutions to the following effect : (1) To
open an account in the Chartered Bank at Bombay. (2) To authorise Chokhani to
operate on the account of the Insurance Company. (3) To for the keeping of the
Government securities had by the company, in safe custody, with the Chartered
Bank. (4) To instruct the Bank to accept institutions with regard to withdrawal
from Chokhani and Chordia.
On the same day, Dalmia and Chordia made an
application for the opening of the account at Bombay with the result that
Current Account No. 1120 was opened. On the same day Chokhani was appointed
Agent of the company at Bombay.
260 He was its agent during the relevant
period. From 1951 to 1953, Chokhani alone operated' on that account. On October
1, 1953, the Board of Directors directed that the current account of the
company with the Chartered Bank, Bombay, be operated jointly by Chokhani and Raghunath
Rai, P.W. 4.
Ragbunath Rai, joined the company in 1921 as
a Clerk, became Chief Accountant in 1940 and Secretary-cum-Chief Accountant of
the company from August 17, 1954.
The modus operandi of the joint operation of
the bank account by Chokhani and Raghunath Rai amounted, in practice to
Chokbani's operating that account alone. Chokbani used to get a number of blank
cheques signed by Raghunath Rai, who worked at Delhi. Chokhani signed those
cheques when actually issued. In order to have signed cheques in possession
whenever needed, two cheque books were used.
When the signed cheques were nearing
depletion in one cheque book, Chokhani would send the other cheque book to
Raghunath Rai for signing again a number of cheques. Thus Raghunath Rai did not
actually know when and to whom and for what amount the cheques would be
actually issued and therefore, so far as the company was concerned, the real
operation of its banking account was done by Chokhani alone. This system led to
the use of the company's funds for unauthorized purposes.
Chokhani used to purchase and sell securities
on behalf of the company at Bombay. Most of the securities were sent to Delhi
and kept with the Imperial Bank of India there. The other securities remained
at Bombay and were kept with the Chartered Bank. Sometimes securities were kept
with the Reserve Bank of India and inscribed stock was obtained instead. The
presence, of the inscribed stock was a guarantee that the securities were, in
the Bank.
261 Chokhani was not empowered by any
resolution of the Board of Directors to purchase and sell securities. According
to the prosecution, he purchased and sold securities under the instructions of
Dalmia. Dalmia and Chokhani state that Dalmia had authorised Chokhani in
general to purchase and sell securities and that it was in pursuance of such
authorisation that Chokhani on his own purchased and sold securities without
any further reference to Dalmia or further instructions from Dalmia.
The transactions which have given rise to the
present proceedings against the appellants consisted of purchase of securities
for this company and sale of' the securities which the company held. The
transactions were conducted through recognised brokers and ostensibly were
normal transactions. The misappropriation of funds of the company arose in this
way. Chokhani entered into a transaction of purchase of securities with a
broker. The broker entered into a transaction of purchase of the same
securities from a company named Bhagwati Trading Company which was owned by
Vishnu Prasad, appellant, nephew of Chokhani and aged about 19 years in 1954.
The entire business for Bhagwati Trading Company was really conducted by
Chokhani. The securities purchased were not delivered by the brokers to
Chokhani. It is said that Chokhani instructed the brokers that he would have
the securities from Bhagwati Trading, Company. The fact, however, Chokhani
however was that Bhagwati Trading Company did not deliver the securities.
Chokhani however issued cheques in payment of the purchase price of the
securities to Bhagwati Trading Company. Thus, the amount of the cheques was
paid out of the company's funds without any gain to it.
The sale transactions consisted in the sale
of the securities held or supposed to be held by the company to a broker and
the price obtained from 262 the sale was unutilised in purchasing formally
further securities which were not received: The purchase transaction followed
the same pattern, viz., Chokhani purchased for the company from a broker, the
broker purchased the same securities from Bhagwati Trading Company and the
delivery of the securities was agreed to be given by Bhagwati Trading Company
to Chokhani. Bhagwati Trading Company did not deliver the securities but
received the price from the Insurance Company. In a few cases, securities so
purchased and not received were received later when fresh genuine purchase of
similar securities took place from the funds of the Bharat Union Agencies or
Bhagwati Trading Company.
These securities were got endorsed in favour
of the Insurance Company.
The funds of the company, ostensibly spent on
the purchase of securities, ultimately reached another company the Bharat Union
Agencies.
Bharat Union Agencies ( hereinafter referred
to as the Union Agencies) was a company which dealt in speculation in shares
and, according to the prosecution was practically owned by Dalmia who held its
shares either in his own names or in the names of persons or firms connected
with him. The Union Agencies suffered Icsses in the relevant period from August
1954 to September, 1955. The prosecution case is that to provide funds for the
payment of these losses at the due time, the accused persons entered into the
conspiracy for the diversion of the funds of the Insurance Company to the Union
Agencies. To cover up this unauthorised transfer of funds, the various steps
for the transfer of funds from one company to the other and the falsification
of accounts of the Insurance Company and the Union Agencies took place and this
conduct of the accused gave rise to the various offences they were charged With
and convicted of.
263 The real nature of the sale and' purchase
transactions of the securities did not come to the notice of the head office of
the Insurance Company at Delhi as Chokhani communicated to the head office the
contracts of sale and purchase with the brokers' statements of accounts, with a
covering letter stating the purchase of securities from the brokers, without
mentioning that the securities had not been actually received or that the
cheques in payment of the purchase price were issued to Bhagwati Trading
Company and not to the brokers.
Raghunath Rai, the Secretary-cum-Accountant
of the Insurance Company, on getting the advice about the purchase of
securities used to inquire from Dalmia about the transaction and used to get
the reply that Chokhani had purchased them under Dalmia's instructions.
Thereafter, the usual procedure in making the entries with respect to the
purchase of securities was followed in the office and ultimately the purchase
of securities used to be confirmed at the meeting of the Board of Directors. It
is said that the matter was put up in the meeting with an office note which
recorded that the purchase was under the instructions of the Chairman. Dalmia
however, denies that Raghunath Rai ever approached him for the confirmation or
approval of the purchase transaction and that he told him that the purchase
transaction was entered into under his instructions.
The firm of Khanna and Annadhanam, Chartered
Accountants, was appointed by the Bharat Insurance Company, its auditors for
the year 1954. Shri Khanna carried out the audit and was not satisfied with
respect to certain matters and that made him ask for the counterfoils of the
cheques and for the production of securities and for a satisfactory explanation
of the securities not with the company at Delhi.
264 The matter, however, came to a head not
on account of the auditors' report, but on account of Shri Kaul, Deputy
Secretary , Ministry of Finance, Government of India, hearing at Bombay in
September 1955 a rumour about the unsatisfactory position of the securities of
the Insurance Company. He contacted Dalmia and learnt on September 16, 1955
from Dalmia's relatives that there was a short-fall securities. He pursued the
matter Departmentally and, eventually, the Government of India appointed Shri
Annadhanam under a. 33 (1) of the Insurance Act to investigate into the affairs
of the company. This was done on September 19, 1955. Dalmia is said to have
made a confessional statement to Annadhanam on September 20.
Attempt was made to reimburse the Insurance
Company with respect to the short-fall in securities. The matter was, however,
made over to the Police and the appellants and a few other persons, acquitted
by the Sessions Judge, were proceeded against as a result of the investigation.
Dalmia's defence, in brief, is that be had
nothing to do with the details of the working of the company, that he had
authorised Chokhani, in 1953, to purchase and sell securities and that
thereafter Chokbani on his own purchased and sold securities. He had no
knowledge of the actual modus operandi of Chokhani which led to the diversion
of the funds of the company to the Union Agencies. He admits knowledge of the
losses incurred by the Union Agencies and being told by Chokhani that he would
arrange funds to meet them. He denies that he was a party to what Chokhani did.
Chokhani admits that he carried out the
transactions in the form alleged in order to meet the losses of the Union
Agencies of which he was an employee. He states that be did so as he expected
that the Union Agencies would, in due course, 265 make tip the losses and the
money would be returned to the Insurance Company. According to, him, he was
under the impression that what he did amounted to giving of a loan by the
Insurance Company to the Union Agencies and that there was nothing wrong in it.
He asserts emphatically that if he bid known that he was doing, was wrongful,
he would have never done it and would have utilised other means to raise the
money to meet the losses of the Union Agencies as he had large credit in the
business circle at Bombay and as the Union Agencies possessed shares which
would be sold to meet the losses.
Vishnu Prasad expresses his absolute
ignorance about the transactions which were entered into on behalf of Bbagwati
Trading Company and states that what he did himself was under the instructions
of Chokhani, but in ignorance of the real nature of the transactions.
Gurha denies that he was a party to the
fabrication of false accounts and vouchers in the furtherance of the interests
of the conspiracy.
The learned Sessions Judge found the offences
charged against the appellants proved on the basis of the circumstances
established in the case and, accordingly, convicted them as stated above. The
High Court substantially agreed with the findings of the Sessions Judge except
that it did not rely on the confession of Dalmia.
Mr. Dingle Foot, counsel for Dalmia, has
raised a number of contentions, both of law and of facts. We propose to deal
with the points of law first.
In order to appreciate the points of law
raised by Mr. Dingle Foot, we may now state the charges which were framed against
the various appellants.
266 The charge under s. 120-B read with s.
409, I.P.C., was against the appellants and five other persons and read:
"I, Din Dayal Sharma, Magistrate I
Class, Delhi, do hereby charge you, R. Dalmia (Ram Krishna Dalmia) s/o etc.
2. G. L. Chokhani s/o etc.
3. Bajranglal Chokhani s/o etc.
4. Vishnu Pershad Bajranglal s/oetc.
5. R. P. Gurha (Ragbubir Pershad Gurba) s/o
etc.
6. J. S. Mittal (Jyoti Swarup Mittal) s/o
etc.
7. S. N. Dudani (Shri Niwas Dudani) s/o etc.
8. G. S. Lakhotia (Gauri Sbadker Lakbotia)
s/o etc.
9. V. G. Kannan Vellore Govindaraj Kannan S/o
etc. accused as under :That you, R. Dalmia, G. L. Chokhani, Bajrang Lal
Chokhani, Vishnu Pershad Bajranglal, R. P. Gurha, J. S. Mittal, S. N. Dudani,
G. S. Lakhotia and V. G. Karinan, during the period between August 1954 and
September 1955 at Delhi, Bombay and other places in India.
were parties to a criminal conspiracy to do
and cause to be done illegal acts ; viz., criminal breach of trust of the funds
of the Bharat Insurance Company Ltd., by agreeing amongst yourselves and with
others that criminal breach of trust be Committed by you R. Dalmia and G. L.
Chokhani 267 in respect of the funds of the said Insurance Company in current
account No. 1120 of the said Insurance Company with the Chartered Bank of
India, Australia and China, Ltd., Bombay, the dominion over which funds was
entrusted to you R. Dalmia in your capacity as Chairman and the Principal
Officer of the said Insurance Company, and to you G. L. Chokhani, in your
capacity as Agent of the said Insurance Company, for the purpose of meeting
losses suffered by you R. Dalmia in forward transaction (of speculation) in
shares ; which transactions were carried on in the name of the Bharat Union
Agencies Ltd., under the directions and over all control of R. Dalmia, by you,
G. L. Chokhani, at Bombay, and by you, R. P. Gurha, J. S. Mittal and S. N.
Dudani at Calcutta; and for other purposes not connected with the affairs of
the said Insurance Company, by further agreeing that current account No. R1763
be opened with the Bank of India, Ltd., Bombay and current account No. 1646
with the United Bank of India Ltd., Bombay, in the name of M/s. Bhagwati
Trading Company, by you Vishnu Pershed accused with the assistance of you G. L.
Chokhani, and Bajranglal Chokhani accused for the illegal purpose of divertin g
the funds of the said Insurance Company to the said Bharat Union Agencies,
Ltd., by further agreeing that false entries showing that the defalcated funds
were invested in Government Securities by the said Insurance Company be got
made in the books of 268 accounts of the said Insurance Company at Delhi, and
by further agreeing to the making of false and fraudulent entries by you R. P.
Gurha, J. S. Mittal, G. S. Lakhotia, V. G. Kannan, and others, relating to the
diversion of funds of the Bharat Insurance Company to the Bharat Union Agencies
Ltd., through M/s. Bhagwati Trading Company, in the books of account of the
said Bharat Union Agencies, Ltd., and its allied concern known as Asia Udyog
Ltd., and that the same acts were committed in pursuance of the said agreement
and thereby you committed an offence punishable under section 120-B read with
section 409 I.P.C., and within the cognizance of the Court of Sessions."
Dalmia was further charged on two counts for an offence under s. 409 I. P. C.
These charges were as follows :
"I Din Dayal Sharma, Magistrate I Class,
Delhi charge you, R. Dalmia accused as under :FIRSTLY, that yon R. Dalmia, in
Pursuance of the said conspiracy between the 9th day of August 1954 and the 8th
day of August 1955, at Delhi.
Being the Agent, in your capacity as Chairman
of the Board of Directors and the Principal Officer of the Bharat Insurance
Company Ltd., and as such being entrusted with dominion over the funds of the
said Bharat Insurance Company, committed criminal breach of trust of the 269
funds of the Bharat Insurance Company Ltd., amounting to Rs. 2,37,483-9-0, by
wilfully suffering your co-accused G. L. Chokhani to dishonestly misappropriate
the said funds and dishonestly use or dispose of the said funds in violation of
the directions of law and the implied contract existing between you and the
said Bharat Insurance Company, prescribing the mode in which such trust was to
be discharged, by withdrawing the said funds from current account No. 1120 of
the said Bharat Insurance Company with the Chartered Bank of India, Australia
& China, Ltd., Bombay, by means of cheque Nos. B-540329 etc., issued in
favour of M/s. Bhagwati Trading Company, Bombay, and cheque No. B-540360 in
favour of F. C. Podder, and by dishonestly utilising the said funds for meeting
losses suffered by you in forward transactions in shares carried on in the name
of Bharat Union Agencies, Ltd., and for other purposes not connected with the
affairs of the said Bharat Insurance Company ; and thereby committed an offence
punishable under section 409,
1. P. C., and within the cognizance of the
Court of Sessions;
,SECONDLY, that you R. Dalmia, in pursuance
of the said conspiracy between the 9th day of August 1955 and the 30th day of
September 1955, at Delhi, Being the Agent in your capacity as Chairman of the
Board of Directors and the Principal Officer of the Bharat Insurance Company,
Ltd., and as such being entrusted with dominion over the funds of the said
Bharat Insurance Company, 270 committed criminal breach of trust of the funds
of the Bharat Insurance Company Ltd., amounting to Rs. 55,43,220-12-0, by
wilfully suffering your co-accused G.L.
Chokhani to dishonestly misappropriate the
said funds and dishonestly use or dispose of the said funds in violation of the
directions of law and the implied contract existing between you and the said
Bharat Insurance Company prescribing the mode in which such trust was to be
discharged, by withdrawing the said funds from current account No. 1120 of the
said Bharat Insurance Company with the Chartered Bank of India, Australia &
China, Ltd., Bombay by means of Cheque Nos. B-564835...... issued in favour of
M/s. Bhagwati Trading Company Bombay, and, by dishonestly utilising the said
funds for meeting losses suffered by you in forward transactions in shares
carried on in the name of the Bharat Union Agencies Ltd., and for other
purposes not connected with the affairs of the said Bharat Insurance Company,
and thereby committed an offence punishable under section 409 1. P. C., and
within the cognizance of the Court of Sessions." Mr. Dingle Foot has
raised the following contentions (1) The Delhi Court had no territorial
jurisdiction to try offences of criminal breach of trust committed by Chokhani
at Bombay.
(2) Therefore, there had been misjoinder of
charges.
(3) The defect of misjoinder of charges was
271 fatal to the validity of the trial and was not curable under a. 531-s. 537
of the Code.
(4) The substantive charge of the offence
under s. 409, 1.
P. C., against Dalmia offended against the
provisions of a. 233 of the Code; therefore the whole trial was bad.
(5) The funds of the Bharat Insurance Company
in the Chartered Bank, Bombay, which were alleged to have been misappropriated
were not "property' within the meaning of ss. 405 and 409, I. P. C.
(6) If they were, Dalmia did not have
dominion over them.
(7) Dalmia was not an agent' within the
meaning of s. 409 I. P. C., as only that person could be such agent who
professionally carried on the business of agency.
(8) If Dalmia's conviction for an offence
under s. 409 I. P. C., fails, the conviction for conspiracy must also fail as
conspiracy must be proved as laid.
(9) The confessional statement Exhibit P-10
made by Dalmia on September 20, 1955, was not admissible in evidence.
(10) If the confessional statement was not
inadmissible in evidence in view of s. 24 of the Indian Evidence Act, it was
inadmissible in view of the provisions of cl. (3) of Art. 20 of the
Constitution.
(11) The prosecution has failed to establish
that Dalmia was synonymous with Bharat Union Agencies Ltd.
(12) Both the Sessions Judge and the High
Court failed to consider the question of onus of proof i.e., failed to consider
whether the evidence on record really proved or established the conclusion
arrived at by the Courts.
272 (13) Both the Courts below erred in their
approach to the evidence of Raghunath Rai.
(14) Both the Courts below were wrong in
holding that there was adequate corroboration of the evidence of Reounath Rai
who was an accomplice or at least such a witness whose testimony required
corroboration.
(15) It is not established with the certainty
required by law that Dalmia had knowledge of the impugned transactions at the
time they were entered into.
We have heared the learned counsel for the
parties on facts, even though there are concurrent findings of fact, as Mr.
Dingle Foot has referred us to a large number
of inaccuracies, most of them not of much importance, in the narration of facts
in the judgment of the High Court and has also complained of the omission from
discussion of certain matters which were admittedly urged before the High Court
and also of misapprehension of certain arguments presented by him.
We need not, however, specifically consider
points No. 12 to 15 as questions urged in that form. In discussing the evidence
of Ragbunath Rai, we would discuss the relevant contentions of Mr. Dingle Foot,
having a bearing on Raghunath Rai's reliability. Our view of the facts will
naturally dispose of the last point raised by him.
Mr. Dingle Foot's first four contentions
relating to the illegalities in procedure may now be deal ,with. The two
charges under s. 409, I.P.C., against Chokbani mentioned that he committed
criminal breach of trust in pursuance of the said conspiracy. One of the
charges related to the period from August 9, 1954 to August 8, 1955 and the
other related to the period from August 9, 1955 to September 30, 1955.
273 This Court held in Purushotam Das Dalmia
v. State of West Bengal (1) that the Court having jurisdiction to try the
offence of conspiracy has also jurisdiction to try an offence constituted by
the overt acts which are committed, in pursuance of the conspiracy, beyond its
jurisdiction. M. Dingle Foot submitted that this decision required
reconsideration and we heard him and the learned Solicitor General on the point
and, having considered their submissions, came to the conclusion that no case
for reconsideration was made out and accordingly expressed our view during the
hearing of these appeals. We need not, therefore, discuss the first contention
of Mr. Dingle Foot and following the decision in Purushottam Das Dalmia's
case(1) hold that the Delhi Court had jurisdiction to try Chokhani of the
offence under s. 409 I.P.C. as the offence was alleged to have been committed
in pursuance of the criminal conspiracy with which he and the other co-accused
were charged.
In view of this opinion, the second and third
contentions do not arise for consideration.
The fourth contention is developed by
Mr.Dingle Foot thus.
The relevant portion of the charge under s.
409 I. P. C., against Dalmia reads:
"Firstly, that you Dalmia, in pursuance
of the said conspiracy between... being the Agent, in your capacity as Chairman
of Board of Directors and as Principal Officer of the Bharat Insurance Company
Ltd., and as such being entrusted with dominion over the. funds of the said
Bharat Insurance Company, committed criminal breach of trust of the fund,-...by
wilfully suffering your co-accused G. L. Chokhani to dishonestly misappropriate
the said funds and dishonestly use or dispose of the said funds in violations
of the directions of law and the implied contract existing between you and the
said Bharat Insurance (1) [1962]2S.C.R101.
274 Company prescribing the mode in which
such trust was to be discharged..." This charge can be split up into four
charges, each of the charges being restricted to one particular mode of
committing the offence of criminal breach of trust. These four offences of
criminal breach of trust were charged in one count, each of these four
amounting to the offence of criminal breach of trust by wilfully suffering
Chokhani (i) to dishonestly misappropriate the said funds; (ii) to dishonestly
use the said funds in violation of the directions of law; (iii) to dishonestly
dispose of the said funds in violation of the directions of law; (iv) to dishonestly
use the said funds in violation of the implied contract existing between Dalmia
and the Bharat Insurance Company'.
Section 233 of the Code or Criminal Procedure
permits one charge for every distinct offence and directs that every charge
shall be tried separately except in the cases mentioned in ss. 234, 235, 236
and 239. Section 234 allows the trial, together, of offences up to three in
number, when they be of the same kind and be committed within the space of
twelve months. The contention, in this case is that the four offences into
which the charge under s. 409 I.P.C.
against Dalmia can be split up were distinct
offences and therefore could not be tried together. We do not agree with this
contention. The charge is with respect to one offence, though the mode of
committing it is not stated precisely.
If it be complained that the charge framed
under s.409 1. P. C. is vague because it does not specifically state one
particular mode in which the offence was committed, the vagueness of the charge
will not make the trial illegal, especially when no prejudice is caused to the
accused and no contention has been raised that Dalmia was prejudiced by the
form of the charge.
275 We may now pass on to the other points
raised by Mr. Dingle Foot.
Section 405 I.P.C. defines what amounts to
criminal breach of trust. It reads "Whoever, being in any manner entrusted
with property, or with, any dominion over property, dishonestly misappropriates
or converts to his own use that propertly, or dishonestly uses or disposes of
that property in violation of any direction of law prescribing the mode in
which such trust is to be discharged, or of any legal contract, express or
implied, which be has made touching the discharge of such trust, or wilfully
suffers any other person so to do, commits 'criminal breach of trust'."
Section 406 provides for punishment for criminal breach of trust. Section 407
provides for punishment for criminal breach of trust committed by a carrier,
wharfinger or warehouse-keeper, with respect to property entrusted to them as
such and makes their offence more severe than the offence under s. 406.
Similarly, s. 408 makes the criminal breach of trust committed by a clerk or
servant entrusted in any manner, in such capacity, with property or with any
dominion over property, more severely punishable than the offence of criminal breach
of trust under s. 406. Offences under ss.407 and 108 are similarly punishable.
The last section in the series is s. 409 which provides for a still heavier
punishment when criminal breach of trust is committed by persons mentioned in
that section. The section reads :
"Whoever, being in any manner entrusted
with property, or with any dominion over property in his capacity of a public
servant or in the way of his business as a banker, merchant, factor, broker,
attorney or agent, 276 commits criminal breach of trust in respect of that
property, shall be punished with imprisonment for life, or with imprisonment of
either description for a term which may ex tended to ten years, and shall also
be liable to fine." Both Dalmia and Chokhani have been convicted of the
offence under s. 409 I.P.C.
Mr. Dingle Foot contends that no offence of
criminal breach of trust has been committed as the funds of the Bharat
Insurance Company in the Bank do not come with the expression 'property' in s.
405 I.P.C. It is urged that the word 'property' is used in the Indian Penal
Code in different senses, according to the context, and that in s.
405 it refers to movable property and not to
immovable property or to a chose in action.
It is then contended that the funds which a
customer has in a bank represent closes in action, as the relationship between
the customer and the banker is that of a creditor and a debtor, as held in
Attorney General for Canada v. Attorney General for Province of Quebec &
Attorneys General for Saskatchewan, Alberta & Manitoba (1) and in Foley v. Hill
(2).
Reliance is also placed for the suggested
restricted meaning of property in s. 405 I.P.C. on the cases Reg. v. Girdhar
Dharamdas (3); Jugdown Sinha v. Queen Empress( 4) and Ram Chand Gurvala v. King
Emperor (5) and also on the scheme of the Indian Penal Code with respect to the
use of the expressions 'property' and 'movable property' in its various
provisions.
The learned Solicitor General has, on the
other hand, urged that the word 'property' should (1) [1947] A.C. 33. (2)
[1848] 2 H.L.C. 28 9 E. R. 100.
(3) [1869] 6 Bom. High Ct. Rep. (Crown Cases)
33.
(4) (1895)1.L.R.23Cal.372. (5) A.I.R.1926Lah
385.
277 be given its widest meaning and that the
provisions of the various sections can apply to property other than movable
property. It is not to be restricted to movable property only but includes
chose in De. action and the funds of a company in Bank. R. We are of opinion
that there is no good reason to restrict the meaning of the word 'property' to
movable property only when it is used without any qualification in s. 405 or in
other sections of the Indian Penal Code Whether the offence defined in a
particular section of the Indian Penal Code can be committed in respect of any
particular kind of property will depend not on the interpretation of the word
'property' but on the fact whether that particular kind of property can be
subject to the acts covered by that section. It is in this sense that it may be
said that the, word property in a particular section covers only that type of
property with respect to which the offence contemplated in that section can be
committed.
Section 22 I.P.C. defines 'movable property'.
The definition is not exhaustive. According to the section the words 'movable
property' are intended to include corporeal property of every description,
except land and things attached to the earth or permanently fastened to
anything which is attached to the earth. The definition is of the expression
,movable property' and not of 'property' and can apply to all corporeal
property except property excluded from the definition. It is thus clear that
the word 'property' is used in the Code in a much wider sense than the
expression movable property'. It is not therefore necessary to consider in detail
what type of property will be included in the various sections of the Indian
Penal Code.
In Reg. v. Girdhar Dharamdas (1) it was held
that reading ss. 403 and 404 I.P.C. together, s. 404 (1) (1869) 6 Bom. High Ct.
Rep. (Crown Cases) 278 applied only to movable property. No reasons are given
in the judgment.
It is to be noticed that though s. 403 I.P.C.
speaks of dishonestly misappropriating or converting to one's own use any
movable property, s. 404 speaks of only dishonestly misappropriating or converting
to one's own use property.
