Supreme Court of India
AJOY ACHARYAversusSTATE BUREAU OF INV. AGAINST ECO. OFFENCE
- Citation
- 2013 INSC 632
- Decided
- 17 September 2013
- Disposal
- Dismissed
- Bench
- P SATHASIVAM
Holding
Sanction under Section 197 CrPC is required only from the authority empowered to remove the public servant from the specific office he is alleged to have misused, and if he no longer holds that office at the time cognizance is taken, no prior sanction is necessary.
Summary
The case concerned Ajoy Acharya, an IAS officer who was also a nominee Director of the Madhya Pradesh State Industrial Development Corporation (MPSIDC). He was charged for allowing the Board of MPSIDC to pass a resolution on 19‑April‑1995 that authorised short‑term loans, allegedly contrary to earlier government decisions. The appellant argued that prosecution could not proceed without prior sanction under Section 197 of the CrPC because he was a public servant. The Supreme Court held that sanction is required only from the authority competent to remove the officer from the specific post he is alleged to have misused – here, the Governor’s authority over nominee Directors – and that no sanction is needed if the officer had ceased to hold that post at the time cognizance was taken (the charge sheet was filed in 2007, while he left the director post in 1998). Consequently, the appeals were dismissed and the trial was directed to proceed expeditiously.
Issues considered
- The necessity of obtaining prior sanction under Section 197 CrPC when the accused holds multiple public offices.
- Whether sanction must be obtained from the authority competent to remove the specific office alleged to have been misused (nominee Director of MPSIDC) versus other offices held.
- Whether sanction is required when the accused had relinquished the alleged misused office before cognizance was taken.
- Whether the appellant’s participation in MPSIDC board meetings was in his capacity as nominee Director or as Industries Commissioner/IAS officer.
- Applicability of Section 141 of the Negotiable Instruments Act to a director not in charge of the company's business.
- Whether the principle of parity in law obliges sanction because a co‑accused obtained it.
Legislation cited
- Code of Civil Procedure, 1973s. 197
- Code of Criminal Procedure, 1973s. 239
- Companies Act, 1965s. 292
- Indian Penal Code, 1860s. 120B, s. 161, s. 164, s. 165, s. 406, s. 409, s. 467, s. 468
- Negotiable Instruments Act, 1881s. 141
- Prevention of Corruption Act, 1988s. 13(1)(d), s. 19
Subjects
sanctionpublic servantSection 197 CrPCmultiple officesnominee directorMPSIDCPrevention of Corruption ActIndian Penal CodeNegotiable Instruments Actcorporate governanceparity in law
Judgment
[2013] 9 S.C.R. 457
AJOY ACHARYA A
v.
STATE BUREAU OF INV. AGAINST ECO. OFFENCE
(Criminal Appeal No. 1454 of 2013 etc.)
SEPTEMBER 17, 2013.
B
[P. SATHASIVAM, CJI AND JAGDISH
SINGH KHEHAR, J.)
Code of Civil Procedure, 1973:
c
s. 197 read with s.239 CrPC and s.19 of P.C. Act -
Previous sanction for prosecution of public servant -
Appellant, an /AS, holding offices of Industries Commissioner
in State Government and a nominee Director of MPS/DC -
Misuse of position by appellant while discharging his 0
responsibilities as a nominee Director of MPS/DC -
Prosecution of - Held: The Governor under Clause 89 of
Memorandum and Articles of Association of MPS/DC has
absolute discretion to nominate anyone suitable as per his
wisdom, as nominee Director of MPS/DC and is also vested E
with absolute discretion to remove a nominee Director -
Participation of appellant in the meeting of the Board of
Directors of MPS/DC was not on account of his holding the
office of Industries Commissioner, Government of Madhya
Pradesh, nor was it on account of his being a member of /AS
cadre - Therefore, sanction if required, ought to have been F
obtained from the Governor of the State - However, since
appellant was not holding the public office which he is alleged
to have abused, when the first charge sheet was filed, there
was no need to obtain any sanction before proceeding to
prosecute him for the offences f111eged against him. G
s.197 - Previous sanction for prosecution of public
servant - Held: Sanction is essential only if, at the time of
457 H
458 SUPREME COURT REPORTS (2013] 9 S.C.R.
A taking cognizance, accused was still holding the public office
which he allegedly abused.
s. 197 - Previous sanction for prosecution of public
servant - Plurality of offices held by public servant - Held: If
an accused holds a plurality of offices, sanction is essential
8
only at the hands of the competent authority entitled to
remove him from service of the office which he had allegedly
misused.
s. 197 - Previous sanction for prosecution of public
C servant - Public servant, a nominee Director of MPSDIC -
Plea that such nominee Director was not incharge of conduct
of business of MPSD/C nor was he responsible for its day to
day activities - Held: Accusation implicating the appellant, is
directly attributable to him as nominee Director of MPS/DC
D - His culpability lies in the mischief of passing the resolution
in question - Implementation of said resolution is the
consequential effect of the said mischief.
By a resolution dated 19.4.1995, the Board of
E Directors of the Madhya Pradesh State Industrial
Development Corporation (MPSIDC) authorized its
Managing Director, to extend short term loans including
inter-corporate deposits (ICDs) out of the surplus funds
with the MPSIDC, on suitable terms and conditions. It was
alleged that the resolution dated 19.4.1995 was passed
F in disregard of an earlier decision· taken in the Cabinet
Review Meeting held on 28.1.1994, and the resolution
dated 31.1.1994 passed by Board of Directors of MPSIDC,
that the MPSIDC would not extend financial assistance
to industries. The petitioner, a member of the IAS cadre,
G while holding the charge of the office of Industries
Commissioner, Government of Madhya Pradesh, was
nominated as a Director of the MPSIDC in 1993. He
continued as such till 1998. In June 1998, he was
transferred as Joint Secretary, Department of Heavy
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 459
ECO. OFFENCE
Industries, Government of India, whereupon, he ceased A
to be on the Board of Directors of the MPSIDC. He had
admittedly attended both the meetings held on 28.1.1994
and 31.1.1994. The first charge sheet dated 22.9.2007 was
filed in Special Case no. 7 of 2007, and the Special Judge
took cognizance thereof. The petitioner filed a petition u/ B
s 239 of the CrPC as well as, s.19 of the Prevention of
Corruption Act, 1988 seeking his discharge on the
ground, that prosecution had been initiated against him
without seeking sanction of the competent authority. The
petition was dismissed by the Special Judge on 11.4.2008 c
and the criminal revision preferred by him was dismissed
by the High Court.
In the instant appeal filed by the appellant, the issue
for consideration was: whether the participation of the
appellant in the meetings, in question was based on his D
position as a nominee Director on the Board of Directors
of the MPSIDC, and/or in his capacity as a member of the
IAS cadre allocated to the State of Madhya Pradesh.
Dismissing the appeals, the Court E
HELD: 1.1. The appellant's nomination as Director
with the MPSIDC emerges from clause 89(2) of the
Memorandum and Articles of Association of the MPSIDc:·
The Governor under clause 89 has the absolute
discretion to nominate anyone suitable as per his F
wisdom, as nominee Director to the MPSIDC. The
Governor, under sub-clause (4) of Clause 89 is also
vested with the absolute discretion to remove a nominee
Director. It was only on account of the nomination of the
appellant as director of the MPSIDC that he assumed the G
responsibility and the power to deal with the affairs of the
MPSIDC and to participate in the controversial ·meeting
where the MPSIDC passed its resolution dated 19.4.1995.
It is significant to note that clause 89 does not
H
460 SUPREME COURT REPORTS [2013] 9 S.C.R.
A contemplate that the Industries Commissioner,
Government of Madhya Pradesh would necessarily, or
automatically, or as a matter of course, must be
nominated as Director of the MPSIDC. Likewise, clause
89 does not require a nominee director to be drawn out
B of members of the IAS cadre. In this view of the matter, it
cannot be said that the appellant's nomination as Director
of the MPSIDC, was the outcome of his holding the office
of Industries Commissioner, Government of Madhya
Pradesh, or his nomination as a Director in six other
C companies, or on account of his being a member of the
IAS cadre. [para 12] [471-D-E; 473-A-D]
1.2. If an accused holds a plurality of offices, each
one of which makes him a public servant, sanction is
essential only at the hands of the competent authority
D entitled to remove him from service of the office which
he had allegedly misused. This leads .to the clear
inference, that other public offices held by the accused
are irrelevant for purposes of obtaining sanction .. Further,
sanction is essential only if, at the time of taking
E cognizance, the accused was still holding the public
office which he allegedly abused. [para 14] [486-D-F]
R.S. Naik vs. A.R. Antulay, 1984 (2) SCR 495 = (1984)
2 SCC 183; and Prakash Singh Badal vs. State of Punjab,
F 2006 (1 Ol Suppl. SCR 197 = (2007) 1 sec 1, relied on. ·
. 1.3. In the facts and circumstances of the instant
case, sanction if required, ought to have been obtained
from the' Governor of the State of Madhya Pradesh, as the
appellant is stated to have misused his position while
G discharging his responsibilities as a nominee Director of
the MPSIDC. It is clear that the appellant's participation
in the Cabinet Review Meeting dated 28.1.1994, and in the·
relevant meetings of the Board of Directors (of the
MPSIDC) had no nexus to the post of Industries
H Commissioner, Government of Madhya Pradesh, or the
,.
