Holding

The Special Court had exclusive jurisdiction to try the offences as they related to securities transactions, and the convictions of all appellants except A‑7 are upheld, with A‑6’s sentence reduced to six months’ rigorous imprisonment.

Summary

The case concerned a massive "call money" scam in which Rs 40 crore of National Housing Bank funds were diverted to broker Harshad Mehta’s account through officials of UCO Bank and NHB. The appellants – senior officials of UCO Bank and NHB – were convicted by a Special Court under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 for criminal conspiracy, criminal breach of trust and criminal misconduct under the Prevention of Corruption Act. The Supreme Court examined whether the Special Court had jurisdiction, whether "call money" transactions fell within the definition of securities, the validity of sanction orders, and the admissibility of the Janakiraman Committee report. It held that the Special Court’s jurisdiction was exclusive and proper, that call‑money transactions related to securities, that the sanction orders were valid, and that the Committee report was inadmissible. All convictions were upheld except for A‑7, and the sentence of A‑6 was reduced to six months’ rigorous imprisonment.

Issues considered

The Special Court’s jurisdiction to try the "call money" scam under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
Whether "call money" transactions constitute "securities" within the meaning of the Act.
The validity of the sanction orders issued under Section 19 of the Prevention of Corruption Act, 1988 for NHB officials.
The admissibility of the Janakiraman Committee report as evidence for sentencing.
The sufficiency of evidence to prove criminal conspiracy, criminal breach of trust and criminal misconduct against each accused.

Legislation cited

Banking Regulation Act, 1949
Code of Criminal Procedure, 1973s. 19(3)
Indian Penal Code, 1860s. 120-B, s. 23, s. 24, s. 34, s. 405, s. 409, s. 43
National Housing Bank Act, 1987s. 14, s. 49(4)
Prevention of Corruption Act, 1988s. 13(1)(d)(iii), s. 13(2), s. 19
Reserve Bank of India Act, 1934s. 42
Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992s. 2(c), s. 3(2), s. 7

Subjects

securitiescall moneycriminal conspiracycriminal breach of trustPrevention of Corruption ActSpecial Court jurisdictionNational Housing BankUCO BankHarshad Mehtasanction orderevidence admissibility

Judgment

[2009J 12 S.C.R. 762

A R. VENKATAKRISHNAN
v.
'

CENTRAL BUREAU OF INVESTIGATION
Ir
-
(Criminal Appeal No.76 of 2004)
:
AUGUST 7, 2009
B
[S.8. SINHA AND CYRIAC JOSEPH, JJ.]

SPECIAL COURT (TRIAL OF OFFENCES RELATING
--1 •
TO TRANSACT/ON IN SECURITIES) ACT, 1992:
c
ss. 2(c), 3(2) and 7 - 'Call money' scam - Jurisdiction of
Special Court - A huge sum belonging to a Scheduled Bank
diverted as 'call money' by officials of Banks concerned to the
account of a broker in securities - HELD: "Call money"
..
D
transactions are banking transactions - The transaction in
question was shown as 'call money' transaction and, therefore, 'r ...
it could not have been used for any other purpose - The act
of illegally diverting the money belonging to National
Housing Bank to the account of the broker during the period
specified in s. 3(2) so as to enable him to enter into
E
transactions in securities, was an offence triable exclusively
by Special Court, which rightly exercised the jurisdiction -
Interpretation of statute - Mischief rule - Liberal construction. •
ss. 2(c) and 3(2) - Expressions 'securities' and 'offences
F relating to transactions in securities' - Connotation of

NATIONAL HOUSING BANK ACT, 1987:

s. 14 - Violation of - HELD: Advancing of loan to an
individual under the disguise of 'call money' transaction is an
G offence under the Act and illegal in terms of s.43 /PC - Penal
Code, 1860 - s.43.

PENAL CODE, 1860:

H 762
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 76.3
INVESTIGATION

ss. 120-B, 405 and 409 - Criminal conspiracy, and A
criminal breach of trust by public servants - Employees of
Scheduled Banks, in connivance with a broker and his
associate diverting in the guise of "call money" a huge sum
belonging to the Bank to the account of the broker - HELD:
Even if the Banks may not have suffered ultimate loss, but if B
money has been allowed to be used il/egal/y/for illegal

.
purpose, s. 405 would get attracted - Temporary
embezzlement would also attract s.405 - The charges having
been established, the Bank officials, except A-7, were rightly
' convicted of offences of criminal conspiracy and criminal c
breach of trust - The employee of the broker was rightly
convicted of offence of criminal conspiracy - A-7 acquitted.

ss. 405 and 409 - Criminal breach of trust - Complainant
- HELD: Where public money is involved, criminal law can
be set in motion by anybody- In the instant case, prosecution D
was rightly initiated on the basis of the information received

- by CBI.

ss:23, 24 and 43- 'Wrongful gain' - 'Dishonestly' -'Illegal'
- Connotation of. E
PREVENTION OF CORRUPTION ACT, 1988:

• ss. 13(1)(d)(iii) r!w s.13(2) - Criminal misconduct - 'call
money' scam - Officials of Scheduled Banks - In connivance
with a broker and his employee diverting in the guise of "call F
money" huge sum belonging to the Bank to the account of
the broker - HELD: Accused were guilty of criminal
misconduct u/s 13(1)(d)(iii).

ss. 19(1) and 19(3) - Sanction for prosecution of public ' G
)(-
servant - Official of RBI absorbed in National Housing Bank
- Proceedings against him to be initiated for various criminal
offences - Sanction by officer of NHB - HELD: Authority
concerned was competent to pass the order of sanction - Even
otherwise, there has been no failure of justice because of any H
764 SUPREME COURT REPORTS (2009] 12 S.C.R.