If the Legislature had intended to restrict
the operation of s. 404 to movable property only, there war, no reason why the
general word was used without the qualifying word ,movable'. We therefore do
not see any reason to I restrict the word 'property' to ,'movable property
only. We need not express any opinion whether immovable property could be the
subject of the offence under s. 404 I.P.C.
Similarly, we do not see any reason to
restrict the word 'property' in s. 405 to movable property' as held in Jugdown
Sinha v. Queen Empress (1). In that case also the learned Judges gave no reason
for their view and just referred to the Bombay Case (2). Further, the learned
Judges observed at page 374 :
"In this case the appellant was not at
most entrusted with the supervision or management of the factory lands, and the
fact that he mismanaged the land does not in our opinion amount to a criminal
offence under section 408." A different view has been expressed with
respect to the content of the word property' in certain sections of the Indian
Penal Code, including s. 405.
In Emperor v. Bishan Prasad (3) the right to
sell drugs was held to come within the definition of the word 'property' in s.
185, I.P.C. which makes certain conduct at any sale of property an offence.
(1) (1895) I.L.R. 23 Col. 372.
(2) (1869) 6 Boni. High Ct. Rep. (Crown
Cases) 33, 3) [1914] I.L.R. 37 All. 128.
279 In Ram Chand Gurwala v. King Emperor (1)
the contention that mere transfer of amount from the bank account to his own
account by the accused did not amount to misappropriation was repelled, it
being held that in order to establish a charge of dishonest misappropriation or
criminal breach of trust, it was not necessary that the accused should have
actually taken tangible property such as cash from the possession of the bank
and transferred it to his own possession, as on the transfer of the amount from
the account of the Bank to his own account, the accused removed it from the
control of the bank and placed it at his own disposal. The conviction of the
accused for criminal breach of trust was confirmed.
In Manchersha Ardeshir v. Ismail Ibrahim it
was held that the word 'property' in s. 421 is wide enough to include a chose
in action.
In Daud Khan v. Emperor (3) it was said at
page 674 :
"Like s. 378, s. 403 refers to movable
property. Section 404 and some of the other sections following it refer to
property without any such qualifying description; and in each case the context
must determine whether the property there referred to is intended to be
property movable or immoveable." The case law, therefore, is more in
favour of the wider meaning being given to the word 'property' in sections
where the word is not qualified by any other expression like movable'.
In The Delhi Cloth and General Mills Co. Ltd.
V. Harnam Singh (4) this court said "That a debt is property is, we think,
clear.
It is a chose in action and is heritable (1)
A.I.R. 1926 Lah. 385.
(3) A.I.R. 1925 All. 673.
(2) (1935) I.L.R. 60 Bom. 706.
(4) [1955] 2. S.C.R. 402,417.
280 and assignable and it is treated as
property in India under the Transfer of Property Act which calls it an
actionable claim'." In Allchin v. Coulthard (1) the meaning of the
expression fund' has been discussed it is said:
"Much of the obscurity which surrounds
this matter is due to a failure to distinguish the two senses in which the
phrase 'payment out of a fund' may be used. The word fund' may mean actual cash
resources of a particular kind (e.
g., money in a drawer or a bank), or it may
be a mere accountancy expression used to describe a particular category which a
person uses in making up his accounts. The words 'payment out of when used in
connection with the word fund' in its first meaning connote actual payment, e.
g., by taking the money out of the drawer or drawing a cheque on the bank. When
used in connection with the word 'fund' in its second meaning they connote
that, for the purposes of the account in which the fund finds a place, the
payment is debited to that fund, an operation which, of course, has no relation
to the actual method of payment or the particular cash resources out of which
the payment is made. Thus, if a company makes a payment out of its reserved
fundan example of the second meaning of the word fund'-the actual payment is
made by cheque drawn on the company's banking account, the money in which may
have been derived from a number of sources".
The expression funds' in the charge is used
in the first sense meaning thereby that Dalmia and Chokhani had dominion over
the amount credited to the Bharat Insurance Company in the account (1) [1942] 2
K.B. 228, 234, 281 of the Bank, inasmuch as they could draw cheques on that
account.
We are therefore of opinion that the funds
referred to in the charge did amount to 'property' within the meaning of that
term in s. 405 I.P.C.
It is further contended for Dalmia that he
had not been entrusted with dominion over the funds in the Banks at Bombay and
had no control over them as the Banks had not been informed that Dalmia was
empowered to operate on the company's accounts in the Banks and no specimen
signatures of his had been supplied to the Bank. The omission to inform the
Banks that Dalmia was entitled to operate on the account may disable Dalmia to
actually issue the cheques on the company's accounts, but that position does
not mean that he did not have any dominion over those accounts. As Chairman and
Principal Officer of the Bharat Insurance Company, he had the power, on behalf
of the company, to operate on those accounts. If no further steps are taken on
the execution of the plan, that does not mean that the power which the company
had entrusted to him is nullified. One may have dominion over property but may
not exercise any power which he could exercise with respect to it. Non exercise
of the power will not make the dominion entrusted to him, nugatory.
Article 116 of the Articles of Association of
the Bharat Insurance Company provides that the business of the company shall be
managed by the Directors, who may exercise all such powers of the company as
are not, under any particular law or regulation, not to be exercised by them.
Article 117 declares certain powers of the Directors. Clause (7) of this
Article authorises them to draw, make, give, accept, endorse, transfer,
discount and negotiate 'such bill of exchange, promissory notes and other
similar obligations as may be desirable for carrying on the business of the 282
company. Clause (10) authorizes them to let, mortgage, sell, or otherwise
dispose of any property of the company either absolutely. Clause (12)
authorises them to invest such parts of the fund of the company as shall not be
required to satisfy or provide for immediate demands, upon such securities or
investments as they may think advisable.
It also provides that the funds of the
company shall not be applied in making any loan or guaranteeing any loan made
to a Director of the company or to a firm of which such Director is a partner
or to a private company of which such Director is a Director. Clause (23)
empowers the Director to deal with and invest any Moneys of the company not
immediately required for the purposes thereof, in Government Promissory Notes,
Treasury Bills, Bank Deposits, etc.
The bye-laws of the company entrusting the
Chairman with dominion over its property, were revised in 1951. The Board of
Directors, at their meeting held on September 8, 1951, resolved:
"The bye-laws as per draft signed by the
Chairman for identification be and are hereby approved, in substitution and to
the exclusion of the existing bye-laws of the company." No such draft as
signed by the Chairman has been produced in this case. Instead, K. L. Gupta, P.
W. 112, who was the Manager of the Bharat Insurance Company in 1951 and its
General Manager from 1952 to August, 1956, has proved the bye-laws, Exhibit P.
786, to be the draft revised bye-laws approved by the Board of Directors at
that meeting. He states that he was present at that meeting and had put up
these draft bye-laws before the Board of Directors and that the Directors,
while passing these bye-laws, issued a directive that they should come into
force on January 1, 1952, and that, accordingly, be added in ink in the opening
words of 283 the bye-laws that they would be effective from January 1, 1952. When
cross-examined by Dalmia himself, he stated that he did not attend any other
meeting of the Board of Directors and his presence was Dot noted in the minutes
of the meeting. He further stated emphatically:
"I am definite that I put up the
bye-laws P786 in the meeting of the Board of Directors.
I did not see any bye-laws signed by the
Chairman." There is no reason why Gupta should depose falsely. His
statement finds corroboration from other facts. It may be that, as noted in the
resolution, it was contemplated that the revised bye-laws be signed by the
Chairman for the purposes of their identity in future, but by over-sight such
signatures were not obtained. There is no evidence that the bye-laws approved
by the Board of Directors were actually signed by the Chairman Dalmia. Dalmia
has stated so. It is not necessary for the proof of the bye-laws of the company
that the original copy of the bye laws bearing any mark of approval of the
Committee be produced. The bye-laws of the company can be proved from other
evidence. K. L. Gupta was present at the meeting when the bylaws were passed.
It seems that it was not his duty to attend meetings of the Board of Directors.
He probably attended that meeting because he had prepared the draft of the
revised bye-laws.
His presence was necessary or at least
desirable for explaining the necessary changes in the pre-existing byelaws. He
must have got his own copy of the revised bye-laws put up before the meeting
and it is expected that he would make necessary corrections in his copy in
accordance with the form of the bye-laws as finally approved at the meeting.
The absence of the copy signed by the
Chairman. if ever one existed, does not therefore make the other evidence about
the bye-laws of the 284 company in admissible. The fact that Gupta signed each
page of Exhibit P. 786 supports his statement. There was no reason to sign
every page of the copy if it was merely a draft office-copy that was with him.
He must have signed each page on account of the importance attached to that
copy and that could only be if that copy was to be the basis of the future
bye-laws of the company.
Copies of the bye-laws were supplied to '.he
Imperial Bank, New Delhi, and to the auditor. They are Exhibits P. 897 and P.
15. Raghunath Rai deposed about sending the bye-laws Exhibits P. 897 to the
Imperial Bank, New Delhi, with a covering letter signed by Dalmia on September
4, 1954.
Mehra, P. W. 15, Sub-Accountant of the State
Bank of India (which took over the under taking of the Imperial Bank of India
on July 1, 1955) at the time of his deposition, stated that the State Bank of
India was the successor of the Imperial Bank of India. Notice was issued by the
Court to the State Bank of India to produce latter dated September 4, 1954,
addressed by Dalmia to the Agent, Imperial Bank of India, and other documents.
Mehra deposed that in spite of the best search made by the Bank officials that
letter could not be found and that Exhibit P. 897 was the copy of the bye-laws
of the Bharat Insurance Company which he was producing in pursuance of the
notice issued by the Court.
It appears from his statement in
cross-examination that the words received 15th September 1954 meant that copy
of the byelaws was received by the Bank on that date. Mehra could not
personally speak about it. Only such bye-laws would have been supplied to the
Bank as would have been the corrected bye-laws. These bye-law Exhibit P. 897
tally with the bye-laws Exhibit P. 786. Raghunath Rai proves the letter Exhibit
P. 896 to be a copy of the letter sent along with these bye-laws to the Bank
and states that 285 both the original and P. 896 were signed by Dalmia. He
deposed:
"Ex. P. 786 are the bye-laws of the
Bharat Insurance Company which came into operation on 1-1-52 I supplied copy of
Ex. p. 786 as the copy of the bye-laws of the Bharat Insurance Company to the
State Bank of India, New Delhi Shri Dalmia thereupon certified as true copies
of the resolutions which were sent along with the copy of the bye-laws. He also
signed the covering letter which was sent to the State Bank of India along with
the copy of the byelaws Ex. p.786 and the copies of the resolutions.
I produce the carbon copy of the letter dated
4-9-54 which was sent as a covering letter with the bye-laws of the Bharat Insurance
Company to the Imperial Bank of India, New Delhi. It is Ex. p. 896. The carbon
copy bears the signatures of R. Dalmia accused, which signatures I identify The
aforesaid Bank (Imperial Bank) put a stamp over Ex. p. 896 with regard to the
receipt of its original.
The certified copy of the byelaws of the
Bharat Insurance Company which was sent for registration to the Imperial Bank
along with the original letter of which Ex. p. 896 is a carbon copy is Ex.p.
897 (heretofore marked C). The copy of the bye-laws has been certified to be
true by me under my signatures." Dalmia states in answer to question No.
15 (put to him under s. 342, Cr. P. C.) that the signature,,, on Ex. p. 896
appear to be his.
286 Letter Exhibit P. 896 may be usefully
quoted here "SEC The Agent, 4-9-54 Imperial Bank of India, New Delhi:
Dear Sir, Re : Safe Custody of Govt.
Securities.
We are sending herewith true copies of
Resolution No. 4 dated 10th March, 1949, Resolution No. 3 dated 10th March,
1949, and Resolution No. 8 dated 8th September, 1951, along with a certified
copy of the Bye-laws of the Company for registration at your end.
By virtue of Art. 12 clause (e) of the
Byelaws of the Company I am empowered to deal in Government Securities etc. The
specimen signatures Card of the undersigned is also sent herewith.
Yours faithfully, Encls. 5 Sd/R. Dalmia
Chairman." By Resolution No. 4 dated March 10, 1949, Dalmia was coopted
Director of the Company. By Resolution No. 'a dated March 19, 1949, Dalmia was
elected Chairman of the Board of Directors. Resolution No. 8 dated September 8,
1951 was :
"Considered the draft bye-laws of the
Company and Resolved that the Bye-laws as per draft signed by the Chairman for
identification be and are hereby approved in substitution and to the exclusion
of the existing bye-laws of the Company." 287 The letter Exhibit P. 896
not only supports the statement of Raghunath Rai about the copy of the bye-laws
supplied to the Bank to be a certified copy but also the admission of Dalmia
that he was empowered to deal in Government Securities etc., by virtue of
article 12, clause (e), of the bye-laws of the company. There therefore remains
no room for doubt that bye-laws Exhibit P. 897 are the certified copies of the
byelaws of the company passed on September 8, 1951 and in force on September 4,
1954.
We are therefore of opinion that either due
to oversight the draft bye-laws said to be signed by the Chairman Dalmia were
not signed by him or that such signed copy is no more available and that
bye-laws Exhibits P. 786 and P. 897 are the correct bye-laws of the company.
Article 12 of the company's bye-laws provides
that the Chairman shall exercise the powers enumerated in that article in
addition to all the powers delegated to the Managing Director. Clause (e) of
this article authorises him to negotiate, transfer, buy and sell Government
Securities etc., and to pledge, endorse, withdraw or otherwise deal with them.
Article 13 of the bye-laws mentions the powers of the Managing Director. Clause
(12) of this article empowers the Managing Director to make, draw, sign or
endorse, purchase, sell, discount or accept cheques, drafts, hundies, bills of
exchange and other negotiable instruments in the name and on behalf of the
company.
Article 14 of the bye-laws originally
mentioned the powers of the Manager. The Board of Directors, by resolution No.
4 dated October 6,1952 resolved that these powers be exercised by. K. L. Gupta
as General Manager and the necessary corrections be made.
288 By resolution No. 4 dated August 30,
1954, of the Board of Directors, the General Manager was empowered to make,
draw, sign or endorse, purchase, sell, discount or accept cheques, drafts,
hundies, bills of exchange and other negotiable instruments in the name and on
behalf of the company and to exercise all such powers from time to time
incidental to the post of the General Manager of the Company and not otherwise
excepted. By the same resolution, the words 'Managing Director' in Article 12
of the Bye-laws stating the powers of the Chairman, were substituted by the
words 'General Manager.' Thereafter, the Chairman could exercise the powers of
the General Manager conferred under the byelaws or other resolutions of the
Board.
It is clear therefore from these provisions
of the articles and bye-laws of the company and the resolutions of the Board of
Directors, that the Chairman and the General Manager had the power to draw on
the funds of the company.
Chokhani had authority to operate on the
account of the Bharat Insurance Company at Bombay under the resolution of the
Board of Directors dated January 31, 1951.
Both Dalmia and Chokhani therefore had
dominion over the funds of the Insurance Company.
In Peoples Bank v. Harkishen Lal (1) it was
,stated "Lala Harkishen Lal as Chairman is a trustee of all the moneys of
the Bank." In Palmer's Company Law, 20th Edition, is stated at page 517
"Directors are not only agents but they are in some sense and to some
extent trustees or in the position of trustees." (1) A.I.R. 1936 Lah. 468,
409.
289 In G. E. Ry. Co. v. Turner (1) Lord
Selborne said :
"The directors are the mere trustees or
agents of the company-trustees of the company's money and property-agents in
the transactions which they enter into on behalf of the company.
In Re. Forest of Dean etc., Co. (2) Sir
George Jessel said:
"Directors are called trustees. They are
no doubt trustees of assets which have come into their hands, or which are
under their control." We are therefore of opinion that Dalmia and Chokhani
were entrusted with the dominion over the funds of the Bharat Insurance Company
in the Banks.
It has been urged for Chokhani that he could
not have committed the offence of criminal breach of trust when he alone had
not the dominion over the funds of the Insurance Company, the accounts of which
he could not operate alone.
Both Ragbunath Rai and he could operate on
the accounts jointly. In support of this contention, reliance is placed on the
case reported as Bindeshwari v. King Emperor (3). We do not agree with the
contention.
Bindeshwari's Case (3 ) does not support the
contention. In that case, a joint family firm was appointed Government stockist
of food grain. The partners of the firm were Bindeshwari and his younger
brother. On check, shortage in food grain was found. Bindeshwari was prosecuted
and convicted by the trial Court of an offence under s. 409 1.
P. C. On appeal, the High Court set aside the
conviction of Bindeshwari of the offence under (1)L. R. (1872) 8 Ch. App.
149,152 (2) L. R. (1878) 10 Ch. D. 450,453, (3) (1947) I.L.R. 26 Pat. 703, 715.
290 s. 409 I. P. C. and held him not guilty
of the offence under that section as the entrustment of the grain was made to
the firm and not to him personally. The High Court convicted him, instead, of
the offence under s. 403 1. P. C.
This is clear from the observation :
"In my opinion, the Government rice was
entrusted to the firm of which the petitioner and his younger brother were the
proprietors.
Technically speaking, there was no
entrustment to the petitioner personally." This case clearly did not deal
directly with the question whether a person who, jointly with another, has
dominion over certain property, can commit criminal breach of trust with
respect to that property or not.
On the other hand, a Full Bench of the
Calcutta High Court took a different view in Nrigendro Lall Chatterjee v. Okhoy
Coomar Shaw (1). The Court said :
"We think the word,of Section 405 of the
Penal Code are large enough to include the case of a partner, if it be proved
that he was in fact entrusted with the partnership property, or with a dominion
over it, and has dishonestly misappropriated it, or converted it to his own
use." Similar view was expressed in Emperor v.
Jagannath Raghunathdas. (2) Beaumont C.
J.Said at.
But, in my opinion, the words of the section
(s. 405) are quite wide enough to cover the case of a partner. Where one
partner is given authority by the other partners to collect moneys or property
of the firm I think that he is entrusted with dominion over (1) (1874) 21 W. R.
(criminal Rulings) 59.
61 (1931) 33 Bom. L R. 1518,1521 291 that
property, and if he dishonestly misappropriates it, then I think he comes
within the Section." Barlee J., agreed with this opinion.
The effect of Raghupath Rai's delivering the
blank cheques signed by him to Chokbani may amount to putting Chokbani in sole
control over the funds of the Insurance Company in the Bank and there would Dot
remain any question of Chokhani's having joint dominion over those funds and
this contention, therefore, will not be available to him.
It was also urged for Chokhani that he bad
obtained control over the funds of the Insurance Company by cheating Raghunath
Rai inasmuch as he got blank cheques signed by the latter on the representation
that they would be used for the legitimate purpose of the company but latter
used them for purposes not connected with the company and that, therefore, he
could not commit the offence of criminal breach of trust.
This may be so, but Chokhani did not got
dominion over the funds on account of Raghunath Rai's signing blank cheques.
The signing of the blank cheques merely
facilitated Chokhani's committing breach of trust. He got control and dominion
over the funds under the powers conferred on him by the Board of Directors, by
its resolution authorising him and Raghunath Rai to operate on the accounts of
the Insurance Company with the Chartered Bank, Bombay.
The next contention is that Dalmia and
Chokhani were not agents as contemplated by s. 409 I. P. C. The contention is
that the word "agent' in this Section refers' to a professional agent' i.
e., a person who carried on the profession of agency and that as Dalmia and
Chekbani did not carry on such profession, they could not be covered by the
expression 'agent' in his section.
292 Reliance is placed on the case reported
as Mahumarakalage Edward Andrew Cooray v. The Queen (1). This case approved of
what was said in Reg. v. Portugal (2) and it would better to discuss that case
first.
That case related to an offence being
committed by the accused under s. 75 of the Larceny Act, 1861 (24 & 25
Viet.
c. 96). The relevant portion of the section
reads.
"Whosoever, having been intrusted,
either solely or jointly with any other person, as a banker, merchant, broker,
attorney or other agent, with any chattel or valuable security, or any power of
attorney for the sale or transfer of any share or interest in any public stock
or find............ or in any stock or fund of any body corporate, & c..
for safe custody or for any special purpose, without any authority to sell,
negotiate, transfer, or pledge, shall, in violation of good faith and contrary
to the object or purpose for which such chattel & c., was intrusted to him
sell, negotiate, pledge, & c., or in any manner convert to his own use or
benefit, or the use or benefit of any person other than the person by whom he
shall have been so intrusted............ shall be guilty of a misdemeanor.
The accused in that case was employed by a
firm of Railway contractors for commission' to use his influence to obtain for
them a contract for the construction of a railway and docks in France. In the
course of his employment, he was entrusted with a cheque for pound 500/for the
purpose of opening a credit in their name in one of the two specified banks in
Paris. He was alleged to have misappropriated the cheque to his own use
fraudulently. He was also alleged to have fraudulently dealt with another bill
for pound 250/and other securities which had (1) (1953) A.C. 407, 419. (2)
(1885) 16 Q.B.D. 487.
293 been entrusted to him for a special
purpose. He was committed for trial for the offence under s. 75. He, on arrest
under an extradition warrant, was committed to prison with a view to his
extradition in respect of an offence committed in France. It was contended on
his behalf:
"To justify the committal under the
Extradition Act, it was incumbent on the prosecutors to offer prima facie
evidence that the money and securities which the prisoner was charged with
having misappropriated were in trusted to him in the capacity of "agent',
that is, a person who carries on the business or occupation of an agent, and in
trusted with them in that capacity, and without any authority to sell, pledge,
or negotiate, and not one who upon one solitary occasion acts in a fiduciary
character." It was held, in view of the section referring to ,banker,
merchant, broker, attorney or other agent', that a. 75 was limited to a class,
and did not apply to everyone who might happen to be in trusted as prescribed
by the section, but only to the class of persons therein mentioned. It was
further said :
"In our judgment, the 'other agent'
mentioned in this section means one whose business or profession it is to
receive money, securities or chattels for safe custody or other special purpose;
and that the term does not include a person who carries on no such business or
profession, or the like. The section is aimed at those classes who carry on the
occupations or similar occupations to those mentioned in the section, and not
at those who carry on no such occupation, but who may happen from time to time
to undertake some fiduciary position, whether for money or otherwise".
294 This case therefore is authority to this
effect only that the term agent' in that section does not include a person who
just acts as ,in agent for another for a particular purpose with respect to
some property that is entrusted to him, i. e., does not include a person who
becomes an agent as a consequence of what he has been charged to do, and who
has been asked to do a certain thing with respect the property entrusted to
him, but includes such person who, before such entrustment and before being
asked to do something, already carried on snob business or profession or the
like as necessitates, in the course of such business etc., his receiving money,
securities or chattels for safe custody or other special purpose. That is to
say, he is already an agent for the purpose of doing such acts and is
subsequently entrusted with property with direction to deal with it in a certain
manner. It is not bold that a person to be an agent within that section must
carry on the profession of an agent or must have an agency. The accused, in
that case, was therefore not held to be an agent.
It may also be noticed that he was so
employed for a specific purpose which was to use his influence to obtain for
his employers a contract for the construction of a railways and docks in
France. This assignment did not amount to making him an agent of the employers
for receiving money etc. In Mahumarakalage Edward Andrew Cooray's Case (1) the
Privy Council was dealing with the appeal of a person who had been convicted
under s. 392 of the Penal Code of Ceylon. Sections 388 to 391 of the Ceylon
Penal Code correspond to ss. 405 to 408 of the Indian Penal Code.
Section 392 corresponds to s. 409 1. P. C. It
was contended before the Privy Council that the offence under s. 392 was
limited to the case of one who carried on an agency business and did not
comprehend a person who was casually entrusted with money either on one
individual (1) (1953) A.C. 407 419.
295 occasion or a number of occasions,
provided that the evidence did not establish that he carried on an agency
business. Their Lordships were of opinion that the reasoning in Reg. v.
Portugal (1) for the view that s. 75 of the Larceny Act was limited to the
class of persons mentioned in it, was directly applicable to the case they were
considering, subject to some immaterial variations, arid finally said :
"'In enunciating the construction which
they have placed on section 392 they would point out that they are in no way
impugning the decisions is certain cases that one act of entrustment may
constitute a man a factor for another provided he is entrusted in his business
as a mercantile agent, nor are they deciding what activity is required to
establish that an individual is carrying on the business of an agent".
These observations mean that the view that s.
75 was limited to the class of persons mentioned therein did not affect the
correctness of the view that a certain act of entrustment may Constitute a
person a factor for another provided be was entrusted in his business as a
mercantile agent. It follows that a certain entrustment, provided it be in the
course of business as a mercantile agent, would make the person entrusted with
a factor, i. e., would make him belong to the class of factors. The criterion
to hold a person a factor, therefore, is that his business be that of a
mercantile agent and not necessarily that he be a professional mercantile agent.
Further, their Lordships left it open as to
what kind of activity on the part of a person alleged to be an agent would
establish that he was carrying on the business of an agent. This again makes it
clear that the emphasis is not on the person's carrying on the profession of an
agent, but on his carrying on the business of an agent.
(1) (1885) 16 Q.B.D, 487.
296 These cases, therefore, do not support
the contention for Dalmia and Chokhani that the term "agent' in s. 409 I.
P.
C., which corresponds to s. 392 of the Ceylon
Penal Code., is restricted only to those persons who carry on the profession of
agents. These cases are authority for the view that the word 'agent' would
include a person who belongs to the class of agents, i.e., who carries on the
business of an agent.
Further, the accused in the Privy Council
Case (1) was not held to be an agent. In so holding, their Lordships said :
"In the present case the appellant
clearly was not doing so, and was in no sense entitled te receive the money entrusted
to him in any capacity, nor indeed, had Mr. Ranatunga authority to make him
agent to hand it over to the bank." To appreciate these reasons, we may
mention here the facts of that case. The accused was the President of the
Salpiti Koral Union. The Union supplied goods to its member societies through
three depots. The accused was also President of the Committee which controlled
one of these depots. He was also Vice-President of the Co-operative Central
Bank which advanced moneys to business societies to enable them to buy their
stocks. The societies repaid the advance weekly through cheques and/or money
orders, except when the advance be of small sums. The Central Bank, in its
turn, paid in the money orders, cheques and cash to its account with the Bank
of Ceylon. The accused appointed one Ranatunga to be the Manager of the depot
which was managed by the Committee of which he was the President. The payments
to the Central Bank used to be made through him.