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 461
ECO.· OFFENCE
subsequent office held by him as Joint Secretary, A
Department of Heavy Industries, Government of India.
Accordingly, sanction of the authorities with reference to
the post of Industries Commissioner, Government of
Madhya Pradesh and Joint Secretary, Department of
Heavy Industries, Government of India held by the B
appellant, was certainly not required. [para 14] [486-F-H;
487-A-B]
1.4. Besides, the appellant remained a nominee
Director of the MPSIDC from 1993 to 1998. The first
charge sheet in the m,tter was filed on 24.9.2007, i.e., C
after the appellant had relinquished charge of the office
which he is alleged to have abused/misused (i.e. the
office of nominee Director of the MPSIDC). In this view of
the matter, since the appellant was not holding the public
office which he is alleged to have abused, when the first D
charge sheet was filed, there was no need to obtain any
sanction before proceeding to prosecute the appellant,
for the offe'nces alleged against him. [para 15] [487-G-H;
488-A-B]
E
State of Madhya Pradesh vs. Sheet/a Sahai & Ors .. 2009
(12 ) SCR 1048 = (2009) 8 SCC 617 - distinguished
2.1. As regards the plea that sanction to prosecute
another similarly situated co-accused had been obtained,
suffice it to say that parity in law can be claimed only in F
respect of action rightfully executed. And not otherwise.
Since sanction was not required in the case of the
appellant, it cannot be said that merely because sanction
was obtained in respect of another co-accused, it needed
to have been obtained in the appellant's case as well. G
[para 17] [489-D, E-G]
Soma Chakravarty vs. State through CBI, 2007 (6)
SCR 324 = (2007) 5 SCC 403- held inapplicable.
2.2. So far as the plea that the appellant was not H
462 SUPREME COURT REPORTS [2013] 9 S.C.R.
A incharge of the conduct of business of the MPSIDC is
concerned, it is significant to note that the appellant is not
being blamed for the implementation of the resolution of
the Bo~rd of Directors of the MPSIDC dated 19.4.1995.
The charge against the appellant is based on the fact that
B he allowed the Board of Directors of the MPSIDC to pass
the resolution dated 19.4.1995, inspite of the earlier
decisions of the Cabinet Review Coinmittee (in meeting
dated 18.1.1994) and the consequential resolution of the
Board of Directors (dated 31.1.1994). In the facts of the
c case, the accusation implicating the appellant, is directly
attributable to him as nominee Director of the MPSIDC.
His culpability lies in the mischief of passing the
resolution dated 19.4.1995. The implementation of the
said resolution is the consequential effect of the said
mischief. [para 19) [493-A, C-D; 494-A-C]
0
National Small Industries Corporation Ltd. vs. Harmeet
Singh Paintal & Anr. 2010 (2) SCR 805 = (2010) 3 .SCC 330
- held inapplicable.
E 3. The trial court is directed to expedite the trial, on a
weekly basis, keeping in mind, that the charge sheet in the
matter was filed as far back as in 2007. [para 22) [496-D]
C. K. Jaffer Sharief vs. State (through CBI), (2013) 1 SCC
205- cited.
F
Case Law Reference:
1984 (2) SCR 495 relied on para 13
2006 (10) Suppl. SCR 197 relied on para 13
G 2009 (12) SCR 1048 distinguished para 16
2007 (6) SCR 324 held inapplicable Para 17
2010 (2) SCR 805 held inapplicable para 18
(2013) 1 sec 20s cited Para 20
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 463
ECO. OFFENCE
CRIMINAL AP PELLATE JURISDICTION : Criminal Appeal A
No. 1454 of 2013.
From the Judgment & Order dated 29.08.2011 of the High
Court of Madhya Pradesh at Jabalpur in Criminal Revision No.
1422 of 2008.
B
WITH
C.A. No. 1455 of 2013
L.N. Rao, lndu Malhotra, Amit Prasad, Kush Chatur Vedi,
Vivek Jain, Malvika Kapila, J.P. Malviya, Ruchika Pathak, c
Vikas Mehta for the Appellant.
C.D. Singh, Sunny Choudhary for the Respondent.
The Judgment of the Court was delivered by
D
JAGDISH SINGH KHEHAR, J. 1. Investigation into the
affairs of the Madhya Pradesh Industrial Development
Corporation (renamed as Madhya Pradesh State Industrial
Development Corporation, hereinafter referred to as the
'MPSIDC') was ordered with effect from 3.1.1996, by the State E
Government. Thereupon, a first information report bearing no.
25 of 2004 was registered under Sections 409, 406, 467, 468
and 120B of the Indian Penal Code, 1860 (hereinafter referred
to as the 'IPC') and Section 13(1)(d) read with Section 13(2)
of the Prevention of Corruption Act, 1988 (hereinafter referred
F
to as the 'PC Act'). The allegations levelled in the first
information report generally were, that the functionaries of the
MPSIDC had permitted investment by way of inter corporate
deposits (hereinafter referred to as the 'ICD's') through a
resolution of the Board of Directors (of the MPSIDC) dated
19.4.1995. By the instant resolution, the Board (of the MPSIDC) G
authorized its Managing Director, to extend short term loans
(including ICD's) out of the surplus funds with the MPSIDC, on
suitable terms and conditions. The gravamen of the accusation
was, that the Board of Directors' resolution dated 19.4.1995
H
464 SUPREME COURT REPORTS [2013] 9 S.C.R.
A was passed in disregard of an earlier decision taken in the
Cab,lnet Review Meeting held on 28.1.1994, wherein a
decision was taken that the MPSIDC would not extend financial
assistance to industries. The petitioner herein had admittedly
attended the said meeting held on 28.1.1994. The accusation
B also included the insinuation, that after the decision of the
Cabinet Review Committee dated 28.1.1994, the Board of
Directors (of the MPS IDC) had passed an endorsing resolution
dated 31.1.1994, wherein it was resolved by the MPSIDC to
stop financing industries, from out of its surplus funds. The
C petitioner herein had even participated in the instant
proceedings held on 31.1.1994. Based on the aforesaid factual
position, it was sought to be suggested, that undeterred by the
decision during the Cabinet Review Meeting dated 28.1.1994,
and the resolution of the Board dated 31.1.1994 (which had
prohibited extension of financial assistance to industries), the
0
· Board of Directors' resolution dated 19.4.1995, au~horized its
Managing Director to extend short term loans (including ICD's}
to industries, out of surplus funds with the MPSIDC, on suitable
terms and conditions. It was also alleged, that the above
controversial Board resolution dated 19.4.1995 was passed. in
E complete disregard to the mandate contained in Section 292
of the Companies Act, 1965. After the aforesaid Board
resolution dated 19.4.1995, it was alleged, that the MPSIDC
had extended ICD's to a large number of companies, out of _
which 42 companies had committed default in repayments. In
F the abovementioned first information report, it was also alleged,
that the abovementioned transactions executed by the MPSIDC
were illegal and in violation of law.
2. The ICD's referred to in the foregoing paragraph were
G executed during the period between 1995 and 2004. It was
alleged, that four senior functionaries of the MPSIDC who were
then members- of the Board.of Directors of the MPSIDC had
deliberately supported the reso_lution of the Board of Directors
, dated 19.4.1995, despite the fact that they were aware of the
H Cabinet Review Meeting decision dated 28.1.1994, as well.as,
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 465
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
the earlier resolution of the Board of Directors of the MPSIDC A
dated 31.1.1994. Without their participation and support, it was
alleged, that the controversial Board resolution dated 19.4.1995
could not have been passed.