A alleged error in the orders of sanction.
SENTENCE/SENTENCING:
~
""
Awarding of sentence - Factors to be taken into
consideration - Explained - "Call money" scam - Special
B Court, while awarding the sentence to one of the accused,
placing reliance on 'Jankiraman Committee' Report - HELD:
Special Court acted illegally and without jurisdiction - The
said report was not admissible in evidence - There being IJ.tide
difference in sentence imposed on the accused concemed
c and other accused persons, his sentence reduced to six "' '
months - Sentences imposed on other accused, except the
one who has been acquitted, not interfered with - Evidence -
Committee's Report - Admissibility in evidence.

D WORDS AND PHRASES:

Expressions 'call money', 'dishonestly', 'illegal', 'in relation f ...
to', 'offence relating to transactions in securities', 'securities',
and 'wrongful gain' - Connotation of. -
E Appellant-accused-1, the Chairman and Managing
Director of UCO Bank, appellant-accused-2, its General
Manager, appellant-accused-3, the Divisional Manager of
Bombay Branch, UCO Bank, appellant-accused-4, a ' ~

broker in 'securities', appellant-accused-5, an employee
F of accused-4, appellant-accused-6 and appellant-
accused-7, Assistant General Manager and Assistant
Manager, respectively, of National Housing Bank,
Bombay faced trial before the Special Court. The
prosecution case was that on 6.4.1992 National Housing
Bank lent a sum of Rs.40 crores 'at call' to UCO Bank.
G
However, the said amount was credited to the account
of A-4 in UCO Bank, Hamam Street, Mumbai. This was
allegedly done under the instruction of the Head Office
in Calcutta and its Zonal Office at Bombay. Later, A-4 died
during the trial. A-1 to A-3, A-6 and A-7 were convicted
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 765
INVESTIGATION
j _.. and sentenced u/ss. 120-B, 409 read with s.34 IPC and A
s.13(1)(d) read with s.13(2) of the Prevention of Corruption
Act, 1988; whereas A-5 was convicted and sentenced u/
s 120-B IPC.

In the appeals filed by the accused, it was contended B
for the appellants that the transfer of money being not
'securities' within the meaning of the provisions of
Special Court (Trial of Offences Relating to Transaction
' ~ in Securities) Act, 1992, the Special Court had no
jurisdiction to try the offences. A-6 and A-7 challenged the
sanction orders obtained for their pro.secution. It was
c
contended for A-6 that he had joined NHB on deputation
from the Reserve Bank of India and, therefore, the
conditions of his service were governed by the RBI
Regulations and not those of NHB Act and in his case
y -f the Governor of RBI was the only competent sanctioning D
"- authority. Similarly, the stand of A-7 was that employees
of NHB were governed by the RBI Regulations till 1995
and, therefore, the sanction by NHB was not proper. On
merits it was contended that in the case of conspiracy
active participation by each _one of the accused was E
imperative and in its absence they could not be held
~
• guilty of commission of any offence; that no departmental
proceedings having been initiated by the employers and
~··· neither the UCO Bank nor NHB having suffered any.Joss,
as the money had been repaid by A-4, the judgment of F
conviction for alleged criminal breach of trust was wholly

- )·
unsustainable; that accused No.5, having been acquitted
of the charges of criminal breach of trust, could not have
been held to be guilty of being a party to the conspiracy.

Disposing of the appeals, the Court
G

HELD: 1.1. The jurisdiction of the Special Court
constituted under the Special Court (Trial of Offences
Relating to Transactions in Securities) Act, 1992 is an
H
766 SUPREME COURT REPORTS [2009] 12 S.C.R.

A exclusive one and is of wide amplitude. Section 7,
conferring jurisdiction on the Special Court constituted
~
'
under the Act, begins with a 'non-obstante' clause and
provides that the Special Court shall have jurisdiction to .
.'
try matters in respect of offences relating to transactions
B in securities as referred to in sub-s.{2) of s.3 of the Act.
The definition of 'securities' as provided in s.2(c) of the
Act is an inclusive one and not exhaustive. It takes within
its purview not only the matters specified therein but also
all other types of securities as commonly understood. ~ .
c The provision conferring jurisdiction on Special Court,
having regard to the peculiar nature of offences sought
to be dealt with, should receive a liberal construction.
[Para 48, 49 and 52) [808-B-D; 809-D]

State of Bombay and others v. The Hospital Mazdoor
D Sabha and others AIR 1960 SC 610; Regional Director,
~ '(
Employees State Insurance Corporation v. High Land Coffee
Works of P.X.S. Saldanha and sons and another, (1991) 3
SCC 617; Commercial Taxation Officer, Udaipur v. Rajasthan
Taxchem Ltd. 2007 (2) SCALE 120; Karnataka Power
E Transmission Corpn. & Anr. v. Ashok Iron Works Pvt. Ltd.
(2009) 3 SCC 240; Harshad S. Mehta and others v. State of
~
Maharashtra, (2001) 8 SCC 257; LS. Synthetics Ltd. v.
Fairgrowth Financial Services Ltd. and another, (2004) 11 •
SCC 456; and Solidaire India Ltd. v. Fairgrowth Financial
F Services Ltd. and others (2001) 3 SCC 71, referred to.