The accused instructed this Manager to follow
a course other than the prescribed routine. It was that he was to collect (1)
[1953] A.C. 407, 419.
297 the amounts from the stores in cash and
hand them over to him for transmission to the Bank. The accused thus got the
cash from the Manager and sent his own cheques in substitution for the amounts
to the Central Bank. He also arranged as the Vice President of that Bank that
in certain cases those cheques be not sent forward for collection and the
result was that he could thus misappropriate a large sum of money. The Privy
Council said that the accused was not entitled to receive the money entrusted
to him in any capacity, that is to say as the Vice-President of the Cooperative
Central Bank or the President of the Union controlling the depots or as the President
of the Committee.
It follows from this that he could not have
received the money in the course of his duties as, any of these officebearers.
Further, the Manager of the depot had no authority to make the accused an agent
for purposes of transmitting the money to the Bank. The reason why the accused
was not held to be an agent was not that he was not a professional agent. The
reason mainly was that the amount was not entrusted to him in the course of the
duties he had to discharge as the office-bearers of the various institutions.
Learned counsel also made reference to the
case reported as Rangamannar Chatti v. Emperor (1). it is not of much help.
The accused there is said to have denied all
knowledge of the jewels which had been given to him by the complainant for
pledging and had been pledged and redeemed. It was said that it was not a case
under a. 409 I. P. C. The reason given was:
"There is no allegation that the jewels
were entrusted to the accused 'in the way of his business as an agent'. No
doubt he is said to (1) (1935) M.W.M, 649.
298 have acted as the complainant's agent,
but he is not professionally the complainants agent nor was this affair a
business transaction." The reasons emphasize both those aspects we have
referred to in considering the judgment of the Privy Council in Mahumarakalag
Edward Andrew Cooray's Case (1), and we need not say anything more about it.
What s. 409 I.P.C. requires is that the
person alleged to have committed criminal breach of trust with respect to any
property be entrusted with that property or with dominion over that property in
the way of his business as an agent.
The expression in the way of his business'
means that the property is entrusted to him in the ordinary course of his duty
or habitual occupation or profession or trade'. He should get the entrustment
or dominion in his capacity as agent. In other words, the requirements of this
section would be satisfied if the person be an agent of another and that other
person entrusts him with property or with any dominion over that property in
the course of his duties as an agent. A person may be an agent of another for
some purpose and if he is entrusted with property not in connection with that
purpose but for another purpose, that entrustment will not be entrustment for
the purposes of S. 409 I.P.C. if any breach of trust is committed by that
person. This interpretation in no way goes against what has been held in Reg.
v. Portugal (2) or in Mahumarakalage Edward Andrew Cooray's 'Case (1), and
finds support from the fact that the section also deals with entrustment of
property or with any dominion over property to a person in his capacity of a
public servant. A different expression 'in the way of his business' is used in
place of the expression 'in his capacity,' to make it clear that entrustment of
property in the capacity of agent will not, by itself, be sufficient to make
(1) (1953) A.C. 407. 419.
(2) (188 5) lb Q.B.D. 487.
299 the criminal breach of trust by the agent
a graver offence than any of the offences mentioned is ss. 406 to 408 I.P.C.
The criminal breach of trust by an agent
would be a graver offence only when he is entrusted with property not only in
his capacity as an agent but also in connection with his duties as an agent. We
need not speculate about the reasons which induced the Legislature to make the
breach of trust by an agent more severely punishable than the breach of trust
committed by any servant. The agent acts mostly as a representative of the
principal and has more powers in dealing with the property of the principal
and, consequently, there are greater chances of his misappropriating the
property if he be so minded and less chances of his detection. However, the
interpretation we have put on the expression 'in the way of his business' is
also borne out from the Dictionary meanings of that expression and the meanings
of the words 'business' and 'way', and we give these below for convenience.
'In the way of' -of the nature of, belonging
to the class of, in the course of or routine of (Shorter Oxford English
Dictionary) -in the matter of, as regards, by way of (Webster's New International
Dictionary, II Edition, Unabridged) Business' -occupation, work (Shorter Oxford
English Dictionary) -mercantile transactions, buying and selling, duty, special
imposed or under300 taken service, regular occupation (Webster's New International
Dictionary, II Additional, Unabridged) -duty, province, habitual occupation,
profession, trade(Oxford Concise Dictionary) 'Way' --scope, sphere, range, line
of occupation Oxford Concise Dictionary) Chokhani was appointed agent of the
Bharat Insurance Company on January 31, 1951. He admits this in his statement
under s. 342, Cr. P.C. He signed various cheques as agent of this company and
he had been referred to in certain documents as the agent of the company.
Dalmia, as a Director and Chairman of the
company, is an agent of the company.
In Palmer's Company Law, 20th Edition, is
stated, at page 513 :
"A company can only act by agents, and
usually the persons by whom it acts and by whom the business of the company is
carried on or superintended are termed directors........
Again, at page 515 is noted :
(Directors are, in the eye of the law, agents
of the company for which they act, and the general principles of the law of
principal and agent regulate in most respects the relationship of the company
and its directors.,, 301 It was held in Gulab Singh v. Punjab Zamindara Bank
(1) and in Jasuwant Singh v. V.V. Puri (2) that a director is an agent of the
company.
Both Dalmia and Chokhani being agents of the
company the control, if any, they had over the securities and the funds of the
company, would be in their capacity as agents of the company and would be in
the course of Dalmia's duty as the Chairman and Director or in the course of
Chokhani's duty as a duly appointed agent of the company. If they committed any
criminal breach of trust with respect to the securities and funds of the
company, they would be committing an offence under ss.409 I.P.C.
In view of our opinion with respect to Dalmia
and Chokhani being agents within the meaning of s. 409 I.P.C. and being
entrusted with dominion over the funds of the Bharat Insurance Company in the
Banks which comes within the meaning of the words 'property' in s. 409, these
appellant would commit the offence of criminal breach of trust under s. 409 in
case they have dealt with this 'property' in any manner mentioned in s. 405
I.P.C.
We may now proceed to discuss the detailed
nature of the transactions said to have taken place in pursuance of the alleged
conspiracy. It is, however, not necessary to give details of all the impugned
transaction. The details of the first few transactions will illustrate how the
whole scheme of diverting the funds of the Insurance Company to the Union
Agencies was worked.
The Union Agencies suffered losses in its
shares speculation business in the beginning of August, 1954. The share brokers
sent statements of accounts dated August 6, 1954, to Chokhani and (1) A. I.R.
1942 Lah. 47.
(2) A.I.R. 1951 Pu n. 99.
302 made demand of Rs. 22,25,687-13-0 in
respect of the losses, The total cash assets of the Union Agencies in all it,;
banks and offices at Bombay, Calcutta and
Delhi amounted to Rs. 2,67,857-11-7 only. The Union Agencies therefore needed a
large sum of money to meet this demand and to meet expected future demands in
connection with the losses.
At this crucial time, telephonic
communications did take place between presumably Dalmia and Chokhani. The calls
were made from Telephone No. 45031, which is Dalmia's number at 3, Sikandara
Road, New Delhi to Bombay No. 33726, of Chokhani. Two calls were made on August
7, 1954, three on August 8, two on August 11 and one each on August 13 and
August 14, respectively. Of course, there is no evidence about the conversation
which took place at these talks. The significance of these calls lies in their
taking place during the period when the scheme about the diversion of funds was
coming into operation for the first time, but in the absence of evidence as to
what conversation took place, they furnish merely a circumstance which is not
conclusive by itself.
On August 7 and 9, 1954, the Punjab National
Bank, Bombay, received Rs. 2,00,000 and Rs. 3,00,000 respectively in the
account of the Union Agencies, telegraphically from Delhi.
On the same day, Vishnu Prasad, appellant,
opened an account with the Bank of India, Bombay, in the name of Bhagwati
Trading Company. He gave himself out as the sole proprietor and mentioned the
business of the company in the form for opening account as merchants and
commission agents'. He made a deposit of Rs. 1, 100 said to have been supplied
to him by Chokhani.
On August 11, 1954, Vishnu Prasad made
another deposit of Rs. 1,100, again said to have 303 been supplied by Chokhani,
as the first deposit in the account he opened with the United Bank of India,
Bombay, in the name of Bhagwati Trading Company. The business of the company
was described in the form for opening account as merchants, piece-goods
dealers.' There is no dispute now that Bhagwati Trading Company did not carry
on any business either as merchants and commission agents or as merchants and
piece-goods dealers. Vishnu Prasad states that he acted just at Chokhani told
him and did not know the nature of the transactions which were carried on in
the name of this company. It is however clear from the accounts and dealings of
this company that its main purpose was simply to act in such a way as to let
the funds of the Insurance Company pass on to the Union Agencies, to avoid easy
detection of such transfer of funds.
Chokhani states that he did this business as
the Union Agencies needed money at that time. He thought that the Union
Agencies would make profit after some time and thereafter pay it back to Bhagwati
Trading Company for purchasing securities and therefore he postponed the dates
of delivery of the securities to the Insurance Company. He added that in case
of necessity be could raise money by selling or mortgaging the shares of the
Union Agencies in the exercise of his power of attorney on its behalf.
We may now revert to the actual transaction
gone through to meet the demands in connection with the losses of the Union
Agencies.
On August 9, 1954, Chokbani purchased 3%
1963-65 securities of the face value of Rs. 22,00,000 on behalf of the
Insurance Company from Naraindas and Sons, Security Brokers.
Chokhani entered, into a cross-contract with
the same firm of brokers 304 for the sale of similar securities of the same
face value on behalf of Bhagwati Trading Company. He informed the brokers that
the payment of purchase price would be made by the Insurance Company to
Bhagwati Trading Company from whom it would get the securities. Thus the actual
brokers practically got out of the transaction except for their claim of
brokerage.
On August 11, 1954, a similar transaction of
purchase on behalf of the Insurance Company from the brokers and sale by
Bhagwati Trading Company to those brokers, of 3% 1963-65 securities of the face
value of Rs. 5,00,000, was entered into by Chokhani.
It may be mentioned, to avoid repetition,
that Chokhani always acted in such transaction-which may be referred to as
usual purchase transactions both on behalf of the Insurance Company and on
behalf of Bhagwati Trading Company, and that the same arrangement was made with
respect to the payment of the purchase price and the delivery of securities.
The securities were not delivered to the
Insurance Company by Bhagwati Trading Company and yet Chokhani made payment of
the purchase price from out of the funds of the Insurance Company.
On August 11, 1954, Chokhani got the
statement of accounts from the brokers relating to the purchase of securities
Worth Rs. 22,00,000. The total cost of those securities worked out at Rs.
20,64,058-6-9. Chokhani made the payment by issuing two cheques in favour of
Bhagwati Trading Company, one for Rs. 10,00,000 and the other for the balance,
i.e., Rs. 10,64,058-6-9. Needless to say that he utilised the cheques which had
already been signed by Raghunath Rai, in pursuance of the arrangement to
facilitate transactions on behalf of the Insurance Company.
305 On August 12, 1954, the statement of
account with respect to the purchase of securities worth Rs. 5,00,000 was
received.
The cost worked out to Rs. 4,69,134-15-9.
Chokhani made the payment by issuing a cheque for the amount in favour of Bhag
wati Trading Company. All these cheques were drawn on the Chartered Bank,
Bombay.
On August 12, 1954, Vishnu Prasad drew
cheques for Rs. 9,00,000 in the account of Bhagwati Trading Company in the
United Bank of India. The amount was collected by his father Bajranglal. He
drew another cheque for Rs. 9,60,000 in the account of the Bhagwati Trading
Company with the Bank of India, Bombay, and collected the amount personally.
The total amount withdrawn by these two cheques viz., Rs.
18,60,000 was passed on to the Union Agencies
through Chokhani that day. Thereafter Chokhani deposited Rs.
7,00,000 in the account of the Union Agencies
with the Bank of India, Rs. 7,00,000, in the account of the Union Agencies with
the United Bank of India and Rs. 4,40,000 in the account of the Union Agencies
with the Punjab National Bank Ltd. The Punjab National Bank Ltd., Bombay, as
already mentioned, had received deposits of Rs. 2,00,000 and Rs.
3,00,000 on August 7 and August 9, 1954,
respectively, in the account of the Union Agencies from Delhi.
Between August 9 and August 19, 1954,
Chokhani made payment to the brokers on account of the losses suffered by the
Union Agencies. He issued cheques for Rs. 9,37,473-5-9 between August 9 and
August 13, 1954, on the account with the Punjab National Bank. On August 13, he
issued cheques on the account of the Union Agency with the United Bank of India
in favour of the Bombay brokers on account of the losses of the Union Agencies,
for Rs. 7,40,088-5-9. He also issued, between August 13 and August 19., 1954,
cheque for Rs. 6,84,833-14-0 on the Bank of India, in favour 306 of the share
brokers at Bombay on account of the losses suffered by the Union Agencies.
Chokhani informed the head office at Delhi
about these purchase transaction of securities worth Rs. 27,00,000, through
letter dated August 16, 1954, and along with that letter sent the contract note
and statements of accounts received from the brokers. No mentioned was made in
the letter about the payment being made to Bhagwati Trading Company through
cheques or about the arrangement about getting the securities from Bhagwati
Trading Company or about the postponement of the delivery of the securities by
that company. On receipt of the letter, Raghunath Rai contacted Dalmia and, on
being told that the securities were purchased under the latter's instructions,
made over the letter to the office where the usual entries where made and
records were prepared, as had to be done in pursuance of the office routine.
Ultimately, the formal confirmation of the purchases was obtained on August 30,
1954, from the Board of Directors at its meeting for which the office note
Stating that the securities were purchase under the instruction of the Chairman
(Dalmia) was prepared. The office note, Exhibit P. 793, with respect to the
purchase of these securities worth Rs. 27,00,000 was signed by Chordia, who was
then the Managing, Director of the Bharat Insurance Company.
On August 16, 1954, Vishnu Prasad withdrew
Rs. 2,200 from the account of the Bhagwati Trading Company with the Bank of
India, according to his statement, gave this money to Chokhani in return for
the amount Chokhani had advanced earlier for opening accounts for Bhagwati
Trading Company with the Bank of India and the United Bank of India.
Thereafter, whatever money was in the account
of Bhagwati Trading Company with these Banks was the money obtained through the
dealings entered into on behalf of Bhagwati Trading Company, the funds 307 for
most of which came from the Bharat Insurance Company.
On August 18,1954, Vishnu Prasad drew a sum
of Rs. 50,000 from Bhagwati Trading Company's account with the Bank of India
and passed on the amount to the Union Agencies through Chokhani. On August 23.
1954, he withdrew Rs. 90,000 from Bhagwati Trading Company's account with the
United Bank of India and Rs. 5,10,000 from its account with the Bank of India
and passed on these amounts also to the Union Agencies through Chokhani.
Chokhani then issued cheques to telling Rs. 5,88,380-13-0 from August 23 to
August 26,1954, on the account of the Union Agencies with the Chartered Bank,
Bombay, in favour of the brokers on account of the losses suffered by that
company. Thus, out of the total amount of Rs. 25,33,193-6.6 withdrawn by
Chokhani from the account of the Bharat. Insurance Company and paid over to
Bhagwati Trading Company, Rs. 25,10,000 went to the Union Agencies, which
mostly utilised the amount in payment of the losses suffered by it.
The Union Agencies suffered further losses
amounting to about Rs. 23,00,000. Demands for payment by the brokers were
received on September 3, 1954, and subsequent days.
The Bharat Insurance Company had no
sufficient liquid funds in the Banks at Bombay. There was therefore necessity
to deposit funds in the Bank before they could be drawn ostensibly to pay the
price of securities to be purchased.
This time the transactions of sale of
securities held by the Insurance Company and the usual purchase transactions
relating to certain other securities were gone through. The details of those
transactions are given below.
308 On September 4, 1954, securities of the
face value of Rs.
17,50,000 held by the Insurance Company were
withdrawn from its Safe-custody account with the Imperial Bank of India, New
Delhi, by letter Exhibit P. 1351 under the signature of Dalmia. Securities
worth Rs. 10,00,000 were 2-1/40% 1954 securities and the balance were 2-1/2%
1955 securities.
These securities were then sent to Bombay and
sold there.
On September 9, 1954, Rs. 6,25,000 were
transferred from Delhi to the account of the Insurance Company with the
Chartered Bank, Bombay, by telegraphic transfer. Thus the balance of the funds
of the Insurance Company with the Chartered Bank rose to an amount out of which
the losses of about Rs. 23,00,000 suffered by the Union Agencies could be met.
The 1954 securities sold were to mature on November 15, 1954. The 1955
securities would have matured much later. No ostensible reason for their
premature sale has been given.
On September 6, 1954, Chokhani purchased 3%
1959-61 securities of the face value of Rs. 25,00,000 on behalf of the
Insurance Company from M/s. Naraindas & Sons, Brokers.
A cross--contact of sale of similar securities
by Bhagwati Trading Company to the brokers was also entered into. Steps which
were taken in connection with the purchase of securities worth Rs. 27,00,000 in
August 1954 were repeated.
On September 9, 1954, Chokhani issued two
cheques, one for Rs. 15,00,000 and the other for Rs. 9,20,875 on the account of
the Insurance Company with the Chartered Bank, in favour of Bhagwati Trading
Company which deposited the amount of the cheques into its account with the
Bank of India, Bombay.
Vishnu Prasad passed on Rs. 24,00,000 to the
Union Agencies through Chokhani. This amount was utilised in meeting the losses
suffered by the Union Agencies to the extent of Rs.
22,81,738-2-0, A sum of Rs. 75,000 was paid
309 to Bennett Coleman Co. Ltd., of which Dalmia was a director and a sum of
Rs. 15,000 was deposited in the Punjab National Bank.
It is again significant to note that
telephonic communication took place between Dalmia's residence at New Delhi at,
Chokhani's at Bombay, between September 4 and September 10, 1954. There was two
communications on September 4, one on September 5, three on September 6 and one
on September 10, 1954.
The Union Agencies suffered further losses
amounting to about Rs. 10,00,000 in the month of September. Again, the accounts
of the Union Agencies or of the Insurance Company, at Bombay, did not have
sufficient balance to meet the losses and, consequently, sale of certain
securities held by the Insurance Company and purchase of other securities again
took place. This time, 3% 1957 securities of the face value of Rs. 10,00,000
hold by the Insurance Company in its safecustody deposit with the Chartered
Bank, Bombay, were sold on September 21, 1954, and Rs. 9,84,854-5-6, the net
proceeds, were deposited in the Bank. On the same day, Chokhani purchased 3%
1959-61 securities of the face value of Rs. 10,00,000 on behalf of the
Insurance Company following the procedure adopted in the earlier usual purchase
transactions.
No telephonic communication appears to have
taken place between Delhi and Bombay, on receipt of the demand from the brokers
on September 17, 1954, for the payment of the losses, presumably because
necessary steps to be taken both in connection with the fictitious purchase of
securities, in order to pay money to Bhagwati Trading Company for being made
over to the Union Agencies when funds were needed and also or providing funds
in the Insurance Company's account with the Chartered Bank, Bombay, in case the
810 balance was not sufficient to meet the losses, had already been adopted in
the previous transactions, presumably, after consultations between Dalmia and
Chokhani. This lends weight to the significance of the telephonic
communications between Delhi and Bombay in the critical period of August and
early September, 1954.
To complete the entire picture, we may now
mention the steps taken to cover up the non-receipt of securities purchased, at
the proper time.
By November, 19, 1954, securities of the
facevalue of about Rs. 80,00,000 bad been purchased by Chokhani on behalf of
the Insurance Company and such securities bad not been sent to the head office
at Delhi. Raghunath Rai referred the matter to Dalmia and, on his approval,
sent a letter on November 19, 1954, to Chokhani, asking him to send the
distinctive numbers of those securities. The copy of the letter is Exhibit P.
805. The securities referred to were 3% Loan of 1959-61 of the face value of
Rs. 35,00,000, 3% Loan of 1963-65 of the face value of Rs. 27,00,000 and 23/40/%
Loan of 1960 of face value of Rs. 18,00,000.
It was subsequent to this that stock
certificates with respect to 3% 1963-65 securities of the face, value of Rs.
27,00,000 arid with respect to 2-3 14% 1960.
Loan securities of the face value of Rs. 18,00,000 were received in Delhi.
We may now refer to the transactions which
led to the obtaining of these stock certificates. The due dates of interest of
3% 1963-65 securities purchased in August 1954 were June 1 and December 1. It
was therefore necessary to procure these securities or to enter into a paper
transaction of their sale prior to December 1, as, otherwise, the non-obtaining
of the income-tax deduction certificate from the Reserve Bank would have
clearly indicated that the Insurance Company did not hold these 311 securities,
Chokhani, therefore, entered into a genuine contract of purchase of 3% 1963-65
securities of the face value of Rs. 27,00,000 on behalf of Bhagwati Trading
Company with Devkaran Nanjee, Brokers, Bombay, on November 3, 1954.
He instructed the brokers to endorse the
securities in favour of the Insurance Company, even though the securities were
being sold to Bhagwati Trading Company. These securities so endorsed were
received on November 24, 1954, and were converted into inscribed stock (Stock
Certificate Exhibit P. 920) from the Reserve Bank of India on December 7,1954.
The stock certificate does not mention the date on which the securities were
purchased and therefore it existence could prevent the detection of the fact
that these securities were not purchased in August 1954 when, according to the
books of the Insurance Company, they were shown to have been purchased.
The Insurance Company did not ostensibly pay
for the purchase of these shares but partially paid for it through another
share-purchase transaction. In order to enable Bhagwati Trading Company to pay
the purchase price, Chokbani paid Rs. 16,00,000 to it from the account of the
Bharat Union Agencies with the Banks at Bombay, and Rs. 10,08,51515-0 from the
account of the Insurance Company with the Chartered Bank by a fictitious purchase
of 2-1/2% 19611 securities of the face value of Rs. 11,00,000 on behalf of the
Insurance Company. These 2-1/2% 1961 securities of the face value of Rs.
11,00,000 were purchased by Chokhani on November 16, 1954. by taking a step
similar to those taken for the purchase of securities in August and September,
1954, already referred to.
Interest on the 2-3/4% Loan of 1960 of the
face value of Rs. 18,00,000 was to fall due on January 15, 1955. Both on
account of the necessity for obtaining the interest certificate and also on 312
account of the expected check of securities by the auditors appointed for
auditing the accounts of the Insurance Company for the year 1954, it became
necessary to procure these securities or to sell them off. Chokhani purchased,
on December 9, 1954, 2-3/4% 1960 securities of the face value of Rs. 18,00,000
on behalf of Bhagwati Trading Company. The purchase price was paid out of the
funds of the Union Agencies and Bhagwati Trading Company. The securities were,
however, got endorsed in the name of the Insurance Company.
Chokhani got the securities sometimes about
December 21, 1954, and, therefore, got them converted into stock certificates
which were then sent to the head office at Delhi.
There still remained 3% 1959-61 securities of
face value of Rs. 35,00,000 to be accounted for. They were purchased in
September, 1954, as already mentioned, but had not been received up to the end
of December. On December 27, 1954, Chokhani purchased 2-3/4% 1962 securities of
the face value of Rs. 46,00,000, in two lots of Rs. 11,00,000 and Rs. 35,00,000
respectively, on behalf of the Insurance Company.
He also entered into the usual cross-contract
with the brokers for the sale of those securities on behalf of the Union
Agencies. This was a fictitious transaction, as usual, and these securities
were not received from the Union Agencies. On the same day, Chokhani entered
into a contract for the sale of 3% 1959-61 securities of the face value of Rs.
35,00,000 on behalf of the Insurance, Company and also entered into a
cross-contract on behalf of the Union Agencies for the purchase of these
securities from the same brokers. As these securities did not exist with the Insurance
Company, these transactions were also paper transactions.
We need not give details of the passing of
money from one concern to the other in connection with these transactions.
For purposes of audit the 1959-61 securities
of the face value of 313 Rs.35,00,000 had been sold. Now securities viz.,
2-3/4% 1962 securities of the face value of Rs. 46,00,000 had been ostensibly
purchased. The auditors could demand inspection of these newly purchased
securities. Chokhani therefore entered into another purchase transaction. This
time a genuine transaction for the purchase of 2-3/4% 1962 securities of the
face value of Rs 46,00,000 was entered into on January It, 1955. The purchase
price was paid by the sale of 3% 1957 securities of the face value of Rs.
46,00,000 which the Insurance Company possessed. For this purpose , Chokhani
withdrew these securities of the face value of Rs.
8,25,000 from the Chartered Bank, Bombay, and
Rs. 37,75,000 worth of securities were sent to Bombay from Delhi. These
securities were then converted into inscribed stock.
The Insurance Company was now supposed to
have purchased 23/4% 1962 securities of the face value of Rs. 92,00,000 having
purchased Rs.416,00,000) worth of securities in December 1954 and Rs. 46,00,000
worth of securities in January 1955. It possessed securities worth Rs.
46,00,000 only and inscribed stock certificate with respect to that could serve
the purpose of verifying the existence of the other set of Rs. 46,00,000 worth
of securities. These transactions are sufficient to indicate the scheme
followed by Chokhani in the purchase and sale of securities on behalf of the
Insurance Company. It is clear that the transactions were not in the interests
of the Insurance Company but were in the interests of the Union Agencies
inasmuch as the funds were provided to it for meeting its losses. It is also
clear that the system adopted of withdrawing the funds of the Insurance Company
ostensibly for paying the purchase price of securities after the due date of
payment of interest and selling the securities off, if not actually recouped
from the funds of the Union Agencies or 314 Bhagwati Trading Company prior to
the next date of payment of interest, was not in the interests of the Insurance
Company. When, however, the sale price could not be paid out of the funds of
the Union Agencies or Bhagwati Trading Company, Chokhani, on behalf of the
Insurance Company entered into a fresh transaction of purchase of securities
which were not actually received and thus showed repayment of the earlier funds
though out of the funds withdrawn from the same company (viz., the Insurance
Company) ostensibly for paying the purchase price of newly purchased
securities.