3. It would also be relevant to mention, that allegations B
were also levelled against 42 defaulting companies in the first
information report dated 24.7.2004. The said 42 companies
had defaulted by not making repayments of the ICD's released
to them, in terms of their contractual obligations. The said first
information report, however, did not make any reference to a C
large number of other companies in whose favour the MPSIDC
had likewise extended ICD's, simply because the companies
had returned the loaned amount to the MPSIDC, in consonance
with their contractual obligations.
4 A brief description of the four senior functionaries of the D
MPSIDC, against whom allegations were levelled, is being
delineated below:
(i) Rajender Kumar Singh He was the then State
Minister in the Commerce E
and Industries Department.
He was also the then
Chairman of the MPSIDC,
having been appointed as
such on 7.4.1994.
F
(ii) Ajoy Acharya He was a member of the
IAS cadre, belonging to the
1976 batch. While holding
the charge of the office of
Industries Commissioner, G
Government of Madhya
Pradesh, he was
nominated as a Director of
the MPSIDC in 1993. He
continued as such till H
466 SUPREME COURT REPORTS (2013] 9 S.C.R.
A 1998. In June 1998, he
was transferred as Joint
Secretary, Department of
Heavy Industries,
Government of India,
B whereupon, he ceased to
be on the Board of
Directors of the MPSIDC.
(iii) J.M. Ramamurthy He was also a member of
the IAS cadre. He was
c appointed as Special
Director, on the Board of
the MPSIDC in 1993. He
retired from the IAS on
30.6.1998. Thereupon, he
D ceased to be on the Board
of Directors· of the
MPSIDC.
(iv) Munadutt Pillai Rajan He was also a member of
E the IAS cadre. He was
appointed as the
Managing Director of the
MPSIDC .. He retired from
the IAS on 7.5.2000.
F Thereupon, he ceased to
be the Managing Director
ofthe MPSIDC.
5. The first charge sheet was filed on 24.9.2007. The
allegations against the petitioner herein, Ajoy Acharya, were as
G follows:
"(a) The petitioner was present at the Cabinet Review
Meeting dated 28.01.1994 and Board Meeting
dated 31.01.1994, where the decision relating to
H discontinuance of project financing/providing
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 467
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.)
financial assistance was taken, and thus, the instant A
factual position was within petitioner's personal
knowledge."
(b) The petitioner was present in the Board Meeting
dated 19.04.1995 in which the Board Resolution B
was passed to engage itself in Investments by way
of ICD, and also in other Board Meeting after
28.01.1994 where decision relating to equity
participation was taken. The petitioner did not
object to the passing of these resolutions despite C
of his having been aware of the contrary decision
taken at the Cabinet Review Meeting which was
endorsed at the Board Meeting dated 31.1.1994.
(c) The petitioner did not act bonafidely as the Cabinet
Review Meeting had specifically stopped giving of D
any financial assistance to industries out of the
surplus funds available with the MPSIDC.
(d) The Board Resolution dated 19.04.1995
empowering the Managing Director to invest in ICD E
was in violation of Section 292 of the Companies
Act, and also, in violation of Memorandum of
Association and Articles of Association.
(e) The petitioner facilitated the passing of the
aforesaid allegedly illegal Board Resolution, which F
became the foundation for all illegal ICD's.
(f) The petitioner facilitated the passing of the
resolutions referred to above, by attending the said
Board Meetings, wherein he did not object to the G
proposed resolutions in the Board Meetings."
6. The first charge sheet dated 22.9.2007 was filed in
Special Case no. 7 of 2007, and the Special Judge, Bhop_al,
took cognizance thereof. It is the contention of the petitioner Ajoy
H
468 SUPREME COURT REPORTS (2013] 9 S.C.R.
A Acharya, that upon his having perused the charge sheet dated
22.9.2007 (and the documents enclosed therewith), he learnt
that no sanction was applied for or obtained, before initiation
of the above prosecution against him. Under the belief, that
prior sanction was a pre-requisite under Section 19 of the PC
B Act, as well as, under Section 197 of the Code of Criminal
Procedure, 1973 (hereinafter referred to as the 'CrPC'), the
petitioner filed a petition under Section 239 of the CrP.C (as
well as, Section 19 of the PC Act) seeking discharge on the
ground, that prosecution had been initiated against him without
c seeking sanction of the competent authority. The petition filed
under Section 239 of the CrPC was dismissed by the Special
Judge, Bhopal, on 11.4.2008.
7. Dissatisfied with the aforesaid order dated 11.4.2008,
the petitioner preferred Criminal Revision Petition no. 1422 of
D 2008, in the High Court of Madhya Pradesh (before its principal
seat at Jabalpur, hereinafter referred to as the 'High Court').
The aforesaid Criminal Revision Petition was dismissed by a
. Division Bench of the High Court on 29.8.2011. Aggrieved by
the order passed by the Special Judge, Bhopal (dated
E 11.4.2008), and the order passed by the High Court (dated
29.8.2011 ), the petitioner preferred Petition for Special Leave
to Appeal (Criminal) no. 61 of 2012. This Court issued notice
in the above matter (as also in a connected matter i.e., Special
Leave to Appeal (Criminal) no. 400 of 2012) on 6.1.2012. While
F issuing notice, an interim order came to be passed on
6.1.2012, staying proceedings before the Special Judge,
Bhopal (in Special Case no. 7 of 2007).
8. We have concluded hearing in the matter. Leave is
G granted.
9. We shall endeavour to first adjudicate the principal
contention advanced at the hands of the appellant, namely, that
the initiation of prosecution against the appellant was not
sustainable in law, since sanction of the competent authority
H was not obtained before cognizance in the matter was taken.
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 469
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
The particulars of the allegations levelled against the appellant A
in the charge sheet filed against him (and others) are irrelevant
for the determination of the present controversy. We have
already recorded hereinabove briefly, an outline of the
controversy which resulted in the filing of the charge sheet
(dated 22.9.2007) involving the appellant. Despite our above B
determination, it is imperative at the cost of repetition to notice,
that the pointed allegation in respect of the appellant's
culpability is drawn from the resolution of the Board of Directors
of the MPSIDC dated 19.4.1995. For all intents and purposes,
therefore, our determination on the merits of the controversy, c
will be based on the culpability of the appellant on account of
his participation in the meeting of the Board of Directors,
wherein the resolution dated 19.4.1995 was passed, without
his having objected to the same.
10. Having recorded the cause for his being arrayed as D
an accused, the next step in the process of the present
adjudication is to determine whether the participation of the
appellant in the meetings in question was based on his position
as a nominee Director on the Board of Directors of the
MPSIDC, and/or in his capacity as a member of the IAS cadre E
allocated to the State of Madhya Pradesh. The above
determination, would make all the difference to the outcome on
the principal issue canvassed on behalf of the appellant. If the
appellant's position as nominee director of the MPSIDC was
abused, then the holding of the said position itself would be F
relevant for deciding the present controversy. If however, the
office of Industries Commissioner, Government of Madhya
Pradesh was abused, the consideration would be different. In
the latter situation, the appellant being a member of the IAS
cadre, his said position would necessarily have a relevant G
nexus to the issue in hand. It is essential to notice, that besides
being a nominee Director of the Board of Directors of the
MPSIDC, the appellant was simultaneously nominated as a
Director of six other companies. The nomination of the
appellant as Director in the other companies (besides the H
470 SUPREME COURT REPORTS (2013) 9 S.C.R.
A MPSIDC), has no nexus to the allegations levelled against him
in the charge sheet dated 22.9.2007. However, there is some
doubt about the fact, whether the appellant participated in the
controversial meeting of the Board of Directors (of the
MPSIDC) only because of his holding the office of Industries
B Commissioner of the Government of Madhya Pradesh, which.
position he occupied as a member of the IAS cadre of the State
of Madhya Pradesh.
11. The case set up by the appellant was, that it was
mandatory for the prosecution to obtain sanction before
C initiating prosecution against him, as he held a government
post, namely, the post of Industries Commissioner, Government
of Madhya Pradesh. It was also submitted on the appellant's
behalf, that he was a public servant, and the President of India
was his appointing authority, as also his dismissing authority.