-
1.2. "Call money" transactions are indisputably
banking transactions. In the instant case, the time period
of carrying out 'call money' transactions is not in dispute,
for those transactions admittedly took place within the
G
time period referred to in s.3(2) of the Act. [Para 41 and •
46) [805-G-H; 807-C-D]

1.3. Even if 'call money' transactions are held not to
be within the scope and ambit of the definition of the term
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 767
INVESTIGATION
'securities', the jurisdiction of the Special Court may be A
invoked when an offence committed relates to
transactions in securities; the logical corollary whereof
would be that all parties connected in diverting the funds
of the public sectors and/or financial institutions would
also come within the purview thereof. For considering the B
provisions of the Act, the object and purport thereof has
to be borne in mind. The Reserve Bank of India
constituted Janakiraman Committee for the purpose of
looking into the Securities Scam of the early 90's, and it
was on the basis of that report that the said Act was c
enacted and the Special Court was constituted. [Para 51
and 56) [809-8-C; 810-D-E]

1.4. For the purpose of determining the question as
to whether the Special Court had jurisdiction to try the
offences in question or not, the principle of purposive D
construction must be resorted to. The rule which is also
known as the 'mischief rule', simply stated, lays down
that the courts should identify the mischief which existed
before passing of the statute and then if more than one
construction is possible, favour that which will eliminate E
the mischief so identified. The phrase 'offence relating to
transactions in securities' as used in s.3 (2) is clearly
.. subject to more than one meaning. For the purpose, the
meaning of the words 'in relation to' would be relevant.
Regard, therefore, in the matter of establishing and F
constitution of the Special Court must also be had to the
object of creating the Special Court. [Para 57,58 and 60]
[810-F-H; 811-C; 812-C-D]

Bengal Immunity Co. v. State ofBihar, AIR 1955 SC 661; G
Zile Singh v. State of Haryana AIR 2000 SC 5100; Mis.
~ Doypack Systems (Pvt.) Ltd. v. Union of India & Ors., (1988)
2 SCC 299; T.N. Kalyane Mandapam Association v. Union
of India, (2004) 5 SCC 632 and Minoo Mehta v. Shavak D.
Mehta, AIR 1998 SC 831, referred to.
H
768 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Bismag v. Amblins (Chemists), (1970] 3 All ER 1053 ....
~
(QB) ; Re National Federatino of Retail Newsagetns',
Booksellers' and Stationers Agreement (Nos.3 & 4) (1971] 1
WLR 408; and

Anderton v. Ryan, (1985) 2 All ER 355, referred to.
B
1.5. In the instant case, the money belonging to
National Housing Bank was diverted to the account of A-
4, who was a broker dealing in securities, so as to enable
him to enter into transactions in securities during the -1 '
c period 1st April, 1991 and 6th June, 1992, which was an
offence triable exclusively by the Special Court. The
Special Court, therefore, rightly exercised the jurisdiction
vested in it. [Para 62] (812-G-H; 813-A]

D 2.1. All the appellants, except A-5, at the relevant point
of time being employees of UCO Bank National Housing
~ "
Bank, were public servants and, as such, were also
charged with commission of offences under the
Prevention of Corruption Act, 1988. The competent
-
authorities accorded sanction for their prosecution as
E
required u/s. 19 of the 1988 Act. Though A-6 was initially
appointed by the Reserve Bank of India and was sent to
~
NHB on deputation in the year 1988, he was permanently
absorbed there in 1992 and the order of sanction in
•
respect of him was passed on 26th February, 1993. From
F the date of his absorption the relationship of employer
and employee came into being between him and NHB,
and, therefore, the Chairman-cum-Managing Director,
being its highest authority would be competent to pass .!
the order of sanction: [Para 63,64 and 67] [813-B-F; 814-
G E-G]
~

2.2. As regards A-7, even if till the framing of
Regulations by NHB, it adopted the Service Regulations
governing the employees of the RBI, the same would not
H mean that the appointing authority would also be an

•
fii
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 769
INVESTIGATION
officer of the RBI and not the appropriate authority of A
v
1 NHB. The Chairman-cum-Managing Director of NHB
being the highest executive authority, would be, subject
to any delegation of powers conferred in terms of the
· Regulations or through Resolutions adopted by the
Board of Directors, the appointing authority and, B
therefore, will have the requisite jurisdiction to accord
sanction for prosecution of the employees. [Para 68 and
69) (814-H; 815-A-D]
. )-
2.3. Even otherwise, what has been challenged by
both the accused is in fact the competence of the
c
sanctioning authority to issue sanction orders against
them. As per s. 19(3) of the 1988 Act, 'a finding' or a
'
sentence' shall not be reversed by a court of appeal on
the ground of any error, omission or irregularity in the
sanction order unless a failure of justice has been D
,,, -1 occasioned thereby. There has been no failure of justice
in the instant case by the alleged error in the orders.
[Para 71] (816-B-D]

3.1. Criminal conspiracy in terms of s. 120B IPC is an E
independent offence. It is punishable separately. The
ingredients of the offence of criminal conspiracy are: (i)
~
an ,agreement between two or more persons; (ii) the
~
• agreement must relate to doing or causing to be done
'
either (a) an illegal act; or (b) an act which is not illegal in F
itself but is done by illegal means. Condition precedent
for holding accused persons guilty of a charge of criminal
conspiracy must, therefore, be considered on the anvil
of the fact which must be established by the prosecution,
viz., meeting point of two or more persons for doing or G
causing to be done an illegal act or an act by illegal
means. The courts, however, while drawing an inference
from the materials brought on record to arrive at a finding
as to whether the charges of the criminal conspiracy
H
770 SUPREME COURT REPORTS [2009] 12 S.C.R.