Turning to the evidence on record, the main
statement on the basis of which, together with other circumstances, the Courts
below have found that Dalmia had the necessary criminal intent as what Chokhani
did was known to him and was under his instructions, is that of Raghunath Rai,
Secretary-cum-Account of the Bharat Insurance Company. Mr Dingle Foot has
contended firstly that Raghunath Rai was an accomplice of the alleged
conspirators and, if not, he was a witness whose testimony should not, in the
circumstances be believed without sufficient corroboration which does riot
exist. He has also contended that the Courts below fell into error in accepting
the statements made by him which favoured the prosecution case without
critically examining them, that they ignored his statements in favour of the
accused for the reason that he was under obligation to Dalmia and ignored his
statements inconsistent with his previous statement as he was not confronted
with them in cross-examination.
An accomplice is a person who participates in
the commission of the actual crime charged against an accused. He is to be a
particleboard. There are two cases, however, in which a person has been held to
be an accomplice even if he is not a particeps criminis. Receivers of stolen
property 315 are taken to be accomplices of the thieves from whom they receive
goods, on a trial for theft. Accomplices in previous similar offences committed
by the accused on trial are deemed to be accomplices in the offence for which
the accused is on trial, when evidence of the accused having committed crimes
of identical type on other occasions be admissible to prove the system and
intent of the accused in committing the offence charged Davies Director of
Public Prosecution8 (1).
The contention that Raghunath Rai was an
accomplice is mainly based on the facts that (i) Raghunath Rai did not produce
the counterfoils of the cheques for the inspection of the auditors, though
asked for by them, in spite of the fact that the counterfoils must have come to
Delhi during the period of audit; (ii) the alleged scheme of the conspirators
could not have been carried out without his help in signing blank cheques which
were issued by Chokhani subsequently. The mere signing of the blank cheques is
hardly an index of complicity when the bank account had to be operated both by
Chokhani and Raghunath Rai, jointly.
Raghunath Rai had to sign blank cheques in
order to avoid delay in payments and possible occasional falling through of the
transactions. No sinister retention can be imputed to Raghunath Rai on account
of his signing blank cheques in the expectation that those cheques would be
properly used by Chokhani. The counterfoils have not been produced and there is
no evidence that they showed the real state of affairs, i. e., that the cheques
were issued to Bhagwati Trading Company and not to the brokers from whom the
securities were purchased.
It is not expected that the name of Bhagwati
Trading Company would have been written on the counterfoils of the cheques when
its existence and (1) L. R. 1954 A. C. 378.
316 the part it took in the transactions were
to be kept secret from the head office. When counterfoils were sent for in
August, 1955, they were not received from Bombay. Chokhani states that he did
not get that letter.
Moreover, counterfoils reach the head office
after a long time and there is no particular reason why Raghunath Rai should
notice the counterfoils then. He does not state in his evidence that he used to
look over the counterfoils when the cheque books came to him for further
signatures.
We do not therefore agree that Raghunath Rai
was an accomplice.
Even if it be considered that Raghunath Rai's
evidence required corroboration as to the part played by Dalmia, the
circumstances to which we would refer later in this judgment, afforded enough
corroboration in that respect.
Raghunath Rai made a statement. Exhibit P. 9,
before Annadhanam on September 20, 1955. He made certain statements in Court
which were at variance with the statement made on that occasion. This variation
was not taken into consideration in assessing the veracity of Raghunath Rai as
he had not been cross-examined about it.
The argument of Mr. Dingle Foot is that such
variation, if taken into consideration, considerably weakens the evidence of
Raghunath Rai. He has urged that no cross examination of Raghunath Rai was
directed to the inconsistencies on any particular point in view of the general
attack on his veracity through cross--examination with respect to certain
matters. He has contended that in view of s. 155 of the Indian Evidence Act,
any previous statement of a witness inconsistent with his statement in Court,
if otherwise proved, could be used to impeach his credit and that therefore the
Courts below were not right 317 in ignoring the inconsistencies in the
statement of Raghunath Rai merely on the ground that they were not put to him
in cross-examination. On the other hand, the learned Solicitor General contends
that s. 155 of the Indian Evidence Act is controlled by s. 145 and that
previous inconsistent statements not put to the witness could not be used for
impeaching his credit. We do not consider it necessary to decide this point as we
are of opinion that the inconsistent statements referred to are not of any
significance in impeaching the credit of Raghunath Rai.
The specific inconsistent statements are :
(i) 'I never of my own accord send securities to Bombay nor am authorised to do
so': In Court Raghunath Rai said that certain securities were sent by him to
Bombay on his own accord because those securities were redeemable at Bombay and
the maturity date was approaching. (ii) Before the Administrator, Raghunath Rai
had stated: 'I cannot interfere in the matter as, under Board Resolution,
Chokhani is authorised to deal with the securities. Chokhani always works under
instructions from the Chairman.' In Court, however, he stated that there was no
resolution of the Board of Directors authorising Chokhani to sell and purchase
securities. The misstatement by Raghunath Rai, in his statement P. 9 to the
Investigator made on September 20, 1955. about Chokhani's being authorised by a
Board resolution to deal with the securities, is not considered by Dalmia to be
a false statement as he himself stated, in answer to question No.
21, that such a statement could possibly be
made by Raghunath Rai in view of the Board of Directors considering at the
meeting the question whether Chokhani be authorised to purchase and sell
securities on behalf of the company in order to make profits. (iii) 'Roughly
1-3/4 chores of securities were sent to Bombay from here during the period from
318 April 1955 to June 1955. The period was wrong and was really from July to August
1955. Raghunath Rai admitted the error and said that he had stated to
Annadhanam without reference to books. (iv) 'Securities are sent to Chokhani at
Bombay through a representative of Dalmia. The statement is not quite correct
as securities were sent to Bombay by post also.
Raghunath Rai stated that on the receipt of
the advice from Chokhani about the purchase or sale of securities, he used to
go to Dalmia on the day following the receipt of the advice for confirmation of
the contract of purchase or sale of securities and that after Dalmia's approval
the vouchers about the purchase of those securities and the crediting of the
amount of the sale price of those securities to the account of the Insurance
Company with the Chartered Bank, as the case may be, used to be prepared.
Kashmiri Lal and Ram Das, who prepared the
vouchers, describe the procedure followed by them on receipt of the advice but
do not state anything about Raghunath Rai's seeking confirmation of the
purchase transactions from Dalmia and therefore do not, as suggested for the
appellants, in any way, contradict Raghunath Rai.
It is urged by Mr. Dingle Foot that it was
somewhat unusual to put off the entries with respect to advises received by a
day, that the entries must have been made on the day the advices were received
and that in this manner the entries made by these clerks contradict Raghunath
Rai. A witness cannot be contradicted by first supposing that a certain thing
must have taken place in a manner not deposed to by any witness and then to
find that was not consistent with the statement made by that witness. Further,
we are of opinion that there could be no object in making consequential entries
319 on receipt of the advice about the purchase of securities if the purchase
transaction itself is not approved of and is consequently cancelled. The
consequent entries were to be with respect to the investments of the Insurance
Company and not with respect to infructuous transactions entered into by its
agents.
It has also been urged that if Dalmia's
confirmation was necessary, it was extraordinary that no written record of his
confirming the put-chase of securities was kept in the office. We see no point
in this objection. If confirmation was necessary, the fact that various entries
were made consequent on the receipt of advice is sufficient evidence of the
transaction being confirmed by Lalmit, as, in the absence of confirmation, the
transaction could not have been taken to be complete. Further, office notes
stating that securities had been purchased or sold 'under instructions of the
Chairman' used to be prepared for the meeting of the Board of Directors when
the matter of confirming sale and purchase of securities went before it. The
fact that office notes mentioned that the securities had been purchased under
the instructions of the Chairman is the record of the alleged confirmation.
The proceedings of the meeting of the Board
of Directors with respect to the confirmation of the purchase and sale of
securities do not mention that action was taken on the basis of the office
notes. Minutes with respect to other matters do refer to the office notes. This
does not, however, mean that office notes were not prepared. Confirmation of
the purchase and sale of the shares was a formal matter for the Board.
All the office notes, except one, were signed
by Raghunath Rai. The one not signed by him is Exhibit P. 793. It is signed by
Chordia and is dated August 18,1954. This also mentions under instructions of
the Chairman certain shares have been 320 purchased'. Chordia was a relation of
Dalmia and had no reason to write the expression 'Under instructions of the
Chairman' falsely. Such a note cannot be taken to be a routine note when the
power to purchase and sell securities vested in Chordia as Managing Director of
the company.
Clause (4) of article 13 of the Bye-laws
empowered the Managing Director to transfer, buy and sell Government
securities. When Chordia, the Managing Director, wrote in this office note that
securities were purchased under the instructions of the Chairman, it can be
taken to be a true statement of fact. It is true that he has not been examined
as a witness to depose directly about his getting it from Dalmia that the
purchase of securities referred to in that note was Under his instructions.
This does not matter as we have referred to this office note in connection with
Raghunath Rai's statement that office notes used to be prepared after Dalmia's
statement that the particular purchase of shares was under his instructions.
The statements made by Raghunath Rai which
are said to go in favour of the accused may now be dealt with. Raghunath Rai
was cross-examined with respect to certain letters he had sent to Chokhani. He
stated, in his deposition on July 29, 1958, that Dalmia accepted his suggestion
for writing to Chokhani to send him the distinctive numbers of the securities
which had been purchased, but not received at the head office, and that when he
reported non-compliance of Chokhani in communicating the distinctive numbers and
suggested to Dalmia to ring up Chokhani to send the securities to the head
office, Dalmia agreed. This took place in November and December 1954. Dalmia's
approval of the suggestion does not go in his favour. He could not have refused
the suggestion.
Raghunath Rai also stated that in September
or October 1954 there was a talk between hier, 321 K. L. Gupta and Dalmia about
the low yield of interest on the investments of the Insurance Company and it
was suggested that the money be invested in securities, shares and debentures.
Dalmia then said that he had no faith in private shares and debentures but had
faith in Government securities and added that he would ask Chokhani to invest
the funds of the Insurance Company in the purchase and sale of Government securities.
He, however, denied that Dalmia had said that the investment of funds would be
in the discretion of Chokhani, and added that Chokhani was not authorised to
purchase or sell securities on behalf of the Insurance Company unless he was
authorised by the Chairman.
The statement does not support Dalmia's
authorising Chokhani to purchase and sell securities in his discretion.
Another statement of Raghunath Rai favourable
to Dalmia is said to be that according to him he told the auditors on September
9, 1955, that the securities not then available were with Cbokhani at Bombay
from whom advices about their purchase had been received. Annadhanam stated
that Raghunath Rai had told him that Dalmia would give the explanation of the
securities not produced before the auditors. There is no reason to prefer
Raghunath Rai's statement to that of Annadhanam. Annadhanam's statement in the
letter Exhibit P. 2 about their being informed that in March, 1954, after the
purchase, the securities were kept in Bombay in the custody of Chokhani refer
to what they were told in the first week of January, 1955, and not to what
Raghunath Rai told him on September 9, 1954.
Raghunath Rai stated that on one or two
occasions be, instead of going to Dalmia, talked with him on telephone
regarding the purchase and sale of securities by Chokhani and that Dalmia told
him on telephone that be bad instructed for the purchase 322 and sale of
securities and that he was confirming the purchases or sales. This does not
really favour Dalmia as Raghunath Rai maintains that Dalmia did confirm the
purchase or sale reported to him. It is immaterial whether that was done on
telephone or on Raghunath Rai actually meeting him.
Questions put to the Administrator, Mr. Rao,
in cross examination, implied that Raghunatb Rai was a reliable person and
efforts to win him over failed. It was suggested to the Administrator that the
reasons for the appointment of Sundara Rajan as the Administrator's Secretary
was that he wanted to conceal certain matters from Raghunath Rai. His reply
indicated different reasons for the appointment.
Another suggestion put to him was that
Raghunath Rai offered to retire, but he kept his offer pending because of this
case. This suggestion too was denied.
It was brought out in the cross-examination
of Raghunath Rai that he was in a position in which he could be influenced by
the Administrator. Raghunath Rai was using the office car.
Its use was stopped by the Administrator in
January, 1956.
He was not paid any conveyance allowance. In
April, 1958, he made a representation to the Administrator for the payment of
that allowance to him. The Administrator passed the necessary order in May,
1958, with retrospective effect from January 1956. The amount of conveyance
allowance was Rs. 75 per mensem. Raghunath Rai could not give any satisfactory
explanation as to why he remained silent with regard to his claim for
conveyance allowance for a period of over two years, but denied that he was
given the allowance with retrospective effect in order to win him over to the
prosecution.
Raghunath Rai applied for extension of
service in the end of 1956 or in the beginning of 323 1957 and, in accordance
with the resolution passed on August 17, 1954, by the Board of Directors, his
service was extended up to 1961. The Administrator forwarded the application to
the higher authorities. This matter had not been decided by July 29, 1958.
The amount of his gratuity and provident fund
in the custody of the Insurance Company amounted to Rs. 35,000.
We do not think that the Administrator had
any reason to influence Raghunath Rai's statement and acted improperly in
sanctioning oar allowance to him retrospectively and would have so acted with
respect to Raohunath Rai's gratuity if Raghunath Rai had not made statements
supporting the prosecution case.
Raghunath Rai stated on July 29, 1958, that
in July, 1955, when he informed Dalmia that the bulk of the securities were at
Bombay and the rest were at Delhi, Dalmia asked him to write to Chokhani to
deposit all the securities in Bombay in the Chartered Bank. At this he told
Dalmia that if the sale and purchase of securities was to be carried on as
hithertofore, there was no use depositing them in the Bank and thus pay
frequent heavy withdrawal charges, and suggested that the securities could be
deposited in the Bank if the sale and purchase of them had to be stopped
altogether and that Dalmia then said that the securities should be sent for to
Delhi in the middle of December, 1955 for inspection by the auditors.
Raghunath Rai was re-examined on July 30 and
stated that the aforesaid conversation took place on July 14, 1955, and added
that he had, in the same context, a further talk with Dalmia in August, 1955.
The Public Prosecutor, with the permission of the Court then questioned him 324
about the circumstances in which he had to go a second time to Dalmia and talk
about the matter. His reply was that he had the second talk as the securities
purchased in May, 1955, and those purchased in July and August, 1955, had not
been received at the head office. He asked Dalmia to direct Chokhani to deposit
all the securities in the Chartered Bank or to send them to Head Office. Dalmia
then said that the sale and purchase of securities had to be carried on for
some time and therefore the question of depositing those securities in the Bank
or sending them to the head office did not arise for the time being and that
the securities should be sent for to the head office in December, 1955.
Raghunath Rai thus made a significant change
in his statement. On July, 29,1958, he opposed the direction of Dalmia for
writing to Chokhani to deposit the securities in the Bank as that would entail
heavy withdrawal charges in case the sale and purchase of securities were not
to be stopped while, according to his statement the next day, he himself
suggested to Dalmia in August, 1955, that Chokhani be asked to deposit all the
securities in the Bank or to send them to the head office. He denied the
suggestion that he made this change in his statement under pressure of the
Police.
The cross-examination was really directed to
show that he had been approached by the police between the close of his
examination on July 29 and his further examination on July 30, 1958. Raghunath
Rai admitted in court that after giving evidence he went to the room allotted
in the Court building to the Special Police Establishment and that the
Investigating Officer and the Secretary to the Administrator of the Insurance
Company were there. He went there in order to take certain papers which he had
kept there. He, however, had not brought any papers on July 30 as, accord325
ing to him, his main cross-examination had been over. He however denied that he
had been dictated notes by the police in order to answer questions in
cross-examination or that be remained with the police till 9 p. m. or that the
Secretary to the Administrator held out a threat about the forfeiture of his
gratuity in case be did not make a statement favourable to the prosecution.
We see no Reason for the police to bring
pressure on Raghunath Rai to introduce falsely the conversation in August.
Between July 14, 1955, and middle of August, 1955, the head office learnt of
the purchase of securities of the face value of Rs. 74,00,000 and again, on or
about August 26, of the purchase of securities of the face value of Rs.
40,00,000. A further conversation in August
is therefore most likely as deposed to. The main fact remains that Dalmia said
that the securities be sent for in December, 1955, which implies his knowledge
of the transactions in question.
We are of opinion that the discrepancies or
contradictions pointed out in Raghunath Rai's statement are not such as to
discredit him and make him an unreliable witness and that he is not shown to be
under the influence of the prosecution.
Further, his various statements connecting
Dalmia with the crime, find corroboration from other evidence.
Letter Exhibit P. 1351 dated September 4,
1954, was sent to the Imperial Bank of India, Delhi Branch, under the signature
of Dalmia as Chairman. The letter directed the bank to deliver certain
securities to the bearer. Dalmia admits his signatures on this document and
also on the letter Exhibit P. 1352 acknowledging the receipt of the securities
sent for, thus corroborating Raghunath Rai's statement that the securities were
withdrawn under his instructions.
326 Letters Exhibit D. 3, dated March 16,
1955, and P. 892 dated August 5, 1955, from Raghunath Rai to Chokhani,
mentioned that the stock certificates were being sent under the instructions of
the Chairman. They corroborate Raghunath Rai's statements in Court of the
dispatch of these stock certificates under Dalmia's instructions. He had no
reason to use this expression if he was sending them on his own.
It is true that the date on which the
Chairman gave the instruction is not proved, but it stands to reason that the
stock certificates must have been despatched soon after the receipt of the
instruction from the Chairman. it cannot be presumed that in such transactions
there could be such delay as would make statement in these letters not
corroborative evidence under s. 157, of the Evidence Act which provides that
previous statements made at or about the time a fact took place can be used for
corroborating the statement in Court.
Chokhani's statement that he did not mention
the name of Bhagwati Trading Company in his letters to the head office as be
did not want Dalmia to know about the dealings with Bhagwati Trading Company,
implies that in the ordinary course of business the information conveyed in
those letters would be communicated to Dalmia and thus tends to support
Raghunatb Rai's statement that he used to visit Dalmia on receipt of the
statement of account and inform him about the purchase or sale of the
securities.
Chokhani had been inconsistent about
Raghunath Rai's later knowledge of the existence of Bhagwati Trading Company.
In answer to question No. 66, on November 13, 1958, he stated :
"I did not contradict the statement made
in Ex xi :P. 813 that cheque No. B564809 327 dated 17-11-54 had been issued in
favour of Narain Das and Sons although that cheque had in fact been issued in
favour of Bhagwati Trading Company and not in favour of Narain Das and Sons
because those at the Head Office did not know anything about Bhagwati Trading
Company".
In answer to question No. 149, on November
14, 1958, he stated:
"I did not mention the name of Bhagwati
Trading Company in my letters addressed to the Head Office of the Bharat
Insurance Company as the party with whom there were cross contracts because
Raghunath Rai would not have known as to what was Bhagwati Trading Company. I
also did not mention the name of Bhagwati Trading Company in my letters to the
Head Office of the Bharat Insurance Company because I did not want Shri Dalmia to
know that I was having dealings with Bhagwati Trading Company. I also want to
add that Raghunath Rai must have known that the cross-contracts were with
Bhagwati Trading Company because the name of Bhagwati Trading Company was
mentioned as the payee on the counterfoils of the cheques issued in favour of
Bhagwati Trading Company." Chokhani seems to have attempted to undo the
effect of his statement on November 13, but being of divided mind, made
inconsistent statements even on November 14, 1958. He was in difficult
position. He attempted to show that Dalmia did not know about Bhagwati Trading
Company and also to show that Raghunath Rai had reasons to know about it and
was therefore in the position of an Accomplice, a stand which is also taken by
Dalmia 328 We may now deal first with the case of Chokhani, appellant.
Chokhani has admitted his entering into the
various transactions of purchase and sale and to have set up Bhagwati Trading
Company for convenience to carry out the scheme of diverting the funds of the
Insurance Company to the Union Agencies by way of temporary loan. His main plea
is that he had no attention to cause loss to the Insurance Company and did not
know that the way he arranged funds for the Union Agencies from the Insurance
Company was against law. He contends that he had no dishonest intentions and
therefore did not commit any of the offences he had been charged with, and
convicted of.
Learned counsel for Chokhani has urged two
points in addition to some of the points of law urged by learned counsel for
Dalmia. He urged that the transactions entered into by Chokhani were ordinary
genuine commercial transactions and that there was no evidence of Chokhani's
acting dishonestly in entering into those transactions. It is further said that
the High Court recorded no finding, on the latter point though it was necessary
to record such a finding, even though this point was not seriously urged.
In support of the contention that the
purchase and sale transactions were genuine commercial transactions, it is
urged that to meet the losses of the Union Agencies Chokhani was in a position
to sell the shares held by it or could have raised the money on its credit. He
did not sell the shares as they were valuable and as their sale would have
affected the credit of the Union Agencies. Chokhani had been instructed in
September, 1954, that the yield from the investment of the Insurance Company
was not good and that the funds of the Insurance Company be invested in
securities. Such instructions are said to have been given when he was
authorised by Dalmia to purchase and sell securities 329 on behalf of the
Insurance Company. It is suggested that these instructions were given in 1953
and not in 1954 when Dalmia was going abroad. In view of this authority,
Chokhani decided on a course of action by which he could invest the insurance
money in securities and also help the Union Agencies. It is submitted that it
was not necessary to mention Bhagwati Trading Company to the head office as the
Insurance Company was going to suffer no loss and was simply concerned in
knowing of the sale and purchase transactions. Chokhani's payment of the
purchase price in anticipation of the delivery of the securities, was bona
fide.
We have already expressed the opinion that
the transaction in connection with the investment of the funds of the Insurance
Company were not bonafide purchase and sale transactions. They were
transactions with a purpose. They were motivated in the interests of the Union
Agencies and not in the interests of the Insurance Company.
The mere fact that on account of the non delivery
of securities within a reasonable time of the payment of the purchase money
made the brokers or Bhagwati Trading Company or both of them liable to an
action, does not change the nature of the transactions. That liability can
co-exist with the criminal liability of Chokhani if the transactions were such
which could amount to his committing breach of trust. In fact, the offence of
breach of trust is not with respect to his entering into the sale and purchase
transactions. It is really on the basis of his paying the money out of the
Insurance Company's funds to the Union Agencies through Bhagwati Trading
Company, in contravention of the manner in which he was to deal with that
money.
These purchase and sale transactions were
just a device for drawing on those funds.
We do not believe that Chokhani really
intended to purchase the securities though he did purchase 330 some, in certain
circumstances, and that the nondelivery of the securities was not a case of
just his slightly postponing the delivery of the securities. No reason is given
why such a concession should have been made to the seller of the securities and
the period during which such purchased securities remained undelivered is much longer
than what can be said to be a reasonable period during which purchased
securities for ready delivery should be delivered.
The fact, if true, that the Insurance Company
suffered no monetary loss on account of the purchase and sale transactions and
the passing of its money to the Union Agencies, does not suffice to make the
transaction an honest one. The gain which the Union Agencies made out of the
money it got from the Insurance Company was wrongful gain.
It was not entitled to profit by that money.
One is said to act dishonestly when he does anything with the intention of
causing wrongful gain to one person or wrongful loss to another. Wrongful gain
means gain by unlawful means of property to which the person gaining is not
legally entitled and wrongful loss is loss by unlawful means of property to
which the person using it is legally entitled.
It is urged that Chokhani's keeping Bhagwati
Trading Company secret from Delhi was not the result of a guilty conscience,
but could be due to his nervousness or fear. We do not agree with this
suggestion. He had nothing to fear when he was acting honestly and, according
to him, when he was doing nothing wrong.
It is further submitted that what Chokhani
did amounted simply to the mixing of the funds of the Insurance Company and the
Union Agencies. We do not think that this would be the correct interpretation
of what Chokhani did. It was not a case of mixing of funds but was a case of
making 331 over the funds of the Insurance Company to the Union Agencies.
The fact that the Administrator did not
cancel any contract entered into on behalf of the Insurance Company under the
powers given to him by s. 52(c) of the Insurance Act, does not mean that every
such contract was in the interest of the Insurance Company. The Administrator
has stated that he did not know the legal position as to whether those
contracts stood or not.
Of the points of law urged for Chokhani, we
have already dealt with those relating to the jurisdiction of the Delhi Court
to try the various offences, to the content of the words 'property', dominion'
and agency' in s. 409, I. P. C.
The only other points raised are that the
offence under s. 477 A could not be said to be committed in pursuance of the
conspiracy and that it was not a case of one conspiracy but of several
conspiracies.
The charge under s. 477 A, 1. P. C. is based
on the letters written by Chokhani from Bombay to Delhi intimating his entering
into the contracts of purchase of securities and indicating that cheques had
been issued in payment to the brokers. It is true that these letters did not
specifically state that the cheques had been issued to the brokers, but that is
the implication when the letters refer to the contracts and the statements sent
along with them and which relate simply to the transactions between the
Insurance Company and the brokers and in no way indicate the cross contracts
between the brokers and Bhagwati Trading Company.
It is further said that the payment to
Bhagwati Trading Company was as an agent of the brokers. There is no evidence
that the brokers appointed Bhagwati Trading Company as their agent for the
purpose. The evidence is that on Chokhani's representation that the Insurance
Company would 332 pay to Bhagwati Trading Company and get the securities from
Bhagwati Trading Company that the brokers neither got the price nor delivered
the securities.
It is also contended that Chokhani was not a
,servant' of the Insurance Company and therefore does not come within s. 477 A.