D Even while he was discharging his duties as Industries
Commissioner, Government of Madhya Pradesh, and
thereafter, when he had proceeded on appointment by way of
deputation to the Central Government, his appointing and
dismissing authorities remained the same. Insofar as his being
E nominated as a Director on the Board of the MPSIDC is
concerned, the case set up by the appellant was, that his
nomination co-existed with his appointment as Industries
Commissioner, Government of Madhya Pradesh. In this behalf
it was asserted, that his being nominated as a Director (with
F the MPSIDC) was the outcome/consequence/result of his
holding the office of Industries Commissioner, Government of
Madhya Pradesh. It was submitted, that had he not held the
office of Industries Commissioner, he would not have been
nominated as a Director (with the MPSIDC). It was further
G asserted, that consequent upon his appointment by way of
deputation to the Central Government, his successor on the
post of Industries Commissioner, came to be nominated as a
Director on the Board of the MPSIDC. It was therefore, sought
to be canvassed, that the appellant's nomination as Director
H of the Board of the MPSIDC, was a fallout/sequel of his
AJOY ACHARYA v. STATE BUREAU ·oF INV. AGAINST 471
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
appointment as Industries Commissioner, Government of A
Madhya Pradesh. It was accordingly his contention, that he
continued to occupy the same position as he had occupied
while holding the office of Industries Commissioner,
Government of Madhya Pradesh, even after cognizance was .
taken by the Special Judge, Bhopal. The submission projected B
was premised on the foundation, that the offices held by the
appellant were the outcome of his appointment to the IAS cadre.
As such, according to the appellant, his participation in the
proceedings of the Board of Directors culminating in its
resolution dated 19.4.1995, must be deemed to have been c
taken in his capacity as a member of the IAS cadre.
12. On the pleas canvassed at the hands of the learned
counsel for the appellant, as have been noticed in the foregoing
paragraph, there can be no doubt that merely the position held
by the appellant as Commissioner Industries, Government of D
Madhya Pradesh, would not have vested in him the right to
participate in the affairs of the MPSIDC. It was only on account
of the nomination of the appellant as director of the MPSIDC,
that vested in him the authority to participate in the controversial
meeting where the MPSIDC passed its resolution dated E
19.4.1995. Likewise, his nomination as a Director in six other
companies did not vest in him any right whatsoever, to deal with
the affairs of the MPSIDC. It is only on account of his being a
nominee Director of the MPSIDC, that he assumed the
responsibility and the power, to deal with the affairs of the F
MPSIDC. His participation in the proceedings of the Board of
Directors which passed its resolution dated 19.4.1995 was
therefore exclusively on account of his having been nominated
as a Director on the Board of the MPSIDC. We must therefore,
first endeavour, to deal with the credibility of the submission G
canvassed on beh~lf of the appellant, that the appellant's
nomination as Director (with the MPSIDC) was the outcome of
his holding the office of Industries Commissioner, Government
of Madhya Pradesh. It was not disputed during the course of
. hearing, that the appellant's nomination as Director (with the H
472 SUPREME COURT REPORTS [2013] 9 S.C.R.
A MPSIDC) emerges from clause 89(2) of the Memorandum and
Articles of Association of the MPSIDC. Clause 89
aforementioned is being extracted hereunder:
"89 (1) The number of Directors shall not be less than
three and more than twelve but the number can be
B
increased or decreased by the Governor subject to
the provisions of the Act.
(2) Unless otherwise determined by the Governor
from time to time not more than five Directors shall
c be nominated by the Governor so long as the
Government's share does not exceed Rs.26 lakhs.
In the event of Government's share exceeding this
amount, the number of Directors to be nominated
by the Governor will increase. The number of
D Directors so increased will be in proportion to the
Government's share in excess of Rs.26 lakhs and
the shares held by persons other than Government.
The Directors other than those nominated by the
Governor shall be appointed by the Company in the
E general meeting.
(3) The tenure of all Directors including Chairman
and excluding Managing Director shall be for the
period as fixed or determined by the State
Government from time to time. The Managing
F Director shall retire on his ceasing to hold the office
of the Managing Director. A retiring Director shall
be eligible for reappointment.
(4) The Governor shall have the power to remove
G any Director appointed and nominated by him
including the Chairman and the Managing Director
from Office at any time in his absolute discretion.
(5) The Governor shall have the right to fill any
vacancy in the Office of a Director caused by
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 473
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
retirement, removal, resignation, death or otherwise A
of the Directors nominated/appointed by him.
A perusal of sub-clause (2) of clause 89 reveals, that nominee
Directors to the MPSIDC are appointed by the Governor. The
Governor (under sub-clause (4) extracted above) is also.vested 8
with the absolute discretion to remove a nominee Director. But
what needs emphasis is, that clause 89 of the Memorandum
and Articles of Association of the MPSIDC, does not
contemplate that the Industries Commissioner, Government of
Madhya Pradesh would necessarily, or automatically, or as a C
matter of course, must be nominated as Director of the
MPSIDC. Likewise, clause 89 aforementioned, does not
require a nominee director to be drawn out of members of the
IAS cadre. In fact, in our view, the Governor under clause 89
has the absolute discretion to nominate anyone suitable as per
his wisdom, as nominee Director to the MPSIDC. In the above D
view of the matter, it is not possible to accept, that the
appellant's nomination as Director of the MPSIDC, was the
outcome of his holding the office of Industries Commissioner,
Government of Madhya Pradesh, or on account of his being a
member of the IAS cadre. In the above view of the matter it is E
natural to conclude, that the participation of the appellant in the
meeting of the Board of Directors of the MPSIDC on 19.4.1995
was not on account of his holding the office of Industries
Commissioner, Government of Madhya Pradesh, or on account
of his being a member of the IAS cadre. Having so concluded, F
we shall now endeavour to determine, on the basis of the law
declared by this Court, the veracity of the assertion made by
the appellant, that prior sanction was mandatory, and in its
absence, the prosecution initiated against the appellant should
be considered to be without jurisdiction. G
13. We shall first endeavour to deal with the law declared
by this Court on the proposition being canvassed before us. In
this behalf, reference may first of all be made to R.S. Naik vs.
A.R. Antulay, (1984) 2 SCC 183. Observations made by this
H
474 SUPREME COURT REPORTS [2013] 9 S.C.R.
A Court, as are relevant to the proposition canvassed on behalf
of the appellant, are being extracted hereunder :
"21. Re: (b) and (c): It was strenuously contended that if
the accused has held or holds a plurality of offices
occupying each one of which makes him a public servant.
B
sanction of each one of the competent authorities entitled
to remove him from each one of the offices held by him.
would be necessary and if anyone of the competent
authorities fails or declines to grant sanction. the court is
precluded or prohibited from taking cognizance of the
c offence with which the public servant is charged. This
submission was sought to be repelled urging that it is
implicit in Section 6 that sanction of that authority alone is
necessary which is competent to remove the public servant
from the office which he is alleged to have misused or
D abused for corrupt motives. Section 6(1)(c) is the only
provision relied upon on behalf of the accused to contend
that as M.L.A. he was a public servant on the date of taking
cognizance of the offences, and therefore, sanction of that
authority competent to remove him from that office is a sine
E qua non for taking cognizance of offences. Section 6 (1)(c)
bars taking cognizance of an offence alleged to have been
committed by public servant except with the previous
sanction of the authority competent to remove him from his
office.
F
)()()( )()()( )()()( )()()(
23. Offences prescribed in Sections 161, 164 and 165 IPC
and Section 5 of the 1947 Act have an intimate and
inseparable relation with the office of a public servant. A
G public servant occupies office which renders him a public
servant and occupying the office carries with it the powers
conferred on the office. Power generally is not conferred
on an individual person. In a society governed by rule of
law power is conferred on office or acquired by statutory
H status and the individual occupying the office or on whom
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 475
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
status is conferred enjoys the power of office or power A
flowing from the status. The holder of the office alone would
have opportunity to abuse or misuse the office. These
sections codify a well-recognised truism that power has the
tendency to corrupt. It is the holding of the office which gives
an opportunity to use it for corrupt motives. Therefore, the B
corrupt conduct is directly attributable and flows from the
power conferred on the office. This interrelation and
interdependence between individual and the office he
holds is substantial and not severable. Each of the three
clauses of sub-section ( 1) of Section 6 uses the c
expression 'office' and the power to grant sanction is
conferred on the authority competent to remove the public
servant from his office and Section 6 requires a sanction
before taking cognizance of offences committed by public
servant. The offence would be committed by the public
0
servant by misusing or abusing the power of office and it
is from that office, the authority must be competent to
remove him so as to be entitled to grant sanction. The
removal would bring about cessation of interrelation
between the office and abuse by the holder of the office.
The link between power with opportunity to abuse and the E
holder of office would be severed by removal from office.