A have been proved or not, must always bear in mind that ..._,
a conspiracy is hatched in secrecy and it is, thus, difficult, "
if not impossible, to obtain direct evidence to establish
the same. [Para 78 and 80-82] [818-F; 819-A-F]

3.2. The manner and circumstances in which the
B
offences have been committed and the level of
involvement of the accused persons therein are relevant
factors. For the said purpose, it is necessary to prove that
the propounders had expressly agreed to or caused to
"-1 •
be done the illegal act but it may also be proved
c otherwise by adduction of circumstantial evidence and/
or by necessary implication. Conduct of the parties would
also be relevant. [Para 83 and 88) [819-G; 823-8)

Mohammad Usman Mohammad Hussain Maniyar &
D Ors. v. State of Maharashtra (1981) 2 SCC 443; Kehar Singh
and Ors. v. State (Delhi Administration), 1988 (3) SCC 609 f .
at 731; State of Maharashtra v. Som Nath Thapa (1996) 4
SCC 659; K.R. Purushothaman ·v. State of Kera/a (2005) 12
SCC 631; State (NCT) of Delhi v. Navjot Sandhu @ Afsan
E Guru (2005) 11 SCC 600; Esher Singh v. State of A.P. (2004)
11 SCC 585; Yogesh @ Sachin Jagdish Joshi v. State of
Maharashtra (2008) 6 SCALE 469; Nirmal Singh Kah/on v.
State of Punjab and Others, 2008 (14) SCALE 639, referred '•
to.
F Penal Law of India by Dr. Hari Singh Gour, (Vol.2, 11th
Edn. p. 1138 - referred to.

3.3. In the instant case UCO Bank in order to maintain
cash reserve ratio, as was statutorily required, used to
G participate in 'call money' transactions in the money
market, decision in respect whereof used to be taken at
its Head Office at Kolkata. For the said purpose, however,
the Head Office used to be in touch with the D.N. Road .
Main Branch in Bombay. A-2, the General Manager, at the
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 771
INVESTIGATION

~ ~
Head Office in Kolkata, was authorized for the said A
purpose. Again a decision taken by the General Manager
would be subject to any direction which may be issued
by A-1, the Managing Director of the Bank. The fact that
the decision had been taken by the A-2 to obtain "call
money" to the tune of Rs. 40 crores is not in dispute. B
[Para 89, 90 and 94] [823-C-E; 824-H; 825-A]

3.4. The prosecution in view of the documentary and
' }- oral evidence must be held to have proved the following
facts: (i) That the decisions regarding the lending or
borrowing of "call money" were usually taken at the Head
c
Office in Kolkata based upon the information received
from the DN Road Branch in Bombay, (ii) These decisions
in Kolkatta were primarily taken by A-2 who at the
relevant time was the General Manager of UCO Bank,
~ _, Kolkatta, (iii) The decision as to the 'call money' D
borrowing on the 6th April, 1992 was also taken by A-2.
On that day he had communicated his decision of
borrowing of "call money" to PW-17, who at the relevant
time was an official there. PW-17 had noted the
information regarding the borrowings in a chit of paper E
including 'call money' amounting to Rs. 40 crore
.f borrowed from NHB at 26% interest,(iv) PW-17 then
)I
handed over the said chit with the 'call money'
information to PW-12 who had the responsibility of noting
the details in the 'call money' register. He accordingly F
noted the details of the "call money" transactions of the
day, including the one from NHB worth Rs. 40 Crore.
[Para 104] [828-C-H; 829-A]

3.5. Keeping in view the statement made by P.W. 14
G
't which was not shaken in the cross-examination, there is
no reason to disbelieve that part of the material brought
on record that 'call money' from NHB was, in fact, sought
to be cancelled. In any event, the prosecution cannot be
said to have failed to prove its case. On 6.4.1992 itself the
H
772 SUPREME COURT REPORTS [2009] 12 S.C.R.

A amount was credited to the account of A-4. It may be that ): ....
National Housing Bank is entitled to enter into the
security transactions but neither deceased A-4 nor A-5
made any attempt to show that any transaction had been
entered into by and between deceased A-4 and National
B Housing Bank. [Para 110 and 124] [831-E-F; 836-F-G]
3.6. The accused in their statements u/s. 313 of the
Cr. P.C. accepted that the transaction in question was a
routine transaction. Such a transaction indisputably was .... <

utilized for the personal gain of A-4. If such transaction
c was a routine transaction, it goes to show the long
standing agreement between the said bank and A-4. PW-
5 who used to work with A-4 admitted that he knew A-6
since 1990 and the remittance facilities were available. A
sort of arrangement by and between the said Bank and
D A-4, thus, stood established. This is one of the links in ,, .
the chain to show how the arrangement developed so as
to bring the matter within the purview of conspiracy
amongst the accused. [Para 125 and 127] [836-H; 837-A-
D]
E
3.7. The transaction in question was shown to be a
'call money' transaction and, therefore, it could not have +
been used for any other purpose. But, it was credited to •
the account of A-4 on the very same day. Any "call
F money" operation could not have been carried out
without the knowledge and involvement of A-1 and A-2.
The involvement of the A-1 and A-2 in tandem for the
purpose of entering into such agreement, thus, stands
established. [Para 128] [837-D-G]
G 3.8. As per PW 13, A-1 had informed him that A-3 had
been authorized by him to deal with security transactions
of A-4 at the UCO Bank, Hamam Street Branch, Bombay.
It has also been emphasized by the prosecution that A-3
was present at the Hamam Street Branch on the day the
H said transaction took place. PW-18 in his testimony,
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 773
INVESTIGATION

clarified the role of A-3 in insisting the starting up of A
.i
'
"\ security transactions through the account of A-4. It is
evident, therefore, that A3 also played an important role
in ensuring that the 'call money' from NHB which was
meant for UCO bank got transferred to account of A-4.
[Para 129-131] [837-H; 838-A-G] B
3.9. The testimony of PW-8 also brings out the
involvement of A5 in the entire chain of conspiracy. He