1. P. C. which makes certain conduct of a clerk, officer or servant an offence
Chokhani was a servant of the Insurance Company as he was its Agent and
received payment for doing work as an agent. His being a full-time servant of
the Union Agencies does not mean that he could not be a servant of any other
company, or other employer.
We do not agree with the contention that it
was a case of several conspiracies, each transaction to meet the losses, as
they occurred, giving rise to an independent conspiracy.
The conspiracy was entered into in the
beginning of August, 1954, when such circumstance arose that funds had to
provided to the Union Agencies to meet its losses. The conspiracy must have
been to continue up to such time when it be possible to anticipate that such a
situation would no more arise. Similar steps to meet the losses were taken
whenever the occasion arose. The identity of purpose and method is to be found
in all the transactions and they must be held to have taken place in pursuance
of the original conspiracy.
We next come to the case of Vishnu Prasad,
appellant. He was the sole proprietor of Bhagwati Trading Company. His main
defence is that he was ignorant of the various transactions entered into by Chokhani
on behalf of Bbagwati Trading Company and that it was Chokbani who kept the
books of accounts and entered into those transactions. The courts below have
found that he knew of transactions and the nature of the conspiracy.
333 We agree with this opinion. There is
sufficient material on record to establish his knowledge and part in the
conspiracy.
Bhagwati Trading Company came into existence
just when the Union Agencies suffered losses and was not in a position to pay
them and, consequently, there arose the necessity for Dalmia and Chokhani to
devise means to raise funds for meeting those losses. Vishnu Prasad opened the
banking accounts in two banks at Bombay on August 9 and August 11, 1954,
depositing the two sums of Rs. 1,100 each in each of the two banks. He states
that he got this money from Chokbani. The money was, however withdrawn after a
short time and paid back to Chokhani and no further contribution to the funds
of the Bhagwati Trading Company was made on his behalf. The Company functioned mainly
on the amounts received from the Insurance Company. Vishnu Prasad, therefore,
cannot be said to be quite innocent of the starting of the company and the
nature of its business.
He started, in answer to question No. 24:
"I started business in the name of
Bhagwati Trading Company in 1953, or beginning of 1954.
1 however did no business in the name of that
company. G. L. Chokhani stated that I should do business for the purchase or
sale of securities." and in answer to question No. 26 he stated that he
had no knowledge about Chokhani's entering into contracts on behalf of the
Bharat Insurance Company for the purchase of securities and his entering into
crose-contracts with the same firm of brokers for the sale of those securities
on behalf of Bhagwati Trading Company but admitted that he knew that Chokhani
was doing business for the purchase and sale of securities on behalf of
Bhagwati Trading Company. He expressed ignorance 334 about similar future
contracts for purchase of securities on behalf of the Insurance Company and
cross-contracts for the sale of those securities on behalf of Bhagwati Trading
Company.
Vishnu Prasad, however, made a statement at
the close of the day when he had made the above statement, and said:
"In answer to question No. 24 I want to
state that I did not start business of Bhagwati Trading Company in 1953 or the
beginning of 1951 but only intended to start that business." The latter
statement deserves no acceptance and is a clear indication that the
implications of his earlier statement worked on his mind and he attempted to
indicate that he was not even responsible in any way for the starting of the
business of Bhagwati Trading Company. Bhagwati Trading Company did come into
existence and ostensibly did business.
The latter statement therefore cannot be
true.
Vishnu Prasad further knew, as his answer to
question No. 157 indicates, that Chokhani did shares speculation business at
Bombay. He, however, stated that he did not know on behalf of which company he
did that business.
What Vishnu Prasad actually did in connection
with the various transactions which helped in the diversion of the funds of the
Insurance Company to the Union Agencies has to be looked at in this background.
He cashed a number of cheques issued on behalf of the Insurance Company and
made over that money to Chokhani, who passed it on the Union.
Agencies. He issued cheques on behalf of
Bhagwati Trading Company in favour of Bharat Union Agencies after the amounts
of the cheques of the Insurance Company in favour of Bhagwati Trading Company
had been deposited in the Bank.
Some of 335 these cheques issued in favour of
Union Agencies were filled in by Vishnu Prasad himself and therefore he must
have known that he was passing on the money to the Union Agencies. In fact,
some of the cheques issued on behalf of Bhagwati Trading Company in favour of
the Union Agencies were deposited in the bank by Vishnu Prasad himself It is
therefore not possible to believe that Vishnu Prasad did not know that the
amounts which his company viz., Bhagwati Trading Company, received from the
Insurance Company must have purported to be on account of securities sold to
the Insurance Company, as that was the business which Bhagwati Trading Company
professed to do and, according to him, he knew to be its business, He knew that
most of this amount was passed on to the Union Agencies.
Both these facts must have put him on enquiry
even if he did not initially know of the nature of the business which brought
in the money to, and took out the money from, Bhagwati Trading Company. He is
expected to knew that the Insurance Company was not likely to purchase
securities so frequently. If he had made enquiries, he would have learnt about
the nature of receipts and payments and in fact we are inclined to the view
that he must have known of their nature and that it is not reasonable that he
would be completely in the dark.
The business of Bhagwati Trading Company is
said to have been started as Vishnu Prasad was not taking interest in the other
business. This should indicate that he must have evinced interest in the
activities of Bhagwati Trading Company which continued for over a year and
which made him receive and dispose of lakhs of Rupees. Surely, it is not
expected that he would have made no effort to know what is required to be know
by one earring on business for the purchase and sale of securities, and any
attempt to have known this would have 336 necessarily led him to know that
securities were being purchased on behalf of the Insurance Company and were not
delivered to it and that Bhagwati Trading Company purchased no securities from
the Union Agencies and that any payment by it to the latter was for something
which B wait Trading Company was not liable to pay. It follows that he must
have known that money was being received from the Insurance Company for nothing
which was due to Bhagwati Trading company from that company and that most of
that money was being paid to the Union Agencies for payment of which Bhagwati
Trading Company had no liability and that the net result of the transactions of
receipt of money from the Insurance Company and payment of it to the Union
Agencies was that Bhagwati Trading Company was acting to help the diversion of
funds from the Insurance Company to the Union Agencies.
We therefore hold that Vishnu Prasad has been
rightly found to be in the conspiracy.
We may now deal with the case of Dalmia,
appellants The fact that the funds of the Bharat Insurance Company were
diverted to Union Agencies by the transactions proved by the prosecution, is
not challenged by Dalmia. His main contention is that he did not know what
Chokhani had been doing in connection with the raising of funds for meeting the
losses of the Union Agencies. There is, however, ample evidence to indicate that
Dalmia knew of the scheme of the transactions and was a party to the scheme
inasmuch as the transactions were carried through under his instructions and
approval:
The facts which have a bearing on this matter
are:
(1) Dalmia had the clearest motive to devise
means for meeting the losses of the Union Agencies.
337 (2) Dalmia actually looked after the
share business of the Union Agencies at Calcutta and Delhi. He had knowledge of
the losses of the Union Agencies.
(3) The frequency of telephonic calls between
him and Chokhani during the period when the losses took place and steps were
taken to meet them, especially during the early stages in August and September,
1954, when the scheme was being put into operation, and in July and August,
1955, when there bad been heavy and recurring losses.
(4) Dalmia's informing the Imperial Bank,
Delhi, on September 4, 1954, about his powers to deal with securities and
actually withdrawing securities thatday, which were shortly after sold at
Bombay and whose proceeds were utilised for meeting the losses.
(5) The gradually increasing retention of
securities in the office of the Insurance Company and consequently the
gradually reduced deposit of securities in the Banks.
(6) The transfer of securities held by the
Insurance Company from Delhi to Bombay when funds were low there to meet the
losses.
(7) The purchase and sale of securities in
the relevant period in order to meet the losses were under his instructions.
(8) A larger use of converting securities
into inscribed stock certificates which was used for concealing the disclosure
of the interval between the date of purchase of the securities which were then
not received, and the date when those securities were recouped later.
(9) Dalmia's annoyance and resentment on September
9, 1955, when the auditors made a surprise inspection of the office of the
insurance company and wanted to see the securities, 338 (10) His conduct on
September 15, 1955.
(11) His not going to meet Mr. Kaul on
September 16, 1955, and instead, sending his relatives to state what was not
the full and correct statement of facts which, according to his own statements,
were known to him by then.
(12) His confession P. 10 together with the
statement Exhibit p. 11 and the statement made to Annadhanam that he carried on
his speculative business in shares in the name of the Union Agencies.
One of the main factors urged in support of
the contention that Dalmia was in the conspiracy is that the entire scheme of
conspiracy was entered into for the sole benefit of Dalmia. It is not
reasonably probable that such a conspiracy would come into existence without
the knowledge or consent of Dalmia. The conspiracy charge framed against Dalmia
mentioned the object of the conspiracy as 'meeting losses, suffered by you, R.
Dalmia, in forward transactions, of speculation in shares, which transactions
were carried on in the name of the Bharat Union Agencies Limited...' and the
charge under s. 409 1. P. C. referred to the dishonest utilisation of the funds
of the Insurance Company.
This matter has been considered from several
aspects. The first in that Dalmia is said to have owned the entire shares
issued by the Union Agencies, or at least to have owned a substantial part of
them and was in a position to control the other shareholders. To appreciate
this aspect, it is necessary to give an account of the share-holding in this
company. The Union Agencies was incorporated at Bombay on April 1, 1948, as a
private limited company, with its registered office at Bombay. It also had an
office at 10, Daryaganj, Delhi, where the head office of the Bharat Insurance
Company was. Its authorised capital was Rs.
5,00,000. The total number of shares issued
in 1949 Was 2,000, Out of these 339 Dalmia held 1,200 shares, Dalmia Cement
& Paper Marketing Company Ltd. (hereinafter called the Marketing Company)
600 shares, Shriyans Prasad Jain, brother of S. P. Jain, 100 shares and Jagat
Prasad Jain, the balance of 100 shares.
The same position of share-holding continued
in 1950. In 1951, Dalmia continued to hold 1,200 shares, but the other 800
shares were hold by Govan Brothers. The position continued in 1952 as well and,
in the first half of 1953, Dalmia increased the number of his shares to 1,800
and Govan Brothers increased theirs to 1,200 and the total shares issued thus
stood at 3,000. This position continued up to September 21, 1954.
On September 22, 1954, 2,000 shares were
further issued to S. N. Dudani, a nominee of Asia Udyog. The total shares on
that date stood at 5,000 of which Dalmia held 1,800, Govan Brothers 1,200, and
Dadani 2,000. On October 4, 1954, R.P.
Gurha and J. S. Mittal each got 100 shares
from Govan Brothers with the result that thereafter the position of
shareholding was: Dalmia 1,800; Govan Brothers 1000; Dudani 2,000; Gurba 10);
and Mittal 100, out of the total number of issued shares of 5000.
It is said that Dalmia transferred his 1,800
,shares to one L. R. Sharma on October 30, 1954. Sharma's holding 1,800 shares
was mentioned in the return, Exhibit P. 3122 filed by the Union Agencies as
regards share capital and shares as on December 31, 1955, in the office of the
Register of Companies in January 1956 with respect to the year 1955.
The return showed that the transfer had taken
place on January 31, 1955. It would appear that the alleged sale of shares to
Sharma in October 1954 was not mentioned in a similar return which must have
been submitted to the Registrar of Companies in January, 1955, and that
therefore its transfer was show on January 31, 1955, Probably 340 a date
subsequent to the submission of the relevant return for the year 1954.
A brief account of the various share-holders
may be given.
Dalmia was a Director of Govan Brothers Ltd.,
and was succeeded, on his resignation, by O. P. Dhawan, who was an Accountant
in the Delhi Office of the Union Agencies. He was also an employee of another
company named Asia Udyog Ltd. Another Director of Govan Brothers Ltd. was D. A.
Patil, lncome-tax Adviser in the concerns of
Dalmia. The share scrips in the Marketing Company standing in the name of Govan
Brothers Ltd. and three blank share transfer forms signed by S. N. Dudani as
Secretary of Govan Brother Ltd., in the column entitled 'seller' were recovered
from Dalmia's house on search on November 25, 1955. Dudani was the personal
accountant of Dalmia and Manager of the Delhi Office of Bharat Union Agencies.
The inference drawn by the Courts below from these circumstances is that Govan
Brothers Ltd. was the concern of Dalmia, and this is reasonable. No
Satisfactory explanation is given why the shares standing in the name of Govan
Brothers Ltd. and the blank transfer forms should be found in Dalmia's
residence.
Dudani was the personal accountant of Dalmia
and Manager of the Delhi Office of the Union Agencies, and was also Secretary
of Asia Udyog Ltd. Asia Udyog appears to be a sister concern of the Union
Agencies. It was previously known as Dalmia Jain Aviation Ltd. It installed a
telephone at one of Dalmia's residences in January, 1953. Its offices were in
the same room in which the offices of the Union Agencies were. Dhawan, who
succeeded Dalmia as Director of Govan Brothers Ltd., was an employee of Asia
Udyog. Gurha was the Accountant of Asia Udyog, in addition to being Director of
the Union Agencies. He bad powers over the staff of both the companies. J, S,
Mittal was Director of 341 Union Agencies and held 100 shares in the Union
Agencies as nominee of Govan Brothers Ltd., from October 4, 1954, and 1,000
shares as nominee of Crosswords Ltd., from some time about January 31, 1955. L.
N. Pathak, R. B. Jain and G. L.
Dalmia, were authorised to operate on the
account of both the Union Agencies, Calcutta, and Asia Udyog Ltd., with the
United Bank of India, Calcutta.
The issue and transfer of shares of the Union
Agencies in September and October, 1954, seem to be in pursuance of an attempt
to meet a contention, as at present urged for the State, that Dalmia was the
largest shareholder in it. The same idea seemed to have led to the transfer of
shares to Sharma by Dalmia. The verbal assertion of the sale having taken place
in October, 1954, is not supported by the entry in Exhibit P. 3122 and what may
be taken to be the entries in a similar return for the year 1954. This can go
to support the allegation that Dalmia knew about the shady transactions which
were in progress from early August, 1954.
The learned Sessions Judge relied on the
following circumstances for his conclusion that Dalmia was synonymous with
Bharat Union Agencies.
"1. The speculation business of Dalmia
Cement and Paper Marketing Co,. Ltd., the paid up capital of which nearly all
belonged to Dalmia was on the liquidation of that company taken over by Bharat
Union Agencies and more or less the same persons conducted the business of
Bharat Union Agencies who were previously looking after Dalmia Cement &
Paper Marketing Company.
2. Bharat Union Agencies was known and taken
to be the concern of Dalmia by its then Accountant Dhawan and by the brokers
with whom it had dealings 342
3. Chokhani, who hold power of attorney on
behalf of Dalmia and Bharat Union Agencies, told the brokers at the time he
gave business of Bharat Union Agencies to them J. that it was the business of
Dalmia.
4. The salaries of personal and domestic
employees of Dalmia were paid by Bharat Union Agencies and those payments were
debited to the Salaries Account of the company. The personal employees of
Dalmia were thus treated as the employees of Bharat Union Agencies.
5. The business done in the name of Dalmia
with Jagdish Jagmohan Kapadia was treated as the business of Bharat Union
Agencies.
6. The funds of Bharat Union Agencies were
used to discharge an obligation personally undertaken by Dalmia. The price of
the shares purchased in the process in the name of Dalmia was paid out of the
funds of Bharat Unio n Agencies and the purchase of those shares was treated in
the books of Bharat Union Agencies as part of its investment.
7. When sister-in-law of Dalmia wanted money
it was lent to her out of the funds of Bharat Union Agencies and in the books
of that company no interest was charged from her".
It has been strenuously urged by Mr. Dingle
Foot that what certain persons considered to be the nature of the Union
Agencies or what Chokhani told them could not be evidence against Dalmia with
respect to the question whether he could be said to be identical with the Union
Agencies. We need not consider this legal objection as it is not very necessary
to rely on these considerations for 343 the purpose of the finding on this
point. It may be said, however, that prima facie there seems to be no legal bar
to the admissibility of statements that Chokhani told certain persons that
Union Agencies was the business of Dalmia. He had authority to represent Dalmia
and Union Agencies on the basis of the power of attorney held by him from both.
His statement would thus appear to be the statement of their 'agent' in the
course of the business. We have considered the reasons given for the other
findings by the learned Sessions Judge and accepted by the High Court and are of
opinion that the findings are correct and that they can lead to no other
conclusion than that no distinction existed between Dalmia and the Union
Agencies and that whenever it suited Dalmia or the interests of the Union
Agencies such transactions of one could be changed to those on behalf of the
other. We may, however, refer to one matter.
Dalmia admits having purchased shares of
Dalmia Jain Airways of the face value of Rs.6,00,000/from Anis Haji Ali
Mohammad, on behalf of the Union Agencies, in his own name, though the real
purchaser was the Union Agencies and that he did so as the seller and his
solicitor did not agree to sell the shares in the name of the latter. The
explanation does not appear to be satisfactory. The seller had no interest in
whose name the sale took place so long as he gets the money for the shares he
was selling.
Mr. Dingle Foot has urged that these various
considerations may indicate strong association of Dalmia with the Union
Agencies but are not sufficient to establish his complete identity with it, as
is necessary to establish in view of the charges framed. Dalmia's identity with
Union Agencies or having great interest in it is really a matter providing
motive for Dalmia's going to the length of entering into a conspiracy to raise
funds for Meeting the 344 losses of the Union Agencies by diverting the funds
of the Insurance Company and which would amount to Committing criminal breach
of trust.
Dalmia admits having given instructions about
the business of the Union Agencies in 1954 when he was not a Director of that
company, and in 1955 when he was not even a shareholder.
Dalmia's own statement to Annadhanam on
September 20, 1955, goes to support the conclusion in this respect. He stated
to him then that he had lost the moneys in speculation which he did through his
private companies and that most of those transactions were through the Union
Agencies.
Further, the charge said that he committed
criminal breach of trust of the funds of the Insurance Company by wilfully
suffering Chokhani to dishonestly misappropriate them and dishonestly use them
or dispose of them in violation of the directions of law and the implied
contract existing between Dalmia and the Insurance Company prescribing the mode
in which such trust was to be discharged. It was in describing the manner of
the alleged dishonest misappropriation or the use or disposal of the said funds
in violation of the legal and contractual directions that the charge under s.
409 I.P.C. described the Manner to consist of withdrawing the funds from the
banks by cheques in favour of Bhagwati Trading Company and by the utilisation
of those funds for meeting losses' suffered by Dalmia in forward transactions
in shares carried on in the name of Bharat Union Agencies, and for other purposes
not connected with the affairs of the Insurance Company. Even in this
description of the manner, the emphasis ought to be placed on the expression
'for meeting losses suffered by Dalmia in forward transactions in shares
carried on in the name of the Bharat Union Agencies and for other purposes not
connected with 345 the affairs of the said Bharat Insurance Company' and not on
the alleged losses suffered by Dalmia personally. We are therefore of opinion
that firstly the evidence is adequate to establish that Dalmia and the Union
Agencies can be said to be interchangeable and, secondly, that even if that is
not possible to say, Dalmia had sufficient motive, on account of his intimate
relations with the Union Agencies, for committing breach of trust, and thirdly,
that the second finding does not in any way adversely affect the establishment
of the offence under s. 409 I. P. C. against Dalmia even though the charge
described the utilisation of the money in a somewhat different manner.
The entire scheme of the transactions must
start at the instance of the person or persons who were likely to suffer in
case the losses of the Union Agencies were not paid at the proper time. There
is no doubt that in the first instance it would be the Union Agencies as a
company which would suffer in its credit and its activities. We have found that
Dalmia was so intimately connected with this company as could make him a sort
of a sole proprietor of the company. He was to lose immensely in case the
credit of the Union Agencies suffered, as it was commonly believed to be his
concern and he bad connections and control over a number of business concerns
and had a high stake in the business world. His prestige and credit were bound
to suffer severely as a result of the Union Agencies losing credit in the
market. There is evidence on record that if the losses are not promptly paid,
the defaulter would suffer in credit and may not be able to persuade the
brokers to enter into contracts with him.
It is suggested for Dalmia that Chokbani had
a greater interest in seeing that Union Agencies does not suffer in credit. We
do not agree. If the Union Agencies failed on account of its losing credit in
the market on its failure to meet the losses, Chokhani 346 may stand to lose
his service with the Union Agencies. That would have meant the loss of a few
hundred rupees a month.
In fact, he need not have suffered any loss.
He could have been employed by Dalmia who bad great confidence in him and whom
he had been serving faithfully for a long time.
Chokhani, as agent of Dalmia, had certainly
credit in the market. There is evidence of his good reputation, but much of it
must have been the result of his association with Dalmia and his concerns. He
really enjoyed reflected glory.
He bad no personal interest in the matter as
Dalmia had. We therefore do not consider this suggestion to be sound and are of
opinion that Dalmia was the only person who bad to devise means to meet the
losses of the Union Agencies.
Further, Dalmia admits that he used to give
instructions with regard to the speculation-in-shares business of the Union
Agencies at Calcutta and Delhi during 1954 and 1955, and stated, in answer to
question No. 210 with respect to the evidence that Delhi Office of the Union
Agencies used to supply funds for meeting the losses suffered by it in the
speculation business at Calcutta and Delhi:
"'It is correct that as the result of
shares speculation business at Calcutta and Delhi Bharat Union Agencies
suffered losses in the final analysis. I was once told by R. P. Mittal on
telephone from Calcutta that G.L. Chokhani had informed him that the Bombay
Office would arrange for funds for the losses suffered by the Calcutta Office
of the Bharat Union Agencies. It was within my knowledge that if the Bombay Office
of the Bharat Union Agencies was not in a position to supply full funds for
meeting the losses at Calcutta the Delhi Office of the Company would supply
those funds." And, in answer to question No. 211 which referred 347 to the
evidence about the Delhi Office of the Union Agencies being short of liquid
funds from August, 1954, onwards and in 1955, to meet the losses, he said
"It was within my knowledge that Bharat Union Agencies was holding very
large number of shares. But I did not know the name of the Companies of which
the shares were held by the Bharat Union Agencies and the quantum of those
shares." Dalmia also admitted his knowledge that Chokhani had entered into
contract for the forward sale of Tata Shares at Bombay on behalf of the 'Union
Agencies during 1954 and 1955 and that the Union Agencies suffered losses on
this business, but stated that he did not know the extent or details of the
losses. Dalmia must be expected not only to know the losses which the Union
Agencies suffered, but also their extent.
He is also expected to devise or at least
know the ways in which those losses would be met. A mere vague knowledge, as
stated, about the 'Union Agencies possessing a number of shares could not have
been sufficient satisfaction about the losses being successfully met. It is to
be noted that he did not deny that the Delhi Office was short of funds and that
it used to supply funds to meet the losses.
Further, if Dalmia's statement about Mittal's
communication to him be correct, it would appear that when the Bombay Office of
the Union Agencies was not in a position to meet the losses, Chokhani would not
think of arranging, on his own, funds to meet the losses, but would first
approach the Delhi Office of the Union Agencies. The Delhi Office., then, if unable
to meet the losses, would necessarily obtain instructions from Dalmia. It can
therefore be legitimately concluded that Dalmia alone, or in consultation with
Chokhani, devised the scheme of 348 the transactions which led to the diversion
of the funds. of the Insurance Company to the Union Agencies and carried it out
with the help of the other appellants.
It has been contended both for Chokhani and
for Dalmia that funds could have been found to meet the losses of the Union
Agencies by means other than the diversion of the Insurance Company's funds. We
need not discuss whether the shares held by the Union Agencies at the time
could be sold to raise the funds or whether on the mere credit of Dalmia funds
could be raised in no time. These courses were not adopted. The selling of the
shares which the Union Agencies possessed, might itself affect its credit, and
that no business concern desires, especially a concern dealing in
sharespeculation business.
Dalmia had been in telephonic communication
with Chokhani.
It is significant, even though there is no
evidence about the content of the conversations, that there had been frequent
calls, during the period of the losses in August and September, 1954, between
Dalmia's telephone and that of Chokhani at Bombay. That was the period when
Dalmia was confronted with the position of arranging sufficient funds at Bombay
for the purpose of diverting them to the Union Agencies. Very heavy losses were
suffered in July and August, 1955. Securities of the face value of Rs. 79,00,000
and Rs. 60,00,000 were purchased in July and August, 1955, respectively. A very
large number of telephone calls took place during that period between Dalmia at
Delhi and Chokhani at Bombay. It is true that during certain periods of losses,
the record of telephonic communications does not indicate that any telephonic
communication took place. We have already stated, in considering the
transactions, that the pattern of action to be taken had been fully determined
by the course adopted in the first few transactions.
349 Chokhani acted according to that pattern.
The only thing that he had to do in connection with further contingencies of
demands for losses, was to send for securities from Delhi when the funds at
Bombay were low. Such requests for the transfer of securities could be made in
good time or by telephonic communication or even by letters addressed to Dalmia
personally. The fact remains that a number of securities were sent from Delhi
to Bombay under the directions of Dalmia when there was no apparent reason to
send them other than the need to meet losses incurred or expected.
Dalmia informed the Imperial Bank at Delhi
about his power to deal with securities on September 4, 1954, though he had
that power from September, 1951, itself. This was at the early stage of the
commencement of the losses of the Union Agencies, suffered for a period of over
a year and the planned diversion of the funds of the Insurance Company to meet
the losses of the Union Agencies.
Raghunath Rai states that on the resignation
of Chordia it was deemed necessary that the powers of the Chairman be
registered with the Bank so that he be in a position to operate on the
securities' safecustody account of the company with the Bank, and that he sent
the copy of the byelaws etc., without the instructions of Dalmia, though with
his knowledge, as he was told that it was necessary for the purpose of the
withdrawal of the securities for which he had given instructions. This was,
however, not necessary, as Raghunath Rai bad the authority to endorse,
transfer, negotiate and or deal with Government securities, etc., standing in
the name of the company. We are of opinion that Dalmia took this step to enable
him to withdraw the securities from the Bank when urgently required and another
person authorised to withdraw be not available or be not prepared to withdraw
them on his own.