Therefore, when a public servant is accused of an offence
of taking gratification other than legal remuneration for
doing or forbearing to do an official act.(Section 161 IPC)
or as a public servant abets offences punishable under F
Sections 161. and 163 (Section 164 IPC) or as public
servant obtains a valuable thing without consideration from
person concerned in any proceeding or business
transacted by such public servant (Section 165 IPC) or
commits criminal misconduct as defined in Section 5 of G
the 1947 Act, it is implicit in the various offences that the
public servant has misused or abused the power of office
held by him as public servant. The expression 'office' in
the three sub-clauses of Section 6(1) would clearly denote
that office which the public servant misused or abused for H
476 SUPREME COURT REPORTS [2013] 9 S.C.R.
A corrupt motives for which he is to be prosecuted and in
respect of which a sanction to prosecute him is necessary
by the competent authority entitled to remove him from that
office which he has abused. This interrelation between the
office and its abuse if severed would render Section 6
B devoid of any meaning. And this interrelation clearly
provides a clue to the understanding of the provision in
Section 6 providing for sanction by a competent authority
who would be able to judge the action of the public servant
before removing the bar, by granting sanction, to the taking
of the cognizance of offences by the court against the
c
public servant. Therefore, it unquestionably follows that the
sanction to prosecute can be given by an authority
competent to remove the public servant from the office
which he has misused or abused because that authority
alone would be able to know whether there has been a
D
misuse or abuse of the office by the public servant and not
some rank outsider. By a catena of decisions, it has been
held that the authority entitled to grant sanction must apply
its mind to the facts of the case, evidence collected and
other incidental facts before according sanction. A grant
E of sanction is not an idle formality but a solemn and
sacrosanct act which removes the umbrella of protection
of government servants against frivolous prosecutions and
the aforesaid requirements must therefore, be strictly
complied with before any prosecution could be launched
F against public servants. (See Mohd. Iqbal Ahmad v. State
of Andhra Pradesh, [1979] 2 S.C.R. 1007). The
Legislature advisedly conferred power on the authority
competent to remove the public servant from the office to
grant sanction for the obvious reason that that authority
G alone would be able, when facts and evidence are placed
before him, to judge whether a serious offence is
committed or the prosecution is either frivolous or
speculative. That authority alone would be competent to
judge whether on the facts alleged, there has been an
H abuse or misuse of office held by the public servant. That
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 477
ECO. OFFENCE [JAGPISH SINGH KHEHAR, J.]
authority would be in a position to know what was the A
power conferred on the office which the public servant
holds, how that power could be abused for corrupt motive
and whether prima facie it has been so done. That
competent authority alone would know the nature and
functions discharged by the public servant holding the B
office and whether the same has been abused or misused.
It is the vertical hierarchy between the authority competent
to remove the public servant from that office and the nature
of the office held by the public servant against whom
sanction is sought which would indicate a hierarchy and c
which would therefore, permit inference of knowledge
about the functions and duties of the office and its misuse
or abuse by the public servant. That is why the legislature
clearly provided that that authority alone would be
competent to grant sanction which is entitled to remove the 0
public servant against whom sanction is sought from the
office.
24. Now if the public servant holds two offices and he is
accused of having abused one and from which he is
removed but continues to hold the other which is neither E
alleged to have been used nor abused, is a sanction of
the authority competent to remove him from the office which
is neither alleged or shown to have been abused or
misused necessary? The submission is that if the
harassment of the public servant by a frivolous prosecution F
and criminal waste of his time in law courts keeping him
away from discharging public duty, are the objects
underlying Section 6, the same would be defeated if it is
held that the sanction of the latter authority is not necessary.
The submission does not commend to us. We fail to see G
how the competent authority entitled to remove the public
servant from an office which is neither alleged to have
been used or abused would be able to decide whether the
prosecution is frivolous or tendentious. An illustration was
posed to the learned counsel that a Minister who is H
478 SUPREME COURT REPORTS [2013] 9 S.C.R.
A indisputably a public servant greased his palms by
abusing his office as Minister, and then ceased to hold the
office before the court was called upon to take cognizance
of the offence against him and therefore, sanction as
contemplated by Section 6 would not be necessary; but if
B after committing the offence and before the date of taking
of cognizance of the offence, he was elected as a
Municipal President in which capacity he was a public
servant under the relevant Municipal law, and was holding
that office on the date on which court proceeded to take
c cognizance of the offence committed by him as a Minister,
would a sanction be necessary and that too of that authority
competent to remove him from the office of the Municipal
President. The answer was in affirmative. But the very
illustration would show that such cannot be the law. Such
an interpretation of Section 6 would render it as a shield
D
to an unscrupulous public servant. Someone interested in
protecting may shift him from one office of public servant
to another and thereby defeat the process of law. One can
legitimately envisage a situation wherein a person may
hold a dozen different offices, each one clothing him with
E the status of a public servant under Section 21 IPC and
even if he has abused only one office for which either there
is a valid sanction to prosecute him or he has ceased to
hold that office by the time court was called upon to take
cognizance, yet on this assumption, sanction of 11 different
F competent authorities each of which was entitled to remove
him from 11 different public offices would be necessary
before the court can take cognizance of the offence
committed by such public servant, while abusing one office
which he may have ceased to hold. Such an interpretation
G is contrary to all canons of construction and leads to an
absurd and product which of necessity must be avoided.
Legislation must at all costs be interpreted in such a way
that it would not operate as a rougue's charter. (See Davis
& Sons Ltd. v. Atkins)
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 479
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
xxx xxx xxx xxx A
26. Therefore. upon a true construction of Section 6. it is
implicit therein that sanction of that competent authority
alone would be necessary which is competent to remove
the public servant from the office which he is alleged to 8
have misused or abused for corrupt motive and for which
a prosecution is intended to be launched against him.
27. In the complaint filed against the accused it has been
repeatedly alleged that the accused as Chief Minister of
Maharashtra State accepted gratification other than legal C
remuneration from various sources and thus committed
various offences set out in the complaint. Nowhere, not
even by a whisper, it is alleged that the accused has
misused or abused for corrupt motives his office as M.L.A.
Therefore, it is crystal clear that the complaint filed against D
the accused charged him with criminal abuse or misuse
of only his office as Chief Minister. By the time, the court
was called upon to take cognizance of the offences, so
alleged in the complaint, the accused had ceased to hold
the office of the Chief Minister. On this short ground, it can E
be held that no sanction to prosecute him was necessary
as former Chief Minister of Maharashtra State. The appeal
can succeed on this short ground. However, as the real
bone of contention between the parties. was whether as
M.L.A. the accused was a public servant and the F
contention was canvassed at some length, we propose to
deal with the same.
xxx )()()( )()()( )()()(
68. Re: (f) & (g): The learned Judge after recording a G
finding that M.L.A. is a public servant within the
comprehension of clause (12)(a) and further recording the
finding that as on the date on which the Court was invited
to take cognizance, the accused was thus a public servant
proceeded to examine whether sanction under Section 6 H
480 SUPREME COURT REPORTS [2013] 9 S.C.R.
A of the 1947 Act is a pre-requisite to taking cognizance of
offences enumerated in Section 6 alleged to have been
committed by him. He reached the conclusion that a
sanction is necessary before cognizance can be taken. As
a corollary he proceeded to investigate and identify, which
B is the sanctioning authority who would be able to give a
valid sancticin as required by Section 6 for the prosecution
of the accused in his capacity as M.L.A.? We have
expressed our conclusion that where offences as set out
in Section 6 are alleged to have been committed by a
c public servant. sanction of only that authority would be
necessary who would be entitled to remove him from that
office which is alleged to have been misused or abused
for corrupt motives. If the accused has ceased to hold that
office by the date. the court is called upon to take
cognizance of the offences alleged to have been
D
committed by such public servant. no sanction under
•
Section 6 would be necessary despite the fact that he may
be holding any other office on the relevant date which may
make him a public servant as understood in Sec 21. if
there is no allegation that office has been abused or
E misused for corrupt motives. The allegations in the
complaint are all to the effect that the accused misused
or abused his office as Chief Minister for corrupt motives.