."' knew that he was to receive 40 crores from NHB and that
is why he had on the said day gone to the Hamam Street
Branch of the Bank. [Para 136 and 138] [840-B-C; F]
c
3.10. It is pertinent to note that the money which was
supposed to be borrowed by UCO Bank as a 'call money'
was ultimately repaid by A-4 through his account in ANZ
Grindlays Bank directly. [Para 133] [839-B] D
.. ~
3.11. It must however be noted that the entire
transaction could not have been carried out, had the
officials of the NHB not been involved. It is amply clear
from testimony of PW-6 that A-6 was the person
E
responsible for the extension of the 'call money'
transaction from 1 day to 9 days and the reduction of the
-+ interest from 26% to 25%. The involvement of A-6 is also
lo
corroborated by the testimony of PW 14 where he made
reference to the fact that it was the former who had
F
informed him that the cheque from NHB worth Rs. 40
crore was to be transferred to the DN Road Branch of
UCO Bank. [Para 139, 141] [840-G; 841-E-F]

3.12. As regards involvement of the A-7 who was
working under A-6 at NHB, relia.nce has been placed by G
the prosecution and even by the Special Court on the
testimony of PW 7 who deposed that A-7 had asked him
to go to UCO Bank, Hamam Street Branch on 16.4.1992
and collect the cheque for the return of the "call money"
advanced.Reliance on the said testimony is not enough. H
774 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Just because PW-7 had been sent by A-7 is not enough
"\-
for his involvement in the criminal conspiracy which was )<

hatched on behalf of the other accused. The burden of
proof is always heavy on the prosecution. In the instant
case, the prosecution has failed in this task with respect
B to A-7. (Para 142 and 144] (841-G; 842-C-F]
3.13. The NHB was created 'to operate as a principal
agency to promote housing finance institutions both at

,.
local and regional levels and to provide financial and
other support to such institutions.' In terms of s. 14 of the
c National Housing Bank Act, 1987, NHB could advance
loans to 'housing finance institutions' and 'scheduled
banks' or 'slum authority' constituted under a Central or
State Legislation, and in case it advances any loan to any
individual the same would amount to an offence under
D the provisions of the 1987 Act. Therefore, advancing of
loan to A-4 by NHB under the disguise of a 'call money' ~ .
transaction amounted to an offence under the provisions
of the 1987 Act and also was illegal as defined in s.43 IPC.
The accused had knowledge of the said transaction.
E There is sufficient evidence to hold A-1 to A3, all officials
of UCO Bank, A-6, an official of NHB and A-5, who was
working under A-4, guilty of criminal conspiracy.
Therefore, they have been rightly convicted by the courts +
•
for commission of the offence of criminal conspiracy. But
F there is not sufficient evidence to show the involvement
of A-7, the other employee of NHB in the said
transactions. [Para 149,151,153 and 154] [843-E; 844-F-G;
845-C-E]

4.1. Section 405 IPC, which defines criminal breach
G
of trust requires (1) entrusting any person with property
or with dominion over property; (2) such· person (a)
dishonestly misappropriates or converts to his own use
that property; or (b) dishonestly uses or disposes of that
property or willfully suffers any other person so to do in
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 775
INVESTIGATION

violation - (i) of any direction of law prescribing the mode A
in which such trust is to be discharged, or (ii) of any legal
contract made touching the discharge of such trust. [Para
157] [846-C-F]

Onkar Nath Mishra and Ors. vs. State (NCT of Delhi) and
8
Anr., (2008) 2 SCC 561; Jaikrishnadas Manohardas Desai
and Anr. v. State of Bombay, AIR 1960 SC 889, relied on.

4.2. Criminal breach of trust by a public servant is
• i<' dealt with uls 409, ingredients whereof are: (1) the
accused must be a public servant; (2) he must have been C
entrusted, in such capacity, with the property ; and (3) he
must have committed breach of trust in respect of such
property. This section classes together public servants,
bankers, merchants, factors, brokers, attorneys and
agents. The duties of such persons are of a highly D
" 1 confidential character, involving great powers of control
over the property entrusted to them, and a breach of trust
by such persons may often induce serious public and
private calamity. [Para 161-163] [847-F; 848-C-D, B]
E
Raghunath Anant Govilkar v. State of Maharashtra and
Ors, 2008 (2) SCALE 303; Superintendent and
Remembrancer of Legal Affairs, WB. v. S.K. Roy, (1974) 4
SCC 230; Chelloor Mankkal Narayan lttiravi Namhudiri v.
State of Travancore, Cochin, AIR 1953 SC 478 - relied on.
F
4.3. The accused had allowed diversion of a huge
sum of NHB meant to be used for spe~fic purpose,
namely, 'call money', to be lent to another Nationalized
Bank. Since the transaction was illegal, as a result
whereof, a private person, who was not expected to reap G
J- the fruit of 'call money' was allowed to retain the same
for a certain period to make an unlawful gain therefrom,
offence of criminal breach of trust must be held to have
been committed. [Para 170) [850-G-H; 851-A]
H
776 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 4.4. The plea that the Banks have not initiated any
proceedings nor have they suffered any loss and thus
•
the judgment of conviction and sentence for criminal
breach of trust is wholly unsustainable, cannot be
accepted. A Bank or Financial Institution may not suffer
B ultimate loss but if the money has been allowed to be
used by another person illegally for illegal purposes, the
ingredients of s. 405 IPC would get attracted. A case
involving temporary embezzlement also attracts the
ingredients of s. 405 IPC. Furthermore, in terms of the
c decisions of this Court, when a person allows others to
misappropriate the property entrusted to him, that also
amounts to criminal breach of trust It is not the law that
complaint petition under all circumstances must be made
by the Banks and Financial Institutions whose money
had been the subject matter of offence. It is also not the
0
law that suffering of loss is a sine qua non for recording
a judgment of conviction. The money involved in the
transfer is public money belonging to Public Sector
Banks. Criminal law can be set in motion by anybody. The
prosecution was initiated on the basis of the information
E received by the Central Bureau of Investigation. It would
be entitled to do so not only in regard to its statutory
powers contained in the Delhi Special Police Act but it
was also entitled to take cognizance in terms of the report
submitted by 'Janakiraman Committee'. [Para 168 and
F 169, 171, 172] [850-A, D-F; 851-B-D)