350 The position of the securities may be
brifely described on the basis of Appendix 1 of the Investigator's report
Exhibit D. 74. The amount of securities at Bombay with the Chartered Bank, on
June 30, 1953, was Rs. 53,25,000 out of a total worth Rs. 2,69,57,200. The
amount of securities in the Bank continued to be the same till March 31, 1954,
even though the total amount of securities rose to Rs.
3,04,88,600. Thereafter, there had been a
depletion of securities with the Chartered Bank at Bombay with the result that
on December 31, 1954, it had no securities in deposit.
The amount of securities in the Imperial Bank
of India, New Delhi, also fell subsequent to June 30, 1954. It came down to Rs.
2,60,000 on March 31, 1955, from Rs. 59,11,100 on June 30, 1954.
Securities worth Rs. 52,00,000 were in the
two offices on June 30, 1953. The amount of such securities kept on steadily
increasing. It was Rs. 1,88,47,500 from September, 1953, to March 31, 1954.
Thereafter, it rapidly increased every quarter, with the result that on March
31, 1955, the securities worth Rs. 3,76,50,804 out of the total worth Rs. 3,86,97,204
were in the offices. The overall position of the securities must have been
known to Dalmia. The saving of Bank charges is no good explanation for keeping
the securities of such a large amount, which formed a large percentage of the
Company's holdings, in the offices and not in deposit with a recognized bank.
The explanation seems to be that most of the securities were not really in
existence.
Raghunath Rai states that be spoke to Dalmia
a number of times, presumably, in July and August, 1955, about the nonreceipt
of the securities of the value of Rs. 81,25,000, Rs. 75,00,000 and Rs.
69,00,000 which were purchased in the months of April-May. July and August 1955
respectively, and Dalmia used 351 to tell him that as the purchase and sale of
securities had to be effected at Bombay, Chokhani could send them to the head
office only after it had been decided about which securities would be finally
retained by the Insurance Company. This statement implies that Dalmia knew and
anticipated the sale of those securities and such a sale of those securities,
as already mentioned, could not be in the usual course of business of the
company. The securities were to be sold only if by the next due date for
payment of interest they could not be recouped and did not exist with the
company. Such an inference is sufficient to impute Dalmia with the knowledge of
the working of the scheme.
Securities were sent to Bombay from Delhi
seven times during the relevant period and they were of the face value of Rs.
2,114,82,500. Securities of the face value of
Rs. 17,50,000 were withdrawn from the Imperial Bank, Delhi, on September 4,
1954-vide Exhibit P. 1351. They were sold at Bombay on September 9, 1954.
Thereafter, 30/ 1957 securities of the face value of Rs. 37,75,000 were sent on
January 6, 1955.
Raghunath Rai deposes that he withdrew these
from the Imperial Bank, Delhi, under the directions of Dalmia, and that he
handed them over to Dalmia. These securities did reach Bombay. There is no
clear evidence as to how they Went from Delhi to Bombay. They were sold on
January 11, 1955.
Eleven stock certificates of the face value
of Rs. 57,72,000 were sent to Bombay on March 16, 1955, vide letter Ex. D.
3. Thereafter, stock Certificates were sent
thrice in July 1955. Stock certificate in respect of 3% Bombay Loan of 1955, of
the face' value of Rs. 29,75,000 was sent to Bombay on July 15, 1955-vide
Exhibit P. 923. On the next day, i.e., on July 16, 1955, stock certificates of
3% Bombay Loan of 1955 of the face value of Rs. 15,50,000 and stock 352
certificates of 3 % Loan of Government of Madhya Pradesh of the face value of
Rs. 60,500 were sent to Bombay-vide Exs. D. 1 and D. 2 respectively.
J. Lastly, stock certificates of 2 3/4% Loan
of 1962 of the face value of Rs. 56,00,000 were sent to Bombay on August 5,
1955.
Letters Exhibits D. 3 and P. 892 state that
the stock certificates mentioned therein were being sent under instructions of
the Chairman'.
Raghunath Rai has deposed that the other
stock certificates send with letters Exhibits D. 1, D. 2 and P. 923, were sent
by him as the securities with respect to which those certificates were granted
were maturing in September and were redeemable at Bombay. It has been urged
that they could have been redeemed at Delhi and that they need not have been
sent by Raghunath Rai on his own a couple of months earlier. We do not consider
the sending of the securities a month and a half or two months earlier than the
date of maturity to be unjustified in the course of business. It is to be
noticed that what was sent were the stock certificates and it might have been
necessary to get the securities covered by those certificates for the purpose
of redemption and that might have taken time. No pointed question was put to
Raghunath Rai as to why he sent the securities two months ahead of the date of
maturity.
Dalmia denies that he gave any instructions
for the sending of the securities. There seems to us to be no good reason why
the expression under the instructions of the Chairman' would be noted in
letters Exhibits D. 3 and P. 892, unless that represented the true statement of
fact.
We have already discussed and expressed the
opinion, in considering the evidence of Raghunath Rai, that Raghunath Rai was
told by 353 Dalmia, when informed of the purchase or sale of securities, that
had been done under instructions and that he had confirmed them. We may further
state that there is no resolution of the Board of Directors empowering Chokbani
to deal with the Rag securities. He was, however, empowered by resolutions at
the meeting of the Board dated June 29, 1953, to lodge and receive G. P. Notes
from the Reserve Bank of India for verification and endorsement on the same and
to endorse or withdraw the G. P. Notes on behalf of the company in the capacity
of an agent. Chokbani was also empowered by a resolution dated October 1, 1953,
to deposit and withdraw Government securities held in safe custody account by
the company. The aforesaid powers conferred on Chokhani are different from the
powers of sale or purchase of securities.
Dalmia has stated that he authorised Chokhani
to purchase securities in about October, 1953,when he was to leave for abroad
and that thereafter Chokhani had been purchasing and selling securities in the
exercise of that authority without consulting him. It is urged for him that
Raghunath Rai's statement that be used to obtain confirmation of the purchase
and sale of the securities from him cannot be true, as there was no necessity
for such confirmation. Chokbani does not appear to have exercised any such
authority during the period Dalmia was abroad or till August, 1954, and
therefore Dalmia's statement does not appear to be correct.
Chokhani and Raghunath Rai were authorised to
operate upon the Bank account at Bombay on October 1, 1953. Dalmia states, in
paragraph 17 of the written statement dated March 30, 1959, that this was done
as Chokhani bad been given 354 the authority for the sale and purchase of
securities at the same time. The Board did not give any such authority to
Chokhani and if the system of joint signatures was introduced for the reason
alleged, there seems to be no good reason why the Board itself did not resolve
that Chokhani be empowered to sell and purchase securities. The explanation for
the introduction of joint-signature scheme does not stand to reason.
Even if it be not correct that Raghunath Rai
had to obtain confirmation, it stands to reason that he should report such
transactions on the part of Chokhani to the Chairman, if not necessarily for
his approval, at least for his information, as Chokhani had no authority to purchase
and sell securities. These transactions have to be confirmed by the Board of
Directors and therefore confirmation of the Chairman who was the only person
authorised to purchase and sell securities was natural.
Raghunath Rai states that when he received no
reply to his letter dated November 19, 1954, asking for distinctive numbers of
securities not received at headquarters. Dalmia said that he would arrange for
the dispatch of those securities from Bombay to the head office. No action was
apparently taken in that connection. Raghunath Rai further states that on March
23, 1955, when he spoke to Dalmia about the non-receipt of certain securities
Dalmia told him that he had already instructed Chokhani for the conversion of
those securities into stock certificates and that it was in view of this
statement of Dalmia that he had written letter Exhibit P. 916 to Chokhani
stating therein.
"You were requested for conversion of
the above said G. P. Notes into Stock Certificate. The said certificate As not
been received by us 355 as yet. It may be sent now immediately as it is
required for the inspection of the company's auditors. " This indicates
that Dalmia was in the know of the position of securities and, on his own, gave
instructions to Chokhani to convert certain securities into inscribed stock.
Dalmia admits Raghunath Rai's speaking to him
about the non receipt of the securities and his telling him that he would ask
Chokhani to send them when he would happen to talk to him on the telephone.
Mention has already been made of securities
of the face value of Rs. 17,50,000 being sent to Bombay from Delhi in the first
week of September 1954. At the time securities of the face value of
Rs.53,25,000 were in deposit in the Chartered Bank at Bombay. There was thus no
need for sending these securities from Delhi. Chokhani could have withdrawn the
necessary securities from the Bank at Bombay.
This indicates that on learning that there
were no liquid funds for meeting the losses at Bombay, Dalmia himself decided to
send these securities to Bombay for sale and for thus providing for the liquid
funds there for meeting the cost of the intended fictitious purchase of
securities to meet the losses of the Union Agencies. It is not suggested that
these securities were sent to Bombay at the request of Chokhani.
Securities withdrawn in January, 1955, and
stock certificates sent in March and August, 1955, coincided with the period
when the Union Agencies suffered losses and the funds of the Insurance Company
at Bombay were low and were insufficient to meet the losses of the Union
Agencies.
3% 1957 securities of the face value of Rs.
46,00,000 (Rs. 37,75,000 set from Delhi and 356 Rs. 8,25,000 withdrawn from the
Chartered Bank at Bombay) were sold on January 11, 1955, and the proceeds were
utilised in purchasing 2-3/4% 1962 securities of the face value of Rs.
46,00,000 in two lots, one of Rs. 35,00,000 and the other of Rs. 11,00,000.
On January 11, 1955, Rs. 3,34,039-15-3, the
balance of the sale proceeds was deposited in the accounts of the Insurance
Company. Inscribed stock for these securities worth Rs. '46,00,000 was duly
obtained. Dalmia himself handed over inscribed stock certificate to Raghunath
Rai some time in the end of January 1955.
This purchase, though genuine, was not a
purchase in the ordinary course of business, but was for the purpose of
procuring the inscribed stock certificate to satisfy the auditors, as already
discussed earlier, that similar securities purchased in December, 1954 existed.
The auditors were than to audit accounts of 1954 and not of 1955. In this
connection reference may be made to Dalmia's attitude to the auditors' surprise
inspection on September 9, 1954, on the ground that they could not ask for
inspection of securities purchased in 1955.
It may also be mentioned that purchasing and
selling securities was not really the business of the Insurance Company. The
Insurance Company had to invest its money and, under the statutory
requirements, had to invest a certain portion at least in Government
Securities. The value of Government securities does not fluctuate much. Dalmia
states, in answer to question No. 25 (under a. 342 Cr. P.
C.): 'Government securities are gift edged
securities and there is very small fluctuation in these.' The question of
purchasing and selling of securities with a view-to profit could not therefore
be the ordinary business of the Insurance 357 Company. It has to purchase
securities when the statutory requirements make it necessary, or when it has
got funds which could be invested.
The Insurance Company had Government of India
3% Loan of 1957 in deposit with the Chartered Bank, Bombay, the face value of
the securities being Rs. 53,25,000, from April 6, 1951, onward. The fact that
these securities remained intact for a period of over three years, bears out
our view that the purchasing and selling of securities was not the normal
business of the Insurance Company, Securities are purchased for investment and
are redeemed on the date of maturity.
In this connection, reference may be made to
Khanna's statement in answer to question in cross-examination-The frequency of
transactions relating to purchase and sale of securities depends upon the share
market and its trends ? His answer was that was so, but that it also depended on
the character of the company making the investment in securities. It may be
said that the trend of the share market will only guide the purchase or sale
transactions of securities of a company speculating in shares, like the Union
Agencies, but will not affect the purchase and sale by a company whose business
is not speculation of shares like the Insurance Company.
Raghunath Rai states that when on September
9, 1955, the auditors wanted the production of the securities, said to be at
Bombay, in the next two days, he informed Dalmia about it and Dalmia said that
he would arrange for their production after two days. Dalmia, however, took no
steps to contact Chokhani at Bombay, but rang up Khanna instead and asked him
to certify the accounts as they had to be laid before the Company by September
30, and told him that everything was in order,. that he would give all
satisfaction later, 358 soon after Chokhani was available and that he did not
ask for an extension of time for the filing of the accounts as that would
affect the prestige of the company. On September 10, 1955, when Raghunath Rai
handed over the letter Exhibit P. 2 of even date from the auditors asking him
to produce a statement of investments as on September 9, 1955, along with the
securities or evidence if they were with other persons, by Tuesday, September
13, Dalmia had stated that Chokbani's mother had died and that he would himself
arrange for the inspection of securities direct with the auditors.
Chokhani's mother died on September 4, 1955.
Dalmia had no reason to tell Raghunath Rai on September 9 that the securities
would be produced for inspection in the next two days, unless he believed that
he could get them in that time on contacting Chokhani, or did not wish to tell
him the real position. Dalmia states that he contacted Chokhani for the first
time on September 15, the last day of the mourning and then learnt from
Chokhani that the securities were not in existence, the money withdrawn for
their purchase having been lent to the Union Agencies. The various statements
made by Dalmia in these circumstances and his conduct go to show that he had a
guilty mind and when he made the statement to Raghunatb Rai that the securities
would be produced within two days, he trusted that he would be persuasive
enough for the auditors to pass the accounts without further insistence on the
production of those securities.
Dalmia's not going to Mr. Kaul's Office on
September 16, and sending his relations to inform the latter of the shortfall
in securities can have no other explanation than that he was guilty and
therefore did not desire to have any direct talk about the matter with Mr.
Kaul. There was no need to avoid meeting him and miss the opportunity 359 of
explaining fully what Chokhani had done without his own knowledge.
Dalmia has admitted that he sent his
relations to Mr. Kaul and has also admitted that what they) stated to Mr. Kaul
was under his instructions., He states in answer to question No. 450, that
after the telephonic talk with Chokhani on the evening, of September 15, he
consulted his brother Jai Dayal Dalmia and his son-in-law S. P. Jain about the
position and about the action to be taken and that it was decided between them
before they left for the office of Mr. Kaul that they would tell him that
either the securities would be restored or their price would be paid off as
would be desired by the Government and in answer to question No. 451, said that
it was correct that these persons told Mr. Kaul that a considerable amount of
the securities were missing and that they were to make good the loss. It is
clear that these persons decided not to disclose to Mr. Kaul that the
securities were not in stock because they were not actually purchased and the
amount shown to be spent on them was lent to the Union Agencies. was not a case
of the securities missing but a case of the Insurance Company not getting those
securities at all. It is a reasonable inference from this conduct of Dalmia
that he did not go himself to Mr. Kaul as he was guilty and would have found it
inconvenient to explain to him how the shortfall had taken place.
We may now discuss the evidence relating to
Dalmia's making a confession to Annadhanam. Annadhanam was a Chartered
Accountant and partner of the Firm of Chartered Accountants M/s. Khanna and
Annadhanam, New Delhi, and he was appointed by the Central Government, in
exercise of its powers under s. 33(1) of the Insurance Act, 1938, on September
19, 1955, to investigate into the affairs of the Bharat Insurance 360 company
and to report to the Government on such investigation. He started this work on
September 20.
Annadhanam, having learnt from Raghunath Rai
about the missing of a number of Government securities and the amount of their
value from the statement prepared by him, called Dalmia to his office that
evening in order to make a statement. Dalmia made the statements Exhibits P. 10
and P. 11. P. 10 reads :
"'I have misappropriated securities of
the order of Rs. 2,20,00,000 of the Bharat Insurance Company Ltd. I have lost
this money in speculation." Exhibit P. 11 reads:
"Further stated on solemn affirmation.
At any cost, I want to pay full amount by
requesting my relatives or myself in the interest of the policy holders. "
Dalmia admits having made the statement Exhibit P. 11. but made some
inconsistent statements about his making the statement Exhibit P. 'LO. It is
said that he never made that statement, but in certain circumstances he asked
the Investigator to write what he considered proper and that he signed what
Annadhanam recorded. He did not directly state, but it was suggested in
cross-examination of Annadhanam and in his written statement that he made that
statement as a result of inducement and promise held out by either Annadhanam
of Khanna (the other partner of M/s. Khanna and Annadhanam, Chartered
Accountants, New Delhi) or both.
Dalmia's contention that Exhibit P. 10 was
inadmissible in evidence, it being not voluntary, was repelled by the learned Sessions
Judge, but was, in a way, accepted by the High Court which did not consider it
safe to rely on it.
The learned Solicitor General urged that the
confession Exhibit P. 10 was 361 voluntary and was wrongly not taken into
consideration by the High Court. Mr. Dingle Foot contended that the High Court
took the proper view and the confession was not voluntary. He further urged
that the confession was bit by the provisions of el. (3) of Art. 20 of the
Constitution.
The only witnesses with respect to the recording
of the statement Exhibit P. 10. are Annadhanam and Khanna. The third person who
knew about it and has stated about it is Dalmia himself. He has given his
version both in his statement recorded under s. 342 Cr. P. C.and in his written
statement filed on October 24, 1958.
We may first note the relevant statement in
this connection before discussing the question whether the alleged confession
is voluntary and therefore admissible in evidence. Annadhanam made the
following relevant statements:
Dalmia came to the office at 6.30 p.m. though
the appointment was for 5.30 p.m. His companion stayed outside the office room.
Annadhanam asked Dalmia the explanation with regard to the missing securities.
Dalmia wanted two hours' time to give the explanation. This was refused. He
then asked for half an-hour's time at least. This was allowed. Dalmia went out
of the office, but returned within ten minutes and said that he would make the
statement and it be record. Annadhanam, in the exercise of the powers under s.
33(3) of the Insurance Act, administered oath to Dalmia and recorded the
statement Exhibit P. 10. It was read over to Dalmia. Dalmia admitted it to be
correct and signed it.
Shortly' after, Dalmia stated that he wanted
to add one more sentence to his statement. He was again administered oath and
his further statement, Exhibit P. 11 was recorded. This was also read over and
Dalmia signed it, admitting its accuracy.
362 Annadhanam states that no threat or
inducement or promise was offered to Dalmia before he made these statements.
A third statement is also attributed to
Dalmia and it is that when Dalmia was going away and was nearing the staircase,
Annadhanam asked him whether the speculation in which he had lost the money was
carried on by him in the company's account or in his private account. Dalmia
replied that he had lost that money in his personal speculation business which
was carried on chiefly through one of his private companies, viz., the Union
Agencies. This statement was not recorded in writing. Annadhanam did not
consider it necessary, but this was mentioned by Annadhanam in his
supplementary interim report, Exhibit P. 13, which he submitted to the Deputy
Secretary, Ministry of Finance, on September 21, 1955. Annadhanan also
mentioned about the statement recorded in Exhibit P. 10 in his interim report,
Exhibit P. 12, dated September 21, 1955, to the Deputy Secretary, Ministry of
Finance.
In-cross-examination, Annadhanam stated that
he did not send for Dalmia to the office of the Bharat Insurance Company where
he had examined Raghunath Rai, as he had not made up his mind with respect to
the further action to be taken. He denied that he had any telephonic talk with
Mr. Kaul, the Deputy Secretary, Ministry of Finance, prior to the recording of
the statements, Exhibits P. 10 and P. II His explanation for keeping Khanna
with him during the examination of Dalmia was that Khanna had done the detailed
auditing of the accounts of the company in pursuance of the firm Khanna and
Annadhanam being appointed auditors for 1954 by the Insurance Company. He
denied that Dalmia told him that he had no personal knowledge' of the
securities and that the only information he had from Chokhani was that the 363
latter had given money on loan to the Union Agencies. He stated that the
statements Exhibits P. 10 and 11 were recorded in the very words of Dalmia. The
statements were not actually read over to Dalmia but Dalmia himself read them
over.
Annadhanam denied that he told Dalmia that he
would not be prosecuted if he made the statements Exhibit P. 10 and P. 11 and
deposited. the money alleged to have been embezzled and further stated that
Khanna did not tell this to Dalmia. He denied that Exhibit P. 10 was never made
by Dalmia and was false and reiterated that statement was made by Dalmia. He
did not consider it proper to reduce to writing every word of what transpired
between him and Dalmia from the moment of the latter's arrival in his office
till the time of his departure, and considered it proper' to reduce in writing
the statement which was made with regard to the missing securities. He further
stated that his statement above Dalmia's making statements Exhibits P. 10 and
P. 11 voluntarily was on account of the facts that Dalmia himself volunteered
to make those statements and that he himself had offered no inducements or
promises.
In cross-examination by Mr. T. C. Mathur, he
denied that he told Dalmia that as Chairman of the Insurance Company he should
own responsibility for the missing securities and that would make him a greater
Dalmia because he was prepared to pay for the short-fall and further denied
that it was on account of the suggested statement that Dalmia had asked for two
hours' time before making his statement.
In cross-examination by Dalmia personally,
Annadhanam explained the discrepancy in the amount of the securities admitted
to be misappropriated. Exhibit P. 10, mentions the securities to be of the
order of Rs. 2,20,00,000/. In his report 364 Exhibit P. 12, he stated the
admission to be with respect to securities of the face value of Rs.
2,22,22,000/-. The explanation is that in the interim report he worked out the
face value of the missing securities to be Rs, 2,22,22,000/, and he mentioned
this figure in his report as Dalmia had admitted the misappropriation of the
securities. Nothing sinister can be inferred from this variation.
Khanna practically supports the statement of
Annadhanam, not only with respect to Exhibit P. 10 and P. II, but also with
respect to the third statement said to have been made near the staircase. His
statements in cross-examination that it was possible that Annadhanam might have
asked the companion of Dalmia to stay outside the office as the proceedings were
of a confidential nature, does not in any way belie Annadhanam's statement as
this statement itself is not definite. In answer to the question whether it
struck him rather improper that Dalmia made the statement Exhibit P. 10 in view
of his previous statement to Khanna that satisfaction would be afforded to the
auditors on the points raised by them after Chokhani was available, he replied
that his own feeling was that the statements Exhibits P. 10 and P. 11 were the
natural culmination of what he learnt in the office of Mr. Kaul on September
16, 1955. He also denied that be told Dalmia that whoever was at fault, the
ultimate responsibility would fall on the Chairman and other Directors as well
as the officers of the Insurance Company by way of misfeasance, and that Dalmia
should sign the statement which would be prepared by himself and Annadbanam so
that the other Directors and the officers of the Insurance Company be not
harassed and that if this suggestion was accepted by Dalmia, he would save
every one and become a greater Dalmia. He denied the suggestion that when
Dalmia talked of his charitable disposition in his office on September 20,
1955, it should have been in answer to his (Khanna's) 365 provocative remarks
wherein he had made insinuations regarding Dalmia's integrity and stated that
he was merely a silent spectator of what actually Del: had happened in the
office that day. He further stated that no question arose of Annadhanam's
attacking the integrity of Dalmia on September 20, 1955. He denied that Mr.
Kaul had told him or Annadbanam on September 19, when the order appointing
Annadhanam Investigator was delivered, that Dalmia had to be implicated in a
criminal case.
Khanna denied that his tone and remarks
during the discussion were very persuasive and that told Dalmia that it was
very great of him that he was going to pay the amount represented by the
short-fall of the securities. He also denied the suggestion that Dalmia told
him and Annadhanam on September 20, at their office, that be had no knowledge
of the missing securities, that it, appeared that the securities had either
been sold or pledged and that the money had been paid to the Union Agencies,
which Dalmia did not-, like, and that in the interest of the policy holders and
the Insurance Company Dalmia was prepared to pay the amount of the short-fall
of securities, and also that when Dalmia spoke about the securities being sold
or pledged.
Khanna and Annadhanam remarked that the
securities bad been misappropriated. He denied that he told Dalmia that if he
took personal responsibility in the matter, it would be only then that no
action would be taken and stated that he and Annadhanam were nobody to give any
assurance to Dalmia.
Dalmia stated, in this statement under s. 342
Cr. P.C. on November 7, 1958, that his companion Raghunath Das Dalmia stayed
out because he was not allowed to stay with him inside the office. He denied
that he first spoke about his charitable disposition and piety when asked by
Annadhanam to explain about the missing securities and stated that 366 there
could be no occasion for him to talk at that time of his piety and charitable
disposition when he had been specifically called to explain with regard to the
missing securities. His version of what took place may now be quoted (answer to
question No. 471) in his own words:
"What actually happened was that I told
Shri Annadhanam that I had learnt from G. L. Chokhani that the amount of the
missing securities had been lent temporarily on behalf of the Bharat Insurance
Company by Shri G. L.
Chokhani to Bharat Union Agencies and that
the amount had been lost in speculation. Shri Annadhanam then asked me about
the missing securities. I then told him that I did not know as to whether the
securities had been sold or mortgaged. My replies here being noted by Shri
Annadhanam on a piece of paper.
Shri Annadhanam then asked me as to when the
securities had been sold or mortgaged I replied that I did not know with regard
to the time when the securities had been sold or mortgaged.. Shri Annadhanam
then asked me as to what were the places where there were offices of Bharat
Union Agencies. I then told him that the offices were at Bombay and Delhi.
I than remarked that whatever had happened, I
wanted to pay the amount of the missing securities as the interest of the
policy holders of the Bharat Insurance Company were close to my heart. During
the course of that talk sometimes Shri Annadhanam questioned and sometimes the
questions were asked by Shri Khanna. Shri Khanna then stated that I should
forget the events of 9-9-1955. Shri Khanna further stated. 'We too are men of
hearts.
And not bereft of all feelings. We too have
children. I am very much impressed by your offer of such a huge 367 amount'.