By the time the Cour:t was called upon to take cognizance
of those offences, the accused had ceased to hold the
F office of Chief Minister. The sanction to prosecute him was
granted by the Governor of Maharashtra but this aspect we
consider irrelevant for concluding that no sanction was
necessary to prosecute him under Section 6 on the date
on which the court took cognizance of the offences alleged
G to have been committed by the accused. Assuming that
as MLA the accused would be a public servant under
Section 21, in the absence of any allegation that he
misused or abused his office as MLA that aspect
becomes immaterial. Further Section 6 postulates
H existence of a valid sanction for prosecution of a public
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 481
ECO. OFFENCE (JAGDISH SINGH KHEHAR, J.]
servant for offences punishable under Sections 161, 164, A
165 IPC and Section 5 of the 1947 Act, if they are alleged
to have been committed by a public servant. In view of our
further finding that M.LA. is not a public servant within the
meaning of the expression in Section 21 IPC no sanction
is necessary to prosecute him for the offences alleged to B
have been committed by him."
(emphasis is ours)
The conclusions drawn by this Court in R.S. Naik's case (supra)
were affirmed by this Court in Prakash Singh Badal vs. State C
of Punjab, (2007) 1 SCC 1, wherein this Court held as under:
"23. Offences prescribed in Sections 161, 164 and 165
IPC and Section 5 of the 1947 Act have an intimate and
inseparable relation with the office of a public servant. A D
public servant occupies office which renders him a public
servant and occupying the office carries with it the powers
conferred on the office. Power generally is not conferred
on an individual person. In a society governed by the rule
of law power is conferred on office or acquired by statutory E
status and the individual occupying the office or on whom
status is conferred enjoys the power of office or power
flowing from the status. The holder of the office alone would
have opportunity to abuse or misuse the office. These
sections codify a well-recognised truism that power has the
tendency to corrupt. It is the holding of the office which
F
gives an opportunity to use it for corrupt motives.
Therefore. the corrupt conduct is directly attributable and.
flows from the power conferred on the office. This
interrelation and interdependence between individual and
the office he holds is substantial and not severable. Each G
of the three clauses of Sub-section (1) of Section 6 uses
the expression 'office' and the power to grant sanction is
conferred on the authority competent to remove the public
servant from his office and Section 6 requires a sanction
H
482 SUPREME COURT REPORTS [2013] 9 S.C.R.
A before taking cognizance of offences committed by public
servant. The offence would be committed by the public
servant by misusing or abusing the power of office and it
is from that office, the authority must be competent to
remove him so as to be entitled to grant sanction. The
B removal would bring about cessation of interrelation
between the office and abuse by the holder of the office.
The link between power with opportunity to abuse and the
holder of office would be severed by removal from office.
Therefore, when a public servant is accused of an offence
c of taking gratification other than legal remuneration for
doing or forbearing to do an official act (Section 161 IPC)
or as a public servant abets offences punishable under
Sections 161 and 163 (Section 164 IPC) or as public
servant obtains a valuable thing without consideration from
person concerned in any proceeding or business
D
transacted by such public servant (Section 165 IPC) or
commits criminal misconduct as defined in Section 5 of
the 1947 Act, it is implicit in the various offences that the
public servant has misused or abused the power of office
held by him as public servant. The expression 'office' in -
E the three Sub-clauses of Section 6(1) would clearly denote
that office which the public servant misused or abused for
corrupt motives for which he is to be prosecuted and in
respect of which a sanction to prosecute him is necessary
by the competent authority entitled to remove him from that
F office which he has abused. This interrelation between the
office and its abuse if severed would render Section 6
devoid of any meaning. And this interrelation clearly
provides a clue to the understanding of the provision in
Section 6 providing for sanction by a competent authority
G who would he able to judge the action of the public servant
before removing the bar, by granting sanction, to the taking
of the cognizance of offences by the court against the
public servant. Therefore, it unquestionably follows that the
sanction to prosecute can he given by an authority
H competent to remove the public servant from the office
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 483
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
which he has misused or abused because that authority A
alone would be able to know whether there has been a
misuse or abuse of the office by the public servant and not
some rank outsider. By a catena of decisions, it has been
held that the authority entitled to grant sanction must apply
its mind to the facts of the case, evidence collected and B
other incidental facts before according sanction. A grant
of sanction is not an· idle formality but a solemn and
sacrosanct act which removes the umbrella of protection
of Government servants against frivolous prosecutions and
the aforesaid requirements must therefore, be strictly c
complied with before any prosecution could be launched
against public servants. (See Mohd. Iqbal Ahmad v. State
of A.P., (1979) 4 SCC 172). The Legislature advisedly
conferred power on the authority competent to remove the
public servant from the office to grant sanction for the
D
obvious reason that that authority alone would be able,
when facts and evidence are placed before him, to judge
whether a serious offence is committed or the prosecution
is either frivolous or speculative. That authority alone would
be competent to judge whether on the facts alleged, there
has been an abuse or misuse of office held by the public E
servant. That authority would be in a position to know what
was the power conferred on the office which the public
servant holds, how that power could he abused for corrupt
motive and whether prima facie it has been so done. That
competent authority alone would know the nature and F
functions discharged by the public servant holding the
office and whether the same has been abused or misused.
It is the vertical hierarchy between the authority competent
to remove the public servant from that office and the nature
of the office held by the public servant against whom G
sanction is sought which would indicate a hierarchy and
which would therefore, permit inference of knowledge
about the functions and duties of the office and its misuse
or abuse by the public servant. That is why the Legislature
clearly provided that that authority alone would be H
484 SUPREME COURT REPORTS [2013] 9 S.C.R.
A competent to grant sanction which is entitled to remove the
public servant against whom sanction is sought from the
office.
24. Now if the public servant holds two offices and he
is accused of having abused one and from which
B
he is removed but continues to hold the other which
is neither alleged to have been used (sic) nor
abused. is a sanction of the authority competent to
remove him from the office which is neither alleged
or shown to have been abused or misused
c necessary? The submission is that if the
harassment of the public servant by a frivolous
prosecution and criminal waste of his time in law
courts keeping him away from discharging public
duty. are the objects underlying Section 6. the same
D would be defeated if it is held that the sanction of
the latter authority is not necessarv. The submission
does not commend to us. We fail to see how the
competent authority entitled to remove the public
servant from an office which is neither alleged to
E have been used (sic) or abused would be able to
decide whether the prosecution is frivolous or
tendentious. An illustration was posed to the
Learned Counsel that a Minister who is indisputably
a public servant greased his palms by abusing his
F office as Minister, and then ceased to hold the office
before the court was called upon to take
cognizance of the offence against him and
therefore, sanction as contemplated by Section 6
would not be necessary; but if after committing the
G offence and before the date of taking of cognizance
of the offence, he was elected as a Municipal
President in which capacity he was a public servant
under the relevant MunicijJal law, and was holding
that office on the date on which court proceeded to
H take cognizance of the offence committed by him
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 485
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
as a Minister, would a sanction be necessary and A
that too of that authority competent to remove him
from the office of the Municipal President. The
answer was in affirmative. But the very illustration
would show that such cannot be the law. Such an
interpretation of Section 6 would render it as a B
shield to an unscrupulous public servant. Someone
interested in protecting may shift him from one office
of public servant to another and thereby defeat the
process of law. One can legitimately envisage a
situation wherein a person may hold a dozen C
different offices, each one clothing him with the
status of a public servant under Section 21 IPC and
even if he has abused only one office for which
either there is a valid sanction to prosecute him or
he has ceased to hold that office by the time court
was called upon to take cognizance, yet on this D
assumption, sanction of 11 different competent
authorities each of which was entitled to remove him
from 11 different public offices would be necessary
before the court can take cognizance of the offence
committed by such public servant, while abusing E
one office which he may have ceased to hold. Such
an interpretation is contrary to all canons of
construction and leads to an absurd and product
which of necessity must be avoided. Legislation
must at all costs be interpreted in such a way that
F
it would not operate as a rougue's charter. (See W
Davis & Sons Ltd. v. Atkins, (1977) 3 All ER 40.
50. The offence of cheating under Section 420 or for
that matter offences relatable to Sections 467, 468,
471 and 1208 can by no stretch of imagination by G
their very nature be regarded as having been
committed by any public servant while acting or
purporting to act in discharge of official duty. In such
cases, official status only provides an opportunity
for commission of the offence."