5.1. The most essential ingredient of proof of criminal
breach of trust is misappropriation with a dishonest
intention. So far as the aspect of dishonest intention is
G concerned, the term 'dishonestly' is defined by s. 24 IPC
as doing anything with the intention of causing wrongful
gain to one person or wrongful loss to another. So the
offence is completed when misappropriation of property
has been made dishonestly. Accordingly, even a
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 777
INVESTIGATION

. temporary misappropriation falls within the ambit of the A
)i
said offence. The term 'wrongful gain' is defined in s. 23
IPC as gain by unlawful means of property to which the
person gaining is not legally entitled. [Para 175,178 and
179) [852-A-F]
B
SW Pa/anikar v. State of Bihar, (2002) 1 SCC 241;
Kartikeshwar Nayak v. State, 1996 Cr.L.J. 2253, relied on

. ,, 5.2. In the instant case A-6 parted with money of NHB,
which was entrusted to him, so that A-4 could get it
c
although not entitled therefor in law. The conduct of A-6
was, therefore, dishonest. He is guilty of the offence of
criminal breach of trust. [Para 180) [852-G-H]

5.3. With regard to A-7 there is not enough evidence
to show his involvement in the said transactions. [Para D
180] [852-G-H; 853-A]
..
Ji
-~

5.4. So far as the involvement of accused 1 to 3 is
concerned, they also played an important role in diverting
the supposed 'call money' from NHB which was meant
for UCO Bank to the account of A-4. As soon as the E
cheque for Rs 40 crore was received by UCO Bank the
j.
amount stood entrusted to the officials of UCO Bank. A-
~
1 to A-3 in violation of law permitted the amount to be
transferred to the account of A-4 who was not entitled to
it. Therefore, the offence of criminal breach of trust stands F
proved against them also. [Para 181) [853-A-C]

Ram Narayan Popli v. Central Bureau of Investigation
2003) 3 sec 641, relied on.

6.1. As regards charges u/s. 13 (1) (d) (iii) read withs G
13 (2) of the Prevention of Corruption Act, 1988, the
ingredients of Sub-clause (iii) of s. 13 (1) (d) contemplate
that a public servant who while holding office obtains for
any person any valuable thing or pecuniary advantage.
H
778 SUPREME COURT REPORTS [2009] 12 S.C.R.

A without any public interest would be guilty of criminal
)>,
misconduct. For convicting the person uls. 13(1)(d)(iii),
there must be evidence on record that accused
'obtained' for any other person any valuable thing or
pecuniary advantage without any public advantage. [Para
B 184 and 185) [855-B-D]
CK Damodaran Nair v. Government of India, AIR 1997
SC 551; Dalpat Singh v. State of Rajasthan, AIR 1969 SC
17; B. Ramachandran and S.S. Abdul Hameed vs. State rep.
~ ,
by The Inspector of Police, Special Police Establishment,
c Central Bureau of Investigation, Anti-Corruption Branch, (Crl.
A. No. 553 of 2000 decided on 23.03.2007), by Madras H.C.
relied on.

6.2. A-1 to A-3 (UCO Bank officials) and A-6 (NHB
D official) were at the relevant time public servants. Each
one of them played a specific role in diversion of funds
..
(

from NHB to the account of A-4, all ostensibly under a
'call money' transaction. They thereby facilitated A-4 to
obtain pecuniary advantage within the meaning of s. 13
E of the 1988 Act. Their acts were anything but intended to
be in public interest. On the contrary, the public loss and
suffering occasioned thereby was immeasurable. Though
it is true that all the funds diverted have subsequently ••
been returned to NHB and no actual loss has been
F occasioned thereby either to the UCO Bank or the NHB,
but it must not be forgotten that white collar crimes of
such a nature affect the ,whole society even though they
may not have any immediate victims. A-1 to A-3 and A-6
are, accordingly, guilty of criminal misconduct uls 13 (1)
(d) (iii) of the Prevention of Corruption Act. 1988.
G
However, there is no sufficient evidence to bring in the
involvement of A-7, within the fold of the said transaction.
[Para 189 and 190) [856-E-H; 857-A-B]

7.1. A sentence of punishment poses a complex
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 779
INVESTIGATION
problem which requires a balancing act between the A
competing views based on the reformative, the deterrent
as well as the retributive theories of punishment.
Accordingly, a just and proper sentence should neither
be too harsh nor too lenient. In judging the adequacy of
a sentence, the nature of the offence, the circumstances B
of its commission, the age and character of the offender,
injury to individual or the society, effect of punishment
on offender, are some amongst many other factors which
should be ordinarily taken into consideration by the
courts. It may also be placed on record that as the CBI c
has not preferred any appeal against the quantuin of
sentence, this Court cannot impose a higher sentence.
Therefore, the sentences imposed by the Special Court
on A-1 to A-3 and A-5 are not interfered with. [Para 191-
196) [857-C-E; 858-8-E]
D
7.2. The Special Court acted illegally and without
jurisdiction in relying upon the report of the
"Janakiraman Committee" while imposing the sentence
on A-6. Though, the court may refer to the constitution
of the Committee for the purpose of tracing the history E
for enactment of the Act, but the contents of the said
report would not be admitted in evidence in a criminal
case without proof thereof. The Committee was not a
court. It did not render any decision. It was merely a fact
finding body. It was constituted for a limited purpose. The F
report in terms of the provisions of the Evidence Act, 1872
is not a judgment. The report may facilitate investigation
but cannot form basis of conviction and sentencing the
accused. Contents of the report, therefore, without formal
proof, could not have been taken in evidence. G
Accordingly, the Janakiraman Committee Report was not
admissible in evidence. [Para 72-73] [816-F~G; 817-A-C]