Shri Khanna also remarked that Shri Annadhanam had been appointed under section
33 of the Insurance Act to investigate into the affairs of the Bharat Insurance
Company and as such the words of Shri Khanna and Shri Annadhanam would carry
weight with the Government. Shri Khanna also stated other things but I do not
remember them. I however distinctly remember that Shri Khanna stated to me that
I should go to Shri C. D. Deshmukb and that Shri Khanna would also help me. I
then replied that I would not like to go to Shri Deshmukh. Shri Khanna then
remarked that the Government attached great importance to the interests of the
policy holders and that if the matter got undue publicity it would cause a
great loss to the policy holders. Shri Khanna accordingly stated that if I
agreed to his suggestion the matter would be settled satisfactorily and without
any publicity. It was in those circumstances that I asked for two hours' time
to consult my brother and son-in-law." He further stated that when
Annadhanam told him that he could have half-an-hour's time and that more time
could not be given as the report had to be given to the Government immediately,
he objected to the shortness of time as he could not during that interval go to
meet his brother and son-in-law and return to the office after consulting them
and further told Annadhanam and Khanna to write whatever they considered proper
as he had trust in them.
His reply to question No. 476 is significant
and reads:
"The statement was read over tome. I
then pointed out that what I had stated had not been incorporated in Ex. P. 10.
I made 368 no mention that the statement Ex.' P. 10 was correct or not. Shri
Annadhanam then reduced to writing, whatever was stated by me. That writing if
Ex. P. 11 and is in the very words used by me." He does not directly
answer question No. 479:
"It is in evidence that the statement
Ex. P. 1 1 was read over to you, you admitted it to be correct and signed it.
Do you want to say anything with regard to that?" and simply stated, 'I
did sign that statement'. He denied the third statement alleged to have been
made near the staircase.
Dalmia also stated that he had mentioned some
facts about the statements Exhibits P. 10 and 11 in his written statement.
Paragraphs 53 to 59 of the written statement
dated October, 24, 1958, refer to the circumstances about the making of the
statements Exhibits P. 10. and P. II. In paragraph 53 Dalmia states that the
recording of his statement in Annadhanam's office took place as it was only
there that Annadhanam and Khanna could get the necessary privacy. The
insinuation is that they did not want any independent person to know of what
transpired between them.
Paragraph 54 refers to a very minor
discrepancy. Paragraph 55 really gives the version of what took place in,
Annadhanam's office.
We refer only to such portions of this
version as do not find a place either in the suggestions made to Annadhanam and
Khanna in their cross-examination or in the statement of Dalmia under a. 342 or
which be inconsistent with either of them. Dalmia stated that he told
Annadbanam that the 369 money that had been received by Bharat Union Agencies
as loan belonged to Bharat Insurance Company and it appeared that the Union
Agencies had lost that money in speculation.
He further which tend to impute an inducement
on the part of Khanna to him. These statements may be quoted in Dalmia's own
words:
"On this Shri Khanna said that I was a
gentleman, that I was prepared to pay such a heavy amount which has never been
paid so far by anybody, that I should accept his advice and that I should act
according to his suggestion and not involve myself in this dispute, the
Government was not such a fool that they would not arrive at a quiet settlement
with a man who thought that his first duty was to protect the policy holders
and thus by spoiling the credit of the Bharat Insurance Co. would harm its
policy holders. If the Government did so it would be an act of cruelty to the
policy holders, and when I was prepared to pay the money it (Government) would
not take any such course by which I may have to face troubles, that my name
would go very high, that he advised me as being my well-wisher that I should
confess that I had taken the securities, that they would help me.
They added that Shri Annadhanam has been
appointed as Investigator by the Government and therefore their words carry
weight with the Government, that it was my responsibility, being the Chairman
and Principal Officer of the Bharat Insurance to pay the money. At that time I
was restless to pay the money. I was influenced by their talk and anybody in my
place would have trusted their words. I was impressed by their saying to me
that Po wise Government or officers would take 370 such action which would harm
the policyholders through publicity. Therefore I took that whatever Shri Khanna
and Annadhanam were saying was for my good".
He stated that he asked Annadhanam and Khanna
for two hours' time to consult his brother. and son-in-law and that one of them
said that they could not give more than half-an-hour, This is inconsistent with
what he stated under s. 342. He further stated :
"I told them to write in whatever way
they thought best and whatever they wrote I simply signed. After signing when I
read it, I pointed out to them that they had not written that I wanted to pay
every pie of the policy holders and then they wrote as I told them and I
signed".
The statement referred to is a short one, and
it is not possible to believe that he signed it without reading it.
Paragraph 56 makes no reference to the events
of that evening, but paragraph 57 refers to the improbability of his writing
things which brought trouble to him when just before it he had been talking
irrelevantly. The question in cross-examination did suggest that he was forced
to make irrelevant talk due to certain provocation. That does not fit in with
the explanation in paragraph 57 that his talk about a temple was invented to
support the statement Annadhanam had made to the police about Dalmia's talking
irrelevantly. His statement 'How could I have acted in such a way without any
positive assurances, implies that he did make the statements though on getting
assurances. In paragraph 58 he states :
"On 20th September Shri Khanna and
Annadhanam had put all sorts of questions 371 to Raghunath Rai but let me off
after recording my statement in just one or two lines. Their design had
succeeded and therefore they, did not care to record any further
question".
This again implies his making the statement
P. 10. Of course, after he had made the statement P. 10 there was no necessity
of asking anything further. His statement explained the missing of the
securities.
Reference may now be made to what Raghunath
Rai, who was the Secretary of the Bharat Insurance Company, states in reference
to the statement made by Dalmia to Annadhanam.
Raghunath Rai states that when he went to
Dalmia about 7 p. m. on September 200, 1955, and told him about the recording
of his own statement by Annadhanam and the preparation of the statement about
Exhibit P. 8 and about his talk regarding the securities at Bombay, Dalmia said
: 'I have been myself in the office of the Investigator. He has recorded my
statement wherein I have admitted the short-fall of the securities'. This also
points to Dalmia's making the statement Exhibit P. 10.
Raghunatb Rai did not admit, but simply said
that Dalmia did tell him something when he was questioned as to whether Dalmia
told him that he had been told by Anadbanam and Khanna that if he had made the
statement in accordance with their desire, there would be no trouble.
Dalmia evaded a direct answer to the question
put to him under s. 342, Cr. P. C. When question No. 482 was put to him with
reference to this statement of Raghunath Rai he simply stated that he had
briefly told Raghunath Rai with regard to what bad transpired between him and
Khanna and Annadhanam and that he had told Raghhunath Rai that he need not
worry.
372 The various statements of Dalmia
suggesting that inducement was; held out to him by Khanna have not been
believed by the Courts below, and we see no good reason to differ from their
view. There was no reason for Annadhanam to record an incriminating statement
like P. 10 and get it signed by Dalmia.
The High Court does not also hold that the
confession was the result of some threat extended by Annadhanam. It did not
consider it safe to rely upon it as it considered the confession to be not
voluntary in a certain sense. It said :
"In that sense, therefore, it was not a
voluntary statement, because although no words of threat or inducement were
uttered by Mr. Annadhanam or anyone else, the circumstances had shaped
themselves in such a manner that there was an implied offer of amnesty being
granted to him if he did not persist in his negative behavior. He therefore
made a statement that he had misappropriated the securities and immediately
offered to make good the loss through his relatives".
What are those circumstances which implied an
offer of amnesty being granted to him if he did not persist in his negative
behaviour, presumably in not giving out full information about the missing
securities ? Such circumstances, as can be gathered from the judgment of tile
High Court seem to be these : (1) Dalmia, a person of considerable courage in
commercial affairs was Dot expected to make a voluntary confession. (2) He had
evaded meeting the issue lull-face whenever he could do so and did not appear
before Mr. Kaul on September 16, 1955, to communicate to him the position about
the securities. (3) He not only appeared before Annadbanam an hour late, but
further asked for two hours' time before answering a simple question about the
missing securities. (4) He made the 373 statement when he felt cornered on
account of the knowledge that Annadhanam had the authority of law to question
and thought that, the only manner of postponing the evil consequence of his act
was by making the statement which would soften the attitude of the authorities
towards him.
We are of opinion that none of these circumstances
would make the confession invalid. Dalmia'a knowledge that Annadhanam could
record his statement under law and his desire to soften the attitude of the
authorities by making the statement do not establish that he was coerced or
compelled to make the statement. A person of the position, grit and
intelligence of Dalmia could not be so coerced. A person making a confession
may be guided by any considerations which, according to him, would benefit him.
Dalmia must have made the statement after
weighing the consequences which he thought would be beneficial to him.
His making the confession with a view to
benefit himself would not make the confession not voluntary. A confession will
not be voluntary only when it is made under some threat or inducement or
promise, from a person in authority.
Nothing of the kind happened in this case and
the considerations mentioned in the High Court's judgment do not justify
holding the confession to be not voluntary. We are therefore of opinion that
Dalmia made the confession Exhibit P. 10, voluntarily.
It was argued in the High Court, for the
State, that Dalmia thought it best to make the statement because, by doing so,
he hoped to avoid the discovery of his entire scheme of conspiracy which had
made it possible for him to misappropriate such a large amount of the assets of
the Insurance Company. The High Court held that even if the confession was made
for that purpose, it would not be a voluntary confession. We consider this
ground to hold the confession involuntary unsound, 374 Mr. Dingle Foot has
contended that the statement, Exhibit P. 10, is not correct, that Annadhanam
and Mr. Kaul colluded and wanted to get a confession from Dalmia and that is
why Annadhanam extracted the confession and that various circumstances would
show that the confession was not voluntary in the sense that it was induced or
obtained by threat. He has also urged that Annadhanam was 'a person in
authority' for the purpose of s. 24 of the Indian Evidence Act. These
circumstances, according to him, are that Dalmia's companion was not allowed to
stay in the office, that only balf-an-hour was allowed for Dalmia to make
consultations, that there had been a discussion before the recording of Exhibit
P. 10, that no record on the discussion was maintained, that Annadhanam, as
Investigator, was a public servant, that s. 176, 1. P. C. was applicable to
Dalmia if he had not made the statement and that the statement on oath really
amounted to an inquisition. It was further contended that if the confession was
not inadmissible under s. 24 of the Evidence Act; it was inadmissible in view
of cl. (3) of Art. 20 of the Constitution.
Mr. Dingle Foot has further contended That
the statement, Ex. P. 10, is not correct inasmuch as it records: 11 have
misappropriated securities of the order of rupees two crones, twenty lakhs of
the Bharat Insurance Company Ltd.', that it could not be the language of Dalmia
and that these facts supported Dalmia's contention that be simply signed what
Annadhanam had written.
The public prosecutor had also questioned the
correctness of this statement inasmuch as the actual misappropriation was done
by Chokhani and Dalmia had merely suffered it and as the accurate statement
would have been that there was misappropriation of the money equivalent of the
Securities.
375 We are of opinion that any vagueness in
the expression could have been deliberate. The expression used was not such
that Dalmia, even if he had a poor knowledge of English, could not have used.
The statement was undoubtedly very brief.
It cannot be expected that every word was
used in that statement in the strict legal sense. The expression 1
misappropriated the securities' can only mean that he misappropriated the
amount which had been either spent on the purchase of the securities which were
not in existence, or realised by the sale of securities, and which was shown to
be utilised in the fictitious purchase of securities.
The main fact is that Dalmia did admit his
personal part in the loss of the amount due to the shortfall in the securities.
There is nothing on record to justify any
conclusion that Annadhanam and Mr. Kaul bad colluded and wanted to get a
confession from Dalmia. It is suggested that Annadhanam war, annoyed with
Dalmia on account of the latter's resentment at the conduct of Annadhanam and
Khanna in conducting a surprise inspection of the accounts and securities on
September 9, 1955. Raghunath Rai protested saying that they had already
verified the securities and that they, as auditors for the year 1954, had no
right to ask for the inspection of securities in the year 1955. At their
insistence, Raghunath Rai showed the securities.
After their return to the office, Dalmia rang
them up and complained that they were unnecessarily harassing the officers of
the Bharat Insurance Company and had no right to inspect the securities. Dalmia
was not satisfied with their assertion of their right to make a surprise
inspection.
There was nothing in this conduct of Dalmia,
which should have annoyed Annadbanam or Khanna. They did 376 what they
considered to be their duty and,., successfully met the opposition of Raghunath
Rai. If there could be any grievance on account of their inspection, it would
be to Dalmia who, as a result, would not be easily induced by them to make the
confession.
Mr. Kaul, as Deputy Secretary, Ministry of
Finance, did take part in the bringing of the matter to a bead, not on account
of any personal animus against Dalmia-such animus is not even alleged but on
account of his official duties, when be heard a rumour in Bombay that Dalmia
had incurred heavy losses amounting to over two crores of rupees through his
speculative activities and had been drawing upon the funds of the Insurance
Company of which he was the Chairman to cover his losses. He asked Dalmia on
September 14, 1955, to see him on the 15th in connection with the securities of
the Insurance Company. When Dalmia met him on the 15th in the presence of Mr.
Barve, Joint Secretary, he asked whether he had brought with him an account of
the securities of the Bharat Insurance Company. Dalmia expressed his inability
to do so for want of sufficient time and promised to bring the account on
September 16. On the 16th, Dalmia did not go to Mr. Kaul's office; instead, his
relations S. P. Jain and others met Mr. Kaul and made certain statements. Mr.
Kaul submitted a note, Ex. D. 67, to the Finance Minister or September 18,
1955, and in his note suggested that of all the courses of action open to the
Government, the one to be taken should be to proceed in the matter in the legal
manner and launch a prosecution as the acceptance of S. P. Jain's offer would
amount to compounding with a criminal offender.
Mr. Kaul stated that he did not consider it
necessary to make any enquiry because the merits of the case against Dalmia
remained unaffected whether the loss was rupees two crores or a few lakhs, more
or less, On the basis of the aforesaid suggestion of 377 Mr. Kaul and his using
the expression 'courses against Shri Dalmia it is urged that criminal action
was contemplated against Dalmia and that there must have been some
understanding between Mr. Kaul and Annadhanam about securing some sort of
confession from Dalmia for the purpose of the case which was contemplated. We
consider this suggestion farfetched and not worthily of acceptance. As a part
of his duty, Mr. Kaul had to consider the various courses of action open to the
Government in connection with the alleged drawing upon the funds of the
Insurance Company to cover his losses in the speculative activities. Mr. Kaul
did not know what bad actually transpired with respect to the securities.
He had heard something in Bombay and then he
was told about the short-fall in the securities of the Bharat Insurance Company
and. naturally. he could co template that the alleged conduct could amount to a
criminal offence. In fact, ,according to Mr. Kaul, a suggestion had been made
to him by S. P. Jain that on the making up of the short-fall in securities no
further action be taken which might affect the position of Dalmia and his other
associates in business and of various businesses run by them. The fact that
Annadhanam knew that there had been a short-fall of over rupees two crores
prior to Dalmia's making the statement Exhibit P. 10 cannot justify the
conclusion that Annadhanam and Mr. Kaul were in collusion.
Annadhanam does not admit he had ordered
Dalmia's companion to stay out of the office. Even if he did, as stated by
Dalmia, that would not mean that Annadhanam did it on purpose, the purpose
being that he would act unfairly towards Dalmia and that there be not any
witness of such an attempt. Similarly, the non-maintenance of the record of
what conversation took place between Dalmia and the Investigator, does not
point out to any sinister purpose on the part of Annadhanam. It was 378
Annadhanam's discretion to examine a person in connection with the affairs of
the insurance Company. He put simple question to Dalmia and that required him
to explain about the missing securities. So long as Dalmia did not make a
statement in that connection, it was not necessary to make any record of the
talk which might take place between the two. In fact, Annadhanam had stated
that the word discussion used by him in his supplementary interim report
Exhibit P. 13, really be read as "recording of the statement of Shri
Dalmia and the talk he had with when he came to Annadhanam's office and which
he had with him while going to the staircase'. This explanation seems to fit in
with the context in which the word discussion' is used in Exhibit P.
The interval of time allowed to Dalmia for
consulting his relations might have been considered to be insufficient
considering for confession voluntary in case that was the time allowed to a
confessing accused produced before a Magistrate for recording a confession. But
that was not the position in the present case. Annadhanam was not going to
record the confession of Dalmia. He was just to examine him in connection with
the affairs of the Insurance Company and had simply to tell him that he had called
him to explain about the missing securities. There was therefore no question of
Annadhanam allowing any time to Dalmia for pondering over the pros and cons of
his making a statement about whose nature and effect he would have had no idea.
We do not therefore consider that this fact that Dalmia was allowed
half-an-hour to consult his relations can point to compelling Dalmia to make
the statement.
We do not see that examination of Dalmia on
oath be considered to be an inquisition. Sub-section (3) of s. 33 of the Insurance
Act empowers the Investigator to examine on oath any manager, managing director
or other officer of the insures in relation to his business., Section 176 of
the Indian 379 Penal Code has no application to the examination of Dalmia under
s. 33 of the Insurance Act. Section 176 reads:
"Whoever, being legally bound to give
any notice or to furnish information on any subject to any public servant, as
such, intentionally omits to give such notice or to furnish such information in
the manner and at the time required by law, shall be punished with simple
imprisonment for a term which may extend to one month, or with fine which may
extend to five hundred rupees, or with both.
or, if the notice or information required to
be given respects the commission of an offence or is required for the purpose
of preventing the commission of an offence, or in order to the apprehension of
an offender, with simple imprisonment for a term which may extend to six
months, or with fine which may extend to one thousand rupees, or with both; or,
if the notice or information required to be given is required by an order
passed under sub-section (1) of section 56.5 of the Code of Criminal Procedure,
1898, with imprisonment of either description for a term which may extend to
six months, or with fine which may extend to one thousand rupees. or with
both." For the application of this section, it is necessary that
Annadhanam, as Investigator, be a public servant.
Annadhanam cannot be said to be a servant. He
was not an employee of Government. He was a Chartered Accountant and had been
directed by the order of the Central Government to investigate into the affairs
of the Insurance Company and to report to the Government on the investigation
made by him.
of course, he was to get 380 some
remuneration for the work he was entrusted with.
'Public servant' is defined in s. 21 of
Indian Penal Code.
Mr. Dingle Foot has argued that Annadhanam
was a public servant in view of the ninth clause of s. 21. According to this
clause, every officer in the service or pay of the Government or remunerated by
fees or commission for the purpose of any public duty would be a public
servant. A person who is directed to investigate into the affairs of an
Insurance Company under s. 33(1) of the Insurance Act, does not ipso facto
become an officer. There is no office which he holds. He is not employed in
service and therefore this definition would not apply to Annadhanam.
The making of a statement to the Investigator
under s. 33(3) of the Insurance Act does not amount to furnishing information
on any subject to any public servant as contemplated by a. 176 I. P. C., an
omission to furnish which would be an offence under that section. This section
refers to information to be given in statements required to be furnished under
some provision of law. We are therefore of opinion that a. 176. I. P. C. did in
no way compel Dalmia to make the statement Exhibit P. 10.
We believe the statements of Annadhanam and
Khanna about Dalmia's making the statement Exhibit P. 10 without his being
induced or threatened by them. Their statements find implied support from the
statement of Raghunath Rai with respect to what Dalmia told him in connection
with the making of the statement to Annadhanam, and from certain statements of
Dalmia himself in his written statement and in answers to questions put to him
under s. 342, Cr. P. C.
We therefore hold the statement Exhibit P. 10
is a voluntary statement and is admissible in evidence.
381 We also hold that it is not inadmissible
in view of cl. (3) of Art. 20 of the Constitution. It was not made by Dalmia at
a time when he was accused of an offence, as is necessary for the application
of that clause, in view of the decision of this Court in The State of Bombay v.
Kathi Kalu Oghad (1) where the contention that the statement need not be made
by the accused person at a time when he fulfilled that character was not
accepted. Dalmia was not in duress at the time he made that statement and
therefore was not compelled to make it. It was said in the aforesaid case :
" "Compulsion', in the context,
must mean what in law is called duress.......... The compulsion in this sense
is a physical objective act and not the state of mind of the person making the
statement, except where the mind has been so conditioned by some extraneous
process as to render the making of the statement involuntary and, therefore,
extorted." The various circumstances preceding the making of the statement
Exhibit P. 10 by Dalmia have all been considered and they fall far short of
proving that Dalmia's mind had been so conditioned by some extraneous process
as to render the making of this statement involuntary and therefore extorted.
We believe the statement of Annadhanam that
Dalmia had told him near the staircase that he had lost the money in his
personal speculation business which was carried on chiefly through one of his
private companies, viz.. the Union Agencies. The later part of his confession,
Exhibit P. 10, is an admission of Dalmia's losing the (1) [1962] 3 S. C. R. 10,
35.
382 money in speculation. His further
statement was only an amplification of it as to the name under which
speculation was carried on the statement finds support from the facts
established by other evidence that the speculation business carried on by the
Union Agencies was really the business of Dalmia himself though, ostensibly, it
was the business of the company of which there were a few shareholders other
than Dalmia.
Mr. Dingle Foot has urged that adverse
inference be drawn against the prosecution case on account of the prosecution
not producing certain documents and certain witnesses. We have considered the
objection and are of opinion that there is no case for raising such an
inference against the prosecution.
The prosecution did not lead evidence about
the persons holding shares in Asia Udyog Ltd., and in Govan Brothers Ltd. Such
evidence would have, at best, indicated how many shares Dalmia held in these
companies. That was not necessary for the prosecution case. The extent of
shares Dalmia held in these companies had no direct bearing on the matter under
inquiry in the case.
The prosecution led evidence about the
telephonic calls up to August 31, 1955, and did not lead evidence about the
calls between September 1 and September 20. 1955, It is urged that presumption
be raised that Dalmia and Chokhani had no telephonic communication in this
period. Admittedly, Dalmia had telephonic communication with Chokhani on
September 15. The prosecution has not impugned any transaction entered into by
Chokhani during this period. It is not therefore essential for the prosecution
to have led evidence of telephonic calls between Dalmia and Chokhani during
this period.
Another document which the prosecution is 383
said not to have produced is the Dak Receipt. Register. The Register could have
at best shown on which dates the various advices received from Bombay about the
transactions were received. On that point there had been sufficient evidence
led by the prosecution. The production of the Register was therefore not
necessary. The accused could have summoned it if he had particular reason to
rely on its entries to prove his case.
Lastly, complaint is made of the
non-production of certain documents in connection with the despatch of certain
securities from Delhi to Bombay. Again, there is oral evidence with respect to
such despatch of securities and it was not essential for the prosecution to
produce the documents in that connection.
Of the witnesses who were not produced, complaint
is made about the prosecution not examining Mr. Barve, JointSecretary, Ministry
of Finance, who was present at the interview which Dalmia had with Mr. Kaul on
September 15,1954, and of the non-production of the Directors of the Insurance
Company. It was quite unnecessary to examine Mr. Barve when Mr. Kaul has been
examined. It was also not necessary to examine the Directors of the company who
are not alleged to have had any first-hand knowledge about the transactions.
They could have spoken about the confirmation of the sale and purchase
transactions and about the passing of the bye-laws and other relevant
resolutions at the meeting of the Board of Directors. The minutes of the
proceedings of the Board's meetings served this purpose.
It is admitted by Dalmia that there was no resolution
of the Board of Directors conferring authority on Chokhani to purchase and sell
securities.
Certain matters have been referred to at 384
pages 206-210 of Dalmia's statement of came, which, according to Dalmia, could
have been proved by the Directors., All these matters are such which were not
necessary for the unfolding of the prosecution case and could be proved by the
accused examining them if considered necessary. We therefore see no force in
this contention.
It is urged for Dalmia that he could not have
been a party to a scheme which would cause loss to the Insurance Company,
because he was mainly responsible for the prosperity of the company. The Union
Agencies has assets. The Government was displeased with Dalmia. The company
readily agreed to the appointment of M/s. Khanna and Annadhanam as auditors.
There was the risk of detection of the fraud
to be committed and so Dalmia would have acted differently with respect to such
affairs of the Union Agencies as have been used as evidence of Dalmia being
synonymous with it. We are of opinion that these considerations are not such
which would off,set the inferences arrived at from the proved facts.
It cannot be it matter of mere coincidence
that frequent telephonic conversations took place between Dalmia and Chokhani
when the Union Agencies suffered losses, that the usual purchase transactions
by which the funds of the Insurance Company were diverted to the Union Agencies
took place then, that such purchases should, recur several times during the
relevant period, that such securities which could not be recouped had to be
shown as sold and when the Union Agencies or Bhagwati Trading Company could not
pay for the sale price which had to be credited to the account of the Insurance
Company, a further usual purchase transaction took place.
We are therefore satisfied from the various
facts considered above that the transactions which 385 led to the diversion of
funds of the Insurance Company to the Union Agencies were carried through under
the instructions and approval of Dalmia. It is clear that he had a dishonest
intention to cause at least temporary loss of its funds to the Insurance
Company and gain to the Union This could be achieved only as a result of the
conspiracy between him and Chokhani. Vishnu Prasad was taken in the conspiracy
to facilitate diversion of funds and Gurha to facilitate the making up of false
accounts etc. in the offices of the Union Agencies and Asia Udyog Ltd., as
would be discussed hereafter.
We may now turn to the charges against Gurha,
appellant. He was charged under s. 120-B read with s. 409 I. P. C. and also on
three counts under s. 477 A for making or abetting the making of false entries
in three journal vouchers Nos.
98, 106 and 107 dated January 12, 1955, of
the Union Agencies. It is necessary to give a brief account of how these
vouchers happened to be made.
Gurha was a Director of the Union Agencies
and looked after the work of its office at Delhi. He was also the Accountant of
Asia Udyog Ltd. At Delhi there was a ledger with respect to the account of the
transactions by the Bombay Office of the Union Agencies.
Under the directions of Chokhani who was an
agent of the Union Agencies at Bombay and also held power of attorney on its
behalf. Kanna used to send a cash statement and a journal to the Bombay Office
and the Union Agencies at Delhi. These documents used to be sent to Gurha
personally.