(emphasis is ours) H
486 SUPREME COURT REPORTS [2013] 9 S.C.R.
A 14. The judgments referred to in paragraph 13 above,
were relied upon by the Courts below to reject the contention
advanced at the hands of the appellant, that sanction was
essential before the appellant could be prosecuted. It would be
pertinent to mention, that extracts from the judgments referred
B to in paragraph 13 reproduced above, deal with two pointed
situations. Firstly, whether sanction before prosecution is
required from each of the competent authorities entitled to
remove an accused from the offices held by him, in situations
wherein the accused holds a plurality of offices. The second
c determination was in respect of the requirement of sanction, in
situations where the accused no longer holds the office, which
he is alleged to have abused/misused, for committing the
offence (s) for which he is being blamed. In answer to the first
query, it has unambiguously been concluded, that if an accused
holds a plurality of offices, each one of wh:ch makes him a
0
public servant, sanction is essential only at the hands of the
competent authority (entitled to remove him from service) of the
office which he had allegedly misused. This leads to the clear
inference, that other public offices held by the accused wherein
an accused holds a plurality of offices, are irrelevant for
E purposes of obtaining sanction prior to prosecution. On the
second issue it was concluded, that sanction was essential only
if, at the time of taking cognizance, the accused was still holding
the public office which he had allegedly abused. If the legal
position determined in the above judgments is taken into
F consideration, there is certainly no doubt, that in the facts and
circumstances of this case, sanction if required, ought to have
been obtained from the Governor of the State of Madhya
Pradesh. The instant determination is premised on the fact, that
the appellant is stated to have misused his position while
G discharging his responsibilities as a nominee Director of the
MPSIDC. It is clear to us, specially from the deliberation
recorded hereinabove, that the appellant's participation in the
Cabinet Review Meeting dated 28.1.1994, and in the relevant
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 487
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
meetings of the Board of Directors (of the MPSIDC) had no A
nexus to the post of Industries Commissioner, Government of
Madhya Pradesh, or the subsequent office held by him as Joint
Secretary, Department of Heavy Industries, Government of
India. Accordingly, in our considered view, sanction of the
authoritie,s with reference to the post of Industries B
Commissioner, Government of· Madhya Pradesh and Joint
Secretary, Department of Heavy Industries, Government of India
held by the appellant, was certainly not required. We therefore,
hereby reject the submission advanced at the hands of the
learned counsel for the appellant, that since the appellant c
continued to hold the above-mentioned public office(s) in his
capacity as a member of the IAS cadre, at the time the first
charge sheet was filed on 24.9.2007, prosecution could be
proceeded with, and cognizance taken, only upon sanction by
the competent authority(ies) of the said two offices (Industries D
Commissioner, Government of Madhya Pradesh and Joint
Secretary, Department of Heavy Industries, Government of
India), as wholly misconceived.
15. The abuse/misuse of authority, alleged against the
appellant pertains to the discharge of his responsibilities as a E
nominee Director (on the Board of the MPSIDC). Therefore, the
further question which arises for our consideration is, whether
sanction at the hands of the Governor of the State of Madhya
Pradesh, (who had the power to remove any Director appointed
or nominated by him under clause 89 of the Memorandum and F
Articles of Association of the MPSIDC), was a prerequisite
before taking cognizance in the matter. In the facts and
circumstances of this case, we are of the view, that answer to
the instant question has also to be in the negative. Our
aforesaid determination is based on the fact that the appellant G
remained a nominee Director of the MPSIDC from 1993 to
1998. The first charge sheet in the matter was filed on
24.9.2007. Well before the filing of the first charge sheet, the
appellant had relinquished charge of the office which he is ·
H
488 SUPREME COURT REPORTS (2013] 9 S.C.R.
A alleged to have abused/misused (i.e. the office of nominee
Director of the MPSIDC). In the above view of the matter, since
the appellant was not holding the public office which he is
alleged to have abused, when the first charge sheet was filed."
in terms of the law declared by this Court (referred to in the
B judgments extracted in paragraph 13 above), there was no
need to obtain any sanction before proceeding to prosecute
the appellant, for the offences alleged against him.
16. It would be relevant to mention, that during the course
of hearing learned counsel for the appellant placed emphatic
C reliance on the judgment rendered by this Court in State of
Madhya Pradesh vs. Sheet/a Sahai & Ors., (2009) 8 SCC
617. It is not necessary for us to refer either to the factual
position in the judgment relied upon, or even the conclusions
recorded thereon. We say so because, the issues canvassed
D and determined in the aforesaid judgments were not the ones
on the basis whereof we have recorded our conclusions, in the
foregoing paragraphs. It is sufficient for us to note, that the
judgment rendered by this Court in State of Madhya Pradesh
vs. Sheet/a Sahai & Ors. (supra), does not carve out any
E exception, to the two propositions relied upon for the
conclusions drawn by us, from the judgments referred to in
paragraph 13 above.
17. The second contention advanced at the hands of the
F learned counsel for the appellant, was based on the
determination rendered by this Court in Soma Chakravarty vs.
State through CBI, (2007) 5 SCC 403. Pointed reliance was
placed by the learned counsel for the appellant on paragraph
23 which is being extracted hereunder:-
G "23. In a case of this nature. the learned Special Judge
also should have considered the question having regard
to the 'doctrine of parity' in mind. An accused similarly
situated has not been proceeded against only because.
the departmental proceedings ended in his favour.
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 489
ECO. OFFENCE (JAGDISH SINGH KHEHAR, J.]
Whether an accused before him although stands on a A
similar footing despite he having not been departmentally
proceeded against or had not been completed exonerated
also required to be considered. If exoneration in a
departmental proceeding is the basis for not framing a
charge against an accused person who is said to be B
similarly situated, the question which requires a further
consideration was as to whether the applicant before it
was similarly situated or not and/or whether the exonerated
officer in the departmental proceeding also faced same
charges including the charge of being a party to the larger c
conspiracy."
(emphasis is ours)
It was the vehement contention of the learned counsel for the
appellant, that sanction to prosecute another co-accused D
similarly situated as the appellant, having been obtained, it was
not permissible to treat the appellant differently. We find no
substance in the second contention advanced at the hands of
the learned counsel for the appellant. Having concluded on the
basis of the law declared by this Court, that prior sanction for E
prosecuting the appellant was unessential, it is futile to suggest
that sanction ought to have been obtained all the same. The
instant submission needs no further consideration in view of the ·
deliberations recorded by us hereinabove. Parity in law can be
claimed only in respect of action rightfully executed. And not F
otherwise. Having concluded that sanction was not required in
the case of the appellant, it is not possible for us to accept on
the an~logy of the submission advanced at the hands of the
learned counsel for the appellant, that merely because sanction
was obtained in respect of another co-accused, it needed to G
have been obtained in the appellant's case as well.
18. The next contention advanced at the hands of the
learned counsel for the appellant was based on Section 141
of the Negotiable Instruments Act, 1881 (hereinafter referred
H
490 SUPREME COURT REPORTS [2013] 9 S.C.R.
A to as the 'NI Act'). Section 141 aforementioned is being
extracted hereunder:-
"141. Offences by companies.- (1) If the person
committing an offence under section 138 is a
company, every person who, at the time the offence
B
was committed, was in charge of, and was
responsible to the company for the conduct of the
business of the company, as well as the company,
shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished
c accordingly:
Provided that nothing contained in this sub-section
shall render any person liable to punishment if he
proves that the offence was committed without his
D knowledge, or that he had exercised all due
diligence to prevent the commission of such
offence:
Provided further that where a person is nominated
as a Director of a company by virtue of his holding
E
any office or employment in the Central Governr:nent
or State Government or a financial corporation
owned or controlled by the Central Government or
the State Government, as the case may be, he shall
not be liable for prosecution under this Chapter.
F
(2) Notwithstanding anything contained in sub-
section (1), where any offence under this Act has
been committed by a company and it is proved that
the offence has been committed with the consent
G or connivance of, or is attributable to, any neglect
on the part of, any director, manager, secretary or
other officer of the company, such director,
manager, secretary or other officer shall also be
deemed to be guilty of that offence and shall be
H liable to be proceeded against and punished
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 491
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
accordingly. A
Explanation.-For the purposes of this section,-
(a) "company" means any body corporate and includes a
firm or other association of individuals; and
B
(b) "director", in relation to a firm, means a partner in the
firm."
Relying on sub-Section (1) of Section 141 extracted above, it
was the vehem.ent contention of the learned counsel for the C
appellant, that the appellant was not in charge of the conduct
of the business of the MPSIDC. It was also his submission, that
the appellant was not responsible to the MPSIDC for the
conduct of its day to day activities. In this behalf it was sought
to be asserted, that the appellant was not aware of the fact, that D
the functionaries of the MPSIDC were extending short term
loans (including ICD's) out of the surplus funds of the MPSIDC
to industrial establishments. It was also pointed out, that the
appellant had neither examined nor approved any financial
assistance extended to industries, out of the surplus funds of
the MPSIDC, on the basis of the resolution of the Board of E
Directors dated 19.4.1995. As such it was asserted, that the
accusations levelled against the appellant were misconceived.