M. V. Rajwade v. Dr. S.M. Hassan, AIR 1954 Nag 71; Re.
H
780 SUPREME COURT REPORTS [2009) 12 S.C.R.

A Maharaja Madhava Singh LR (1905) 31 IA 239, referred to.
J\

Branjnandan Sinha v. Jyoti Narain (1955) S.C.R. 955;
Ram Krishna Dalmia v. Justice S.R. Tendolkar, 1959 SCR
279; Puhupram v. State of Madhya Pradesh, (1968) MPLJ
629; Sham Kant v. State of Maharashtra 1992 Suppl. (2)
B
sec 521, relied on
7.3. Though, A-6 played a very instrumental role in the
entire scheme of things and the transactions could not
have been possibly carried on without his help, but so ~ <
c long as there is doubt that the trial court was not wholly
correct in awarding the sentence as it might have been
influenced by the observations of the Janakiraman
Committee Report while awarding the sentence, this
Court would not be in a position to uphold it This is also
D visible from the wide difference in the sentence of
imprisonment which has been given to him as compared t
-
to other accused persons who also played an equally '
instrumental role in the illegal transactions. Accordingly
the sentence imposed on A-6 is reduced to six months
E but the amount of fine which has been imposed upon
him is upheld. [Para 197] [858-F-H; 859-A-B]
Case Law Reference: ~
~

2003) 3 sec 641 relied on para 16
F AIR 1960 SC 610 referred to para 50
(1991) 3 sec 617 referred to para 50
2007 (2) SCALE 120 referred to para 50
G (2009) 3 sec 240 referred to para 50
(2001) 8 sec 257 referred to para 53
(2004) 11 sec 456 referred to para 54

H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 781
INVESTIGATION
(2001) 3 sec 11 referred to para 55 A

AIR 1955 SC 661 referred to para 57

AIR 2000 SC 5100 referred to para 57

1985) 2 All ER 355 referred to para 57 B
(1988) 2 sec 299 referred to para 59

(2004) 5 sec 632 referred to para 59

' [1970) 3 All ER 1053 (QB} referred to para 59
c
[1971) 1 WLR 408 referred to para 59

AIR 1998 SC 831 referred to para 61

AIR 1954 Nag 71 referred to para 74
referred to para 74 D
LR (1905) 31 IA 239
(1955) S.C.R. 955 relied on para 75

1959 SCR 279 relied on para 75

1968) MPLJ 629 relied on para 75 E
[1992 Suppl. (2) SCC 521 relied on para 75
>
(1981) 2 sec 443 referred to para 83

1988 (3) sec 609 referred to para 84
F
(1996) 4 sec 659 referred to para 86

(2005) 12 sec 631 referred to para 86

(2005) 11 sec 600 referred to para 87
G
• (2004) 11 sec 585 referred to para 87

(2008) 6 SCALE 469 referred to para 87

H
782 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 2008 (14) SCALE 639 referred to para 88
(2008) 2 sec 561 relied on para 158
AIR 1960 SC 889 relied on para 159
2008 (2) SCALE 303 relied on para 164
B
(1974) 4 sec 230 relied on para 165
AIR 1953 SC 478 relied on para 166
I '
2002) 1 sec 241 relied on para 174
c
1996 Cr.L.J. 2253 relied on para 179
AIR 1997 SC 551 relied on para 184
AIR 1969 SC 17 relied on para 187
D CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 76 of 2004.
••
From.the Judgment & Order dated 04.12.2003 of the
Special court (Trial of Offences Relating to Transactions in
E Securities) at Bombay in Special Case No.2 of 1993.

WITH
•
Crl. A. Nos. 101, 147, 164, 90 and 92 of 2004.

F Mohan Parasaran, ASG, V.A. Mehta, Bhimrao Naik,
Bishwajit Bhattacharyya, P.S. Narasimha, Amit Sharma,
Anupam Lal Das, E.C. Agrawala, Mahesh Agarwal, Rishi
Agrawala, Nilkanta Nayar, Rajeev B. Masoodkar, S.S.
Khanduja, Aarohi Bhalla, Amit Yadav, Pramit Saxena, Sujata
G Kurdukar, Debashis Mukherjee, Ajay Singh, Ravindra Kumar,
Kamini Jaiswal, D.L. Chidananda, Gaurav Dhingra, T.A. Khan,
B.K. Prasad (for P. Parmeswaran) for the appearing parties.

The Judgment of the Court was delivered by
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 783
INVESTIGATION
S.S. SINHA, J. A
" INTRODUCTION

1. These six appeals are directed against a judgment and
order dated 4th December, 2003 passed by the Special Court
in Case No.2of1993 whereby and whereunder the appellants B
herein were convicted and sentenced in the following terms :-

"(a) Accused No. 1, K. Margabanthu is sentenced for
' )' the offence punishable under Section 120-B read
with Section 409 of the Indian Penal Code read with c
Section 13(1)[d](iii) read with Section 13(2) of the
Prevention of Corruption Act to undergo R.I. for a
period of six months and to pay fine of Rs.1,00,000/
- in default S.I. for two months .
. "
j
(b) Accused No. 2, R. Venkatkrishnan is sentenced for D
~ y
the offence punishable under Section 120-B read
with Section 409 of the Indian Penal Code read with
Section 13(1 )[d](iii) read with Section 13(2) of the
Prevention of Corruption Act, to undergo R.I. for a
period of six months and to pay a fine of E
Rs.1,00,000/- in default S.I. for two months.
>-
.- (c) Accused No. 3, S.V. Ramnathan is sentenced for
the offence punishable under Section 120-B read
... with Section 409 of the Indian Penal Code read with F
Section 13(1)[d](iii) read with Section 13(2) of the
Prevention of Corruption Act to undergo R.I. for a
period of one month and to pay fine of Rs.10,000/
- in default S.I. for 15 days.

(d) Accused No. 5, Atul M.Parekh is sentenced for the G
offence punishable under Section 1208 of the
Indian Penal Code to undergo R.I. for a period of
15 days and to pay fine of Rs.10,000/-, in default
S.I. for 15 days.
H
784 SUPREME COURT REPORTS [2009] 12 S.C.R.

A (e) Accused No. 6, C. Ravikumar is sentenced for the
offence punishable under Section 120-B read with
section 409 of the Indian Penal Code read with
Section 13(1)[ d](iii) read with Section 13(2) of the
Prevention of Corruption Act to undergo RI. for a
B period of three years and to pay fine of
Rs.1,00,000/- in default S.I. for three months.

(f) Accused No. 7, S. Suresh Babu is sentenced for
the offence punishable under Section 120-B read
with section 409 of the Indian Penal Code read with
c Section 13(1 )[d](iii) read with Section 13(2) of the
Prevention of Corruption Act to undergo RI. for a
period of one year and to pay fine of Rs.50,000/-
in default S.I. for three months."

D BACKGROUND FACTS ...
~
2. While accused No.1, K. Margabandhu, at the relevant •
time, was the Chairman and Managing Director of United
Commercial Bank (UCO Bank), (a public sector b°ank),
accused No.2, Ramaiya Venkatkrishnan was the General
E
Manager and accused No.3, S.V. Ramnathan was the
Divisional Manager thereof of the Bombay Branch.
-i
accused No.4, Harshad Shantilal Mehta (Harshad Mehta) •
is said to be the kingpin of the whole operation. He is no more.
F
accused No.5, Atul Manubhai Parekh was working as Asst.
Vice President in M/s. Growmore Research and Assets
Management Ltd. Bombay and representing Harshad Mehta in
the matter of undertaking security transactions.
G accused No.6 Coodli Ravi Kumar was Assistant General
Manager of National Housing Bank (NHB), Bombay and was -+
in charge of its Funds Department. accused No.7, Seethapathy
Suresh Babu was the Assistant Manager of National Housing
Bank. He used to report to Accused No.6, Shri Coodli Ravi
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 785
INVESTIGATION [S.B. SINHA, J.]
----->
;(
Kumar in regard to his function and worked under his A
instructions.

3. The basic allegation against the appellants and Late
Harshad Mehta was that some transactions were carried out
in connivance with the officials of the Financial Institutions, B
Banks illegally as a result whereof Late Harshad Mehta was
allowed to obtain a sum of Rs.40 crores which was actually 'Call

. )'
Money' given as a loan by the National Housing Bank to the
UCO Bank.

4. Similar illegal transactions relating to government c
securities and other non governmental securities came to the
notice of the Central Government. A Committee commonly
known as 'Janakiraman Committee' was thereafter constituted,
Shri R. Janakiraman, the then Deputy Governor of Reserve
.• y Bank of India was appointed as its Chairman. The Committee D
submitted its report between May, 1992 and April. 1993. On
the basis of the report of the said Committee, Special Courts
were constituted in terms of The Special Court (Trial of Offences
Relating to Transactions in Securities) Act, 1993.
E
5. Allegations against the appellants and late Harshad
___..., ._
,., Mehta were as under:-

On 6th April, 1992 National Housing Bank lent a sum of
Rs.40 crores 'at call' to UCO Bank. However the said amount
was credited to Harshad Mehta's account in UCO Bank, F
Hamam Street Branch, Mumbai. This was allegedly done under
the instructions of the Head Office in Calcutta and its Zonal
~

Office at Bombay. The Fund Dealing Officer at D.N. Road,
Bombay, Branch had alleged that a letter was received from
~
National Housing Bank enclosing the cheque but it was not G
traceable either in UCO Bank or in National Housing Bank. On
the date of credit, the account of Harshad Mehta in UCO Bank,
Hamam Street Branch showed an overdraft of Rs.39.07 crores.
Harshad Mehta allegedly repaid the said amount with interest
amounting to Rs.27 lakhs through Grindlays Banks which had H
/

;;;
786 SUPREME COURT REPORTS [2009] 12 S.C.R.

A debited Harshad Mehta's account.

6. It is stated that National Housing Bank could not have
advanced loans directly to the brokers. The recording of the
transactions as call money transactions through other banks
B was a subterfuge meant only to ensure grant of loans to
Harshad Mehta. It was also alleged that all the funds
manager:nent operations at the National Housjng Bank (the
lending bank) were centralized with C. Ravikumar, Assistant
General Manager (accused No.6). He was not only the dealer
C but was also one of the signatories to the cheques. The back
up functions were conducted by S. Suresh Prabhu, Assistant
Manager, who used to report to C. Ravikumar and acted under
his instructions. These two officers, between themselves, were
responsible for all functions including (i) making the deal; (ii)
recording the same ; (iii) preparing the vouchers; (iv) preparing
D the cheques; (v) signing the cheques (as one of the two
signatories); preparing and signing BRs; (vii) custody of BRs
received from counter-parties; (viii) issuing and receiving SGL
transfer forms and lodging the same with the RBI; and (ix)