Now, the cash statement from Bombay showed
correctly entries of the amounts received from Bhagwati Trading Company. Such
amounts were noted to the credit of Bbagwati Trading Company. When the Union
Agencies made Payment to Bhagwati 386 Trading Company, an entry to that effect
was noted in the cash statement to the debit of Bhagwati Trading Company. On
receipt of these cash statements in 1955, it is alleged, Gurha used to get the
genuine cash statement substituted by another fictitious cash statement in
which no mention was made of Bhagwati Trading Company. Entries to the credit of
Bhagwati Trading Company used to be shown to be entries showing the receipt of
those moneys from the Delhi Office of the Union Agencies through Chokhani. The
debit entry in the name of Bhagwati Trading Company used to be shown as a debit
to the Delhi Office of the Union Agencies. This substituted cash statement was
then made over to one Lakhotia, who worked in the Delhi Office of the Union
Agencies on behalf of the Bombay Office of the company. He was also prosecuted,
but was acquitted. Lakhotia issued credit advices on behalf of the Bombay
Office of the Union Agencies to the Delhi Office of the Union Agencies in
reference to the entry in the cash statement which, in the original statement,
was in respect of the amount received from Bhagwati Trading Company, intimating
that amount had been credited by the Bombay Office to the account of the Delhi
Office. A debit advice on behalf of the Bombay Office to the Delhi Office was
issued intimating that the amount had been debited to the account of the Delhi
Office when in fact, the original entry debited that amount to the account of
Bhagwati Trading Company. Lakhotia also made entries in the ledger of the
Bombay Office which was maintained in the Delhi Office of the company. In its
column entitled 'folios' reference to the folio of the cash statement was given
by writing the letter 'C'' and the number of the folio of the cash statement
from which the entry was posted.
On receipt of such advices from Lakhotia on
behalf of the Bombay Office, Dhawan, P. W,19, 387 Accountant of the Delhi Office
of the Union Agencies used to prepare the journal voucher. In the case of the
credit advices, the amount was debited to the Bombay Office of the Union
Agencies and credited to Asia Udyog Ltd. In the case of the debit advices, the
amount was debited to Asia Udyog Ltd., and credited to the Bombay Office of the
Union Agencies. According to the statement of Dhawan, he did so under the
instructions of Gurha. Gurha used to sign these vouchers and when he fell ill,,
they were signed by another Director, J. S. Mittal. Corresponding entries used
to be made in the account of the Bombay Office and the Asia Udyog Ltd., in the
ledger of the Delhi Office of the Union Agencies.
After Dhawan had prepared these vouchers he
also used to issue advices to Asia Udyog Ltd. intimating that the amount
mentioned therein had been credited or debited to its account. Thus the name of
Bhagwati Trading Company did not appear in the various advises, vouchers and
the ledgers prepared at Delhi.
In the office of Asia Udyog Ltd., on receipt
of the credit advice, a journalvoucher crediting the amount to the Bombay
Officeand debiting it to the Delhi Office of the Union Agencies was prepared. A
journal voucher showing the entries in the reverse order was prepared on the
receipt of the debit advices. Asia Udyog Ltd., issued advice to the Bombay
Office intimating that the amount had been credited or debited to the Bombay
Office of the Union Agencies in the case of vouchers relating to the credit or
debit advice from that Office. All such vouchers in Asia Udyog Ltd. were signed
by Gurha even during the period when he was ill and was not attending the
office of the Union Agencies.
The result of all such entries in the
vouchers Was that on paper it appeared in the case of credit 388 advices that the
Delhi Office of the Union Agencies advanced money to the Bombay Office which
paid the money to Asia Udyog Ltd., which in its turn, paid the money to the
Delhi Office of the Union Agencies, and in the case of debit advices, the
Bombay Office debited the amount to Delhi Office of the Union Agencies and that
debited it to Asia Udyog Ltd., which in its turn debited it to the Bombay
Office. All these entries were against facts and they must have been done with
a motive and apparently it was to keep off the records any mention of Bhagwati
Trading Company. No explanation has been given as to why this course of making
entries was adopted.
The genuine cash statements are on record.
The alleged fictitious statements are not on the record. It is not admitted by
Gurha that any fictitious cash statement was prepared. It is not necessary for
our purposes to bold whether a fictitious cash statement in lieu of the genuine
cash statement received from Bombay was prepared under the directions of Gurha
or not. The fact remains that the entries in the various advices prepared by
Lakhotia on the basis of the cash statements received, did not represent the
true entries in the genuine cash statements and that journal vouchers prepared
by Dhawan also showed wrong entries and did not represent facts correctly.
Of the journal vouchers with respect to which
the three charges under s. 477 A, 1. P. C. had been framed, two are the
vouchers prepared by Dhawan crediting the amounts mentioned the rein to Asia
Udyog Ltd., and debiting them to the Bombay Office of the Union Agencies. They
are Exhibits P. 2055 and P. 2060. Each of them is addressed to Asia Udyog Ltd.
and states that the amount mentioned therein was the amount received by the
former, i. e. the Bombay Office from Chokhani on account of the latter, i, e.,
Asia Udyog Ltd., on 389 January 7 and January 10, 1955,respectively and
adjusted. One Exhibit P.2042 debits the amount to Asia Udyog Ltd, and credits
it to the Bombay Office of Union Agencies and states the amount mentioned therein
to have been paid by the latter, i.e., Bombay Office to Chokhani on account of
the former, i.e Asia Udyog Ltd., and adjusted.
Other facts which throw light on the
deliberate preparation of these false vouchers are that there had been
tampering of the ledger of the Bombay Office in the Delhi Office of the Union
Agencies and also in the journal statement of that office. The letter "C'
in the folio column of the ledger had been altered to 'J' indicating that entry
referred to an entry in the journal statement received from Bombay. Sheets of
the journal statement on which corresponding entries are noted have also been
changed. These two documents remained in the possession of the Union Agencies
till November 12, 1955, though the advices and vouchers in the Delhi Office
were seized by the Police on September 22, 1955, and therefore interested
persons could make alterations in them.
It has been suggested for Gurha that the
alterations were made by the Police. The suggestion has not been accepted by
the learned Sessions Judge for good reasons. The changed entries did not in any
way support the prosecution case and therefore the police had no reason to get
those entries concocted. The entries did show the receipt of the amounts from
Bhagwati Trading Company, but the prosecution case was that the amount was
received in cash and not through transfers which transactions had to be
adjusted. The learned Sessions Judge, did not, however, believe the statement
of Sri Kishen Lal who investigated the case that he had noticed these
alterations earlier than his statement in Court Which was some time in 1958,
for the reason that 390 Dhawan was not questioned by the prosecution in this
regard and no reference was made by Sri Kishen Lal in the case diary about his
questioning Dhawan about the alterations.
The learned Sessions Judge appears to have
overlooked the statement of Sri Kishen Lal to the effect:
"I made a note in the case diary about
myself having put the overwriting to Lakhotia and about having asked his
explanation about that." The Court could have verified the fact from the
case diary.
It is too much to suppose that Sri Kishen Lal
would make a wrong statement whose inaccuracy could be very easily detected.
However, the learned Session Judge himself has given good reasons for not
accepting the suggestion that the over-writing of the letter 'C' by the letter
'J' and the changing of the journal papers were made by the police.
The part that Gurha played in getting these
false entries prepared is deposed to by Dhawan, P.W. 19, who used,
occasionally, to approach Gurha for instructions.
Further, Gurha, as the accountant of Asia
Udyog Ltd., must have known that Asia Udyog Ltd., bad neither advanced any
amounts to' the Bombay Office of the Union Agencies nor received any amounts
from the Bombay Office of the Union Agencies. He however signed all the
vouchers prepared in the office of Asia Udyog Ltd., in connection with these
transactions. He did so even during his illness (May, 1955, to July, 1955,
which, according to the statement of Gurha, in answer to question No. 134 was
from March 15 to August 12, 1955, during which period he did not attend the
office of the Union Agencies). He signed them deliberately to state false
facts, 391 Dhawan particularly stated that on receipt of the advice, Exhibit P.
2041, on the basis of which journal entry No. 98 was prepared by him, he went'
to Gurha to consult as it was not clear from that advice to whom the amount
mentioned in it had' been paid. Gurha, on looking up the Journal statement
received from the Bombay Office told him to debit that amount to Asia Udyog
Ltd. Dhawan prepared journal voucher P. 2042, accordingly, and Gurha initialed
it. It may be mentioned that this debit advice was addressed to M/s.
Delhi Office and therefore could be taken to
refer either to the Delhi Office of the Union Agencies or the Delhi Office of'
Asia Udyog Ltd., both these offices being in the' same building and being
looked after by Gurha. Gurha admits in his statement under s.342, Cr P. C.,
that Dhawan referred this matter to him and that he asked him to debit the
amount to Asia Udyog Ltd., The journal statement of the Bombay Office at the
relevant time could have no reference to this item which was really entered in
the cash statement and Gurha's conduct in looking up the journal was a mere
ruse to show to Dhawan that was giving instructions on the basis of the entries
and not on his own.
Gurha stated, in answer to question No. 45,
that he remembered to have seen an entry relating to this amount of Rs.
4,61,000 which is the amount mentioned in Ex. P. 2042 in the cash statement of
the Bombay Office of the Union Agencies when O.P. Dhawan referred an advice
relating to that amount to him. In answer to questions Nos. 217 and 218, in
connection with his advising Dhawan about the debiting of this amount to Asia
Udyog Ltd., he stated that he gave that advice after tracing the relevant entry
in the journal statement of the Bombay Office. This answer is not consistent
with his earlier answer to question No. 45 as entry with respect to the same
amount could not have existed 392 simultaneously both in the cash statement and
the journal statement of the Bombay Office. If his later answer is correct, his
referring to the journal would have been just a ruse as already stated. If his
earlier answer is correct that would indicate that either Gurha had supplied
the office with the fictitious cash statement of the Bombay Office as alleged
by the prosecution or that seeing in the journal cash statement that the entry
related to Bhagwati Trading Company, deliberately told Dhawan, in accordance
with the scheme, to debit that amount to Asia Udyog Ltd. In either view of the
matter, this conduct of Gurha in advising Dhawan to debit the amount to Asia
Udyog Ltd., is sufficient to indicate his complicity in the whole scheme, as
otherwise, he had no reason to behave in that manner.
Gurba, among the accused, must have been
chosen for the purpose of the conspiracy because he had connection both with
the Union Agencies and with Asia Udyog Ltd. He had been in the employ of a
Dalmia concern from long before. He was the Accountant of the Dalmia Cement and
Paper Marketing Company from 1948 till its liquidation in 1953. Gurha, as
Director of the Union Agencies, knew that it had suffered losses as a result of
shares peculation business in 1954-55 and that the Delhi Office was short of
liquid funds to meet these losses. He must have known how the funds to meet the
losses were being secured from the funds of the Insurance Company through
Bhagwati Trading Company. He must have also known that this was wrong. It is
only with such knowledge that he could have been a party to the making of false
advices and vouchers. There could be DO other reason. It could not have been
possible for the prosecution to lead direct evidence about Gurha's knowledge
with respect to the full working of the scheme to provide for the losses of the
Union Agencies from the funds of the Insurance Company. It is further 393 not,
necessary that each member of a conspiracy must know all the details of the
conspiracy.
Mr, Kohli, for Gurha, has urged that Gurha
could have had nothing to do with the diversion of the funds of the Insurance
Company to the Union Agencies, even though he was a Director of the latter as
he never issued instructions regarding the activities of the Union Agencies,
had no knowledge of the passing of money from the funds of the Insurance
Company to the Union Agencies as he had nothing to do with the movement of the
securities held by the Insurance Company or the receipt of cash or the other
transactions, his role having begun, according to the prosecution, after the
offence under s. 409 1. P. C. had been actually committed, i.e., after Chokhani
had issued cheques on the bank accounts of the Insurance Company with the
Chartered Bank in favour of Bhagwati Trading Company, and therefore could know
nothing regarding the diversion of funds and the desirability of falsifying the
accounts and papers of the Office; he had to deal with. Great reliance is
placed on the letter, Exhibit B. 956 in submitting that Gurha did not know
about the whole affair and simply knew, as stated by him, that Chokhani had
borrowed money for the Union Agencies to pay its losses, from Bhagwati Trading
Company. This letter is of significance and we quote it in full
"Girdharilal Chokhani Times of India Building, Horn by Road, Bombay -1.
CONFIDENTIAL 17th September 55.
Bharat Union Agencies Ltd., Delhi.
Attn. Mr. R. P. Gurha Dear Sir, I have to
inform you that the various a mounts 394 arranged by me as temporary loans to
Bharat Union Agencies Ltd., Bombay Office from time to time in the name of Bhagwati
Trading Company, actually represented the monies relating to the undernoted
securities belonging to Bharat Insurance Company Limited.
Face Value 2-1/2% 1961 Rs. 56,00,000 3%
1963-65 Rs. 79,00,000 3% 1966-68 Rs. 60,00,000 Rs. 1,94,00,000 I have now to
request you to please arrange at your earliest to pay about Rs. 1,80,00,000 in
cash or purchase the a fore said securities (or their equivalent) and deliver
the same to Bharat Insurance Company Ltd., 10, Daryaganj, Delhi on my behalf,
debiting the amount to the credit standing in the books of the Company's Bombay
Office in the name of M/s Bbagwati Trading Company. Any debit or credit balance
left thereafter in the said account would be settled later on.
I am getting this letter also signed by
Vishnuprasad on behalf of Bhagwati Trading Company although he had neither any
knowledge of these transactions nor had any connection with these affairs.
Yours faithfully, For: Bbagwati Trading
Company Sd/ G. L. Cho khani Sd. Illegible Vishnuprasad Bairanglal
Proprietor." We are of opinion that this is a letter written for the
purpose of the case and was, as urged for 395 the State,. ante-dated. There is
inherent evidence in this letter to support this view. The letter makes a
reference to Vishnu Prasad's having no knowledge of the transactions and having
no connection with the affairs. Mention of these facts was quite out of place
in a letter which Chokhani was addressing to Gurha in the course of business
for his immediately arranging for the payment of Rs. 1,80,00,000 in cash or.
securities to Bharat Insurance Company. Further, the opening expression in the
letter does not necessarily mean that Gurha was being informed for the first
time that the temporary loans arranged by him for the Union Agencies Ltd., in
the name of 'Bhagwati Trading Company actually represented the moneys belonging
to the Bharat Insurance Company. If it meant so, that must have been done so by
design, just as the concluding portion of the letter was, as already mentioned,
put in by design to protect Vishnu Prasad's interest.
The letter is dated September 17, 1955, and
thus purports to have been written a few days before the formal complaint was
made to the police. Even if it was written on September 17, it was written at a
time when the matter of securities had come to the notice of the authorities
and Dalmia was being pressed to satisfactorily explain the position of the
securities. Chokhani could have written a letter of this kind in that setting.
Another fact relied upon by the learned
Sessions Judge in considering this letter to be antedated is that it does not
refer to one kind of securities which were not in the possession of the Insurance
Company even though they had been ostensibly purchased. It does not mention of
the securities worth Rs. 26,25,000 which were really supplied to the Insurance
Company on September 23, 1955. This letter should have included securities of
that amount and should have asked Gurha to make up 396 for that amount to the
Insurance Company. This is a clear indication that this letter was written
after September 23, 1955.
Mr. Kohli has, however, urged that the
contract for the purchase of these securities had taken place on September 16,
1955, and that therefore Chokhani did not include those securities in this
letter. Reference is made to the statement of Jayantilal, P.W. 6, a partner of
the Firm Devkaran Nanjee, Brokers in Shares and securities. He states that
Bhagwati Trading Company wanted to purchase for immediate delivery 3% 1966-68
securities of the face value of Rs. 21,25,000 and that a contract about it was
entered into. Securities of this amount were not available in the market.
Securities worth Rs. 1,75,000 were available and were delivered to Chokhani
that day. They had to purchase securities of the face value of Rs. 20,00,000,
from the Reserve Bank of India in order to effect delivery and had to sell some
other securities of that value. The result was that the required securities
were received by them on September 22, 1955. Even this statement does not
account for not including securities of the value of Rs. 4,50,000 in this
letter Ex. P. 956.
It was further urged in the alternative that
Chokhani had very extensive powers in all the alleged concerns of Dalmia and so
could get anything done due to his influence without divulging secrets. That
was not the position taken by Gurha in his statement. Ho did not say that he
deliberately got false documents prepared due to directions from Chokhani and
which he could not disregard. Even if it be so, that means that Gurha got false
documents made deliberately.
Another submission for Gurha is that the case
held proved for convicting him is different from the case as sought to be made
out in the police chargesheet submitted to the Court under s. 173 of the 397
Code of Criminal Procedure. The charge-sheet is hardly a complete or accurate
thesis of the prosecution case. Clause (a ) of sub-s. (1) of s. 173, Cr. P.C.,
requires the officer-in-charge of the police station to forward to the
Magistrate empowered to take cognizance of the offence on a police report, the
report in the prescribed form setting forth the names of the parties, the
nature of the information, and the names of the persons who appear to be
acquainted with the circumstances of the case. Nothing further need be said on
this point.
Further, it is submitted that the prosecution
case has changed from stage to stage. This can only mean that facts came on the
record which was not known before and therefore the complexion of the
allegations against Gurha's conduct varied. Even if this is so, he can have no
grievance against it unless he bad been unable to meet it in defence.
No such inability has been expressed. It is
however stated that the prosecution based its ultimate case against him on the
allegation that the cash statement received from Bombay was suppressed and
another false cash statement was prepared at Delhi under the directions of
Gurha. We have already dealt with this matter. There was no such allegation on
the basis of the statement of any prosecution witness. This way really a
suggestion to explain how despite certain entries in the cash statements
received from Bombay different entries were made in the advices issued by
Lakhotia which advices ought to have been in accordance with the entries in the
cash statement. The suggestion may be correct or may not be correct. It cannot,
however, be said on its basis that there has been such a change in the
prosecution case as would make the prosecution case reasonably doubtful.
In the same connection, a grievance has been
made that Gurha was not questioned about the 398 allegation that the cash
statement had been suppressed and substituted by another fictitious one. No
such question could have been put to him when there was no evidence about it.
An accused is questioned under s. 342 Cr. P. C., to explain any circumstances
appearing in the evidence against him. It is not necessary to ask him to
explain any inference that a Court may be asked to draw and be prepared to draw
from the evidence on record.
Another point stressed for Gurha is that the
cash statements would not have mentioned Bhagwati Trading Company when the
prosecution case is that Chokhani took deliberate steps to keep the Delhi
Office of the Insurance Company in the dark about it. The fact is that the cash
statement sent from Bombay did mention Bhagwati Trading Company. They were sent
to Gurha personally. In the circumstances the reasonable conclusion can be that
they mentioned Bhagwati Trading Company as that represented the true state of
affairs and Chokhani had to inform the Delhi Office of the Bharat Union
Agencies about the source of the money he was receiving for the Union Agencies
to meet its losses. Chokhani did not disclose the true source, but disclosed a
source fictitiously created to conceal the real source. There was no harm in
disclosing Bhagwati Trading Company to the office of the Union Agencies at
Delhi. With the same frankness it could not have been disclosed to the
Insurance Company Office at Delhi both because that would required the
complicity of the entire staff of the Insurance Company in the conspiracy and
because otherwise, it would at once disclose to the Insurance Company and those
who had to check its working that its funds were being miscued. Disclosure of
Bhagwati Trading Company to the Union Agencies was necessary and there was no
harm in any way in informing Gurha confidentially about it. After Gurha had got
possession of the cash 399 statement it was for him how to direct the necessary
entries to be made in the advices prepared by Lakhotia on behalf of the Bombay
Office at Delhi and on the basis of which journal vouchers were to be prepared
by Dhawan and entries were to be made in the accounts of the Union Agencies at
Delhi. We therefore do not consider that this contention in any way favours the
appellent.
The fact that the account of the Asia Udyog
Ltd., in the ledger Exhibit P. 2226 is not alleged to be fictitious and records
in the column folio' the letter 'J' is of no help as the entries in that ledger
must have been made on the basis of the journal vouchers issued by Dhawan. In
fact once it is alleged that the advices issued by Lkhotia were fictitious any
entry which can be traced to it must also be fictitious.
It is argued that the alleged scheme of
making the circuitious entries could not have worked in keeping the source of
money concealed as the Income-tax Authorities could have detected by following
the entries in the Bank records with respect to the source of payment of money
(by cheques issued by Bhagwati Trading Company) to the Union Agencies at
Bombay. They could have thus known only about Bhagwati Trading Company and, as
already stated, it was not necessary to keep Bhagwati Trading Company secret
from the Union Agencies. What was really to be kept secret was that the money
came from the Insurance Company. The various circuitous entries were not really
made to keep Bhagwati Trading Company unknown, but were made to make it
difficult to trace that the money really was received from the Insurance
Company.
A suggestion has been made by Mr. Kohli that
Chokhani might have showed the same amount both in the cash statement and in
the journal statement. No such case, however, seems to have been 400 raised in
the Courts below and has been made in the appellant's statement of case.
It has been contended that an offence under
s. 477A 1. P. C.
has not been established against the accused
as it is not proved that he falsified any book, papers, etc., in the possession
of his employer with intent to defraud and that the intention to defraud should
be to defraud someone in future and should not relate to an attempt to cover up
what had already happened. It is submitted that an intent to defraud connotes
an intention to deceive and make the person deceived ,suffer some loss, that
the entries made in the journal vouchers did not make anyone suffer and
therefore the entries could not be said to have been made with intent to
defraud.
The expression intent to defraud' is not
defined in the Penal Code but s. 25 defines 'fraudulently' thus:
"A person is said to do a thing fraud.
ulently, if he does that thing with intent to
defraud and not otherwise." The vouchers were falsified with one intention
only and that was to let it go unnoticed that the Union Agencies bad got funds
from the Insurance Company. If they had shown the money received an( paid to
Bhagwati Trading Company, it was possible to trace the money back to the Insurance
Company through Bhagwati Trading Company which received the money from the
Insurance Company through cross cheques as well.
Whoever would have tried to find out the
source of the money would have been deceived by the entries. The Union Agencies
mad wrongful gain from the diversion of the Insurance Company's funds to it
through Bhagwati Trading Company and the Insurance Company suffered loss of
funds. The false entries were made to cover 401 up the diversion of funds and
were thus to conceal and therefore to further the dishonest act already
committed.
We agree with respect with the following
observation in Emperor v. Ragho Ram (1) at page 788:
"If the intention with which a false
document is made is to conceal a fraudulent or dishonest act which had been
previously committed, we fail to appreciate how that intention could be other
than an intention to commit fraud. The concealment of an already committed
fraud is a fraud." And, again, at page 789:
"Where, therefore, there is an intention
to obtain an advantage by deceit there is fraud and if a document is fabricated
with such intent, it is forgery. A man who deliberately makes a false document
in order to conceal a fraud already committed by him is undoubtedly acting with
intent to commit fraud, as by making the false document he intends the party
concerned to believe that no fraud had been committed. It requires no argument
to demonstrate that steps taken and devices adopted with a view to prevent
persons already defrauded from ascertaining that fraud had been perpetrated on
them, and thus to enable the person who practiced the fraud to retain the
illicit gain which he secured by the fraud, amount to the commission of a
fraud.
An act that is calculated to conceal fraud
already committed and to make the party defrauded believe that no fraud had
been committed is a fraudulent act and the person responsible for the act acts
fraudulently within the meaning, of section 25 of the Code." (1)1933J 1 L.
R. 55 All. 783, 788, 789, 402 We agree, with this observation, and repel the
contention for the appellant.
It, has then been submitted that the
falsification should have been necessarily connected with the commission of the
breach of trust. There is no question of immediate or remote connection with
the commission of breach of trust which is sought to be covered up by the
falsification, so long as the falsification is to cover that up. In the present
case, introduction of Bhagwati Trading Company in the transactions was the
first step to carry out deception about the actual payment of money out of the
funds of the Insurance Company to the Union Agencies.
The second step of suppressing the name of
Bhagwati Trading Company in the papers of the Union Agencies Delhi, made it
more difficult to trace the passing of the money of the Insurance Company to
the Union Agencies and therefore the falsification of the journal vouchers
related back to the original diversion of the Insurance Companys moneys to the
Union Agencies and was with a view to deceive any such person in future who be
tracing the source of the money received by the Union Agencies.
A grievance is made of the fact that certain
witnesses were not examined by the prosecution. Of the persons working for the
Union Agencies, five were accused at the trial, Kannan, Lakhotia, Gurha, Mittal
and Dudani. Only Gurha among them was convicted. The others were acquitted.
'The remaining persons were Krishnan, Panohawagh and the clerks O. D. Mathur
and Attarshi. Of the persons connected with Asia Udyog, one R. S. Jain of the
Accounts Branch was not examined. Panchawagh who was an Accountant of the Union
Agencies and had custody of the cash statements and journal was given up by the
prosecution on the ground that 403 he was won over. We do not consider that it
was necessary to examine him for the unfolding of the prosecution case against
Gurha. Similarly it was not necessary to examine the others for that purpose. A
mere consideration that they might have given a further description of how
things happened in those offices would not justify the conclusion that the
omission to examine them was an oblique motive and could go to benefit the
accused.
A grievance was made that the High Court did
not deal with the question whether the police tampered with the cash statement
and the journal. It is not clear whether such a point was raised in the High
Court. It was however not mentioned in the grounds of appeal. The trial Court
did deal with the point and held against the appellant Gurha.
In fact, paragraph 22 of the grounds of appeal
by Gurba simply said that no value should have been attached to the said
cuttings when it was not proved on the record as to who made the said cuttings
and when they were not calculated to conceal the true facts or the further
interest of the conspiracy.
We are therefore of opinion that Gurha has
been rightly held to have been in the conspiracy and to have abetted the making
of the false journal vouchers.
In view of the above, we are of opinion that
the appellants have been rightly convicted of the offences charged.
It has been urged for Chokhani that his
sentence be reduced to the period already undergone as he made no profit for
himself out of the impugned transactions, that he is 59 years old and had
already been ten days in jail. We do not consider these to justify the
reduction of the sentence when 404 he was the chief person to carry out the
main work of the conspiracy.
We also do not consider Dalmia's sentence, in
the circumstances of the case, to be severe.
We therefore dismiss these appeals.
Appeals Dismissed.
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