Insofar as the instant aspect of the matter is concerned, learned
counsel for the appellant relied on the decision rendered by this
Court in National Small Industries Corporation Ltd. vs. F
Harmeet Singh Paintal & Anr., (2010) 3 SCC 330. Learned
counsel invited our pointed attention to the following
observations recorded therein:-
"6. In the connected appeal, the appellant - DCM G
Financial Services Ltd., entered into a hire
purchase agreement on 25.2.1996 with M/s
International Agro Allied Products Ltd. At the time
of entering into contract, the Company handed over
post-dated cheques to the appellant towards
H
492 SUPREME COURT REPORTS [2013] 9 S.C.R.
A payment of monthly hire/rental charges. Respondent
No. 1, Dev Sarin was one of the Directors of the
said Company. The cheque issued by International
Agro and Allied Products Ltd. in favour of the
appellant was duly presented for payment on
B 28.10.1998 and the same was returned unpaid for
the reason that the Company· had issued
instructions to the bankers stopping payment of the
cheque.
12. It is very clear from the above provision that what
c is required is that the persons who are sought to
be made vicariously liable for a criminal offence
under Section 141 should be, at the time the
offence was committed, was in-charge of, and was
responsible to the company for the conduct of the
D business of the company. Every person connected
with the company shall not fall within the ambit of
the provision. Only those persons who were in-
charge of and responsible for the conduct of the
business of the company at the time of commission
E of an offence will be liable for criminal action. It
follows from the fact that if a Director of a Company
who was not in charge of and was not responsible
for the conduct of the business of the company at
the relevant time. will not be liable for a criminal
F offence under the provisions. The liability arises
from being in charge of and responsible for the
conduct of the business of the company at the
relevant time when the offence was committed and
not on the basis of merely holding a designation or
G office in a company."
(emphasis is ours)
19. We have given our thoughtful consideration to the
contention advanced at the hands of the learned counsel for the
H appellant, as has been noticed in the foregoing paragraph. We
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 493
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
are of the view, that the appellant's reliance on Section 141 of A
the NI Act, as also, the judgment rendered by this Court in
National Small Industries Corporation Ltd. (supra), is
misconceived. The appellant is not being blamed for the
implementation of the resolution of the Board of Directors of
the MPSIDC dated 19.4.1995. The appellant is being blamed B
for having allowed the aforesaid resolution dated 19.4.1995 to
be passed despite the earlier decision taken in the Cabinet
Review Meeting held on 28.1.1994, as also, the earlier
resolution of the Board of Directo~s of the MPSIDC dated
31.1.1994. It is not a matter of dispute before us, that the c
appellant had participated in the decision making process in
the meeting of the Cabinet Review Committee dated 28.1.1994,
as also, the resolution of the Board of Directors of the MPSIDC
dated 31.1.1994. The charge against the appellant is based
on the fact, that the appellant allowed the Board of Directors D
of the MPSIDC to pass the resolution dated 19.4.1995, inspite
of the earlier decisions at the hands of the Cabinet Review.
Committee (in meeting dated 18.1.1994) and the consequential
resolution of the Board of Directors (dated 31.1.1994). We,
therefore, reject the submission advanced at the hands of the
E,
learned counsel for the appellant based on Section 141 of the
NI Act. All the same, it would be relevant to notice, that the
second proviso under Section 141(1) of the N.I. Act is
inapplicable to the facts of this case, because the appellant was
not nominated as a Director of the MPSIDC on account of
holding the office of Industries Commissioner, Government of F
Madhya Pradesh. The appellant's appointment as nominee
Director of the MPSIDC was based on the determination of the
Governor of Madhya Pradesh under clause 89 of the
Memorandum and Articles of Association of the MPSIDC. If the
factual position alleged against the appellant is correct, the G
culpability of the appellant would emerge from sub-Section (2)
of Section 141 of the N.I. Act. The instant inference is inevitable,
because it is not disputed on behalf of the appellant, that he
had actually participated in the Cabinet Review Meeting dated
28.1.1984, as well as, in the meetings of the Board of Directors H
494 SUPREME COURT REPORTS [2013] 9 S.C.R.
A leading to the passing of the resolutions dated 31.1.1994 and
19.4.1995. In the facts of the present case, the accusation
implicating the appellant, is directly attributable to the appellant,
as nominee Director of the MPSIDC. The aforesaid inference
has been drawn by us, to negate the submission of the learned
B counsel for the appellant based on Section 141 of the N.I. Act.
In our view, the instant issue does not arise for adjudication in
the present controversy in view of the conclusions already drawn
hereinabove, that the culpability of the appellant, lies in the
mischief of passing the resolution dated 19.4.1995. The
c implementation of the said resolution is the consequential effect
of the said mischief.
20. For the last contention advanced on behalf of the
appellant, learned counsel placed reliance on a decision
rendered by this Court in C.K. Jaffer Sharief vs. State (through
D CBI), (2013) 1 SCC 205. Our pointed attention was drawn to
the following observations recorded therein:-
"17. It has already been noticed that the appellant
besides working as the Minister of Railways was
E the Head of the two public sector undertakings in
question at the relevant time. It also appears from
the materials on record that the four persons while
in London had assisted the appellant in performing
certain tasks connected with the discharge of duties
F as a Minister. It is difficult to visualise as to how in
the light of the above facts. demonstrated by the
materials revealed in the course of investigation. the
appellant can be construed to have adopted corrupt
or illegal means or to have abused his position as
a public servant to obtain any valuable thing or
G
pecuniarv advantage either for himself or for any of
the aforesaid four persons. If the statements of the
witnesses examined under Section 161 Cr.P.C.
show that the aforesaid four persons had performed
certain tasks to assist the Minister in the discharge
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST 495
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
of his public duties, however insignificant such tasks A
rr.ay have been, no question of obtaining any
pecuniary advantage by any corrupt or illegal
means or by abuse of the position of the appellant
as a public servant can arise. As a Minister it was
for the appellant to decide on the number and B
identity of the officials and supporting staff who
should accompany him to London if it was
anticipated that he would be required to perform his
official duties while in London. If in the process. the
rules or norms applicable were violated or the c
decision taken shows an extravagant display of
redundance it is the conduct and action of the
appellant which may have been improper or
contrary to departmental norms. But to say that the
same was actuated by a dishonest intention to
0
obtain an undue pecuniary advantage will not be
correct. That dishonest intention is the gist of the
offence under Section 13(1 )(d) is implicit in the
words used i.e. corrupt or illegal means and abuse
of position as a public servant. A similar view has
also been expressed by this Court in M.
E
Narayanan Nambiar v. State of Kera/a, AIR 1963
SC 1116 while considering the provisions of
Section 5 of Act of 1947."
(emphasis is ours) F
Based on the aforesaid determination, it was the contention of
the learned counsel for the appellant, that the allegations levelled
against the appellant do not lead to the inference, that the
appellant had adopted corrupt or illegal means, or had abused G
his position as a public servant to obtain any valuable thing or
pecuniary advantage, either for himself or for the industries to
whom the MPSIDC extended short term loans (including ICD's).
We are of the view, that the last contention advanced at the
hands of the learned counsel for the appellant is a mixed
H
496 SUPREME COURT REPORTS [2013] 9 S.C.R.
A question of fact and law. Determination of the instant issue
would be possible only after the rival parties have adduced
evidence to establish their respective claims. At the said
juncture, it would be possible to record factual conclusions. It
would then be possible for the concerned Court(s) to draw
B inferences on the basis of the established factual position,
whether the accused is guilty of the accusation levelled against
him. Therefore, it is neither proper nor possible for us to deal
with the last contention advanced at the hands of the learned
counsel for the appellant, at the present juncture.
c 21. No further contention was advanced at the-hands of
the learned counsel for the appellant.
22. For the reasons recorded hereinabove, we find no
merit in the instant appeals. The same are accordingly hereby
D dismissed. While disposing of the instant appeals, we consider
it just and appropriate to direct the trial Court to expedite the
trial, keeping in mind, that the charge sheet in the matter was
filed as far back as in 2007. On account of the proceedings
initiated at the hands of the appellant, no further proceedings
E were taken by the Special Judge, Bhopal. In the above view of
the matter, we consider it appropriate to direct the trial Court
to hold proceedings for the disposal of Special Case No. 7 of
2007 on a weekly basis.
F R.P. Appeals dismissed.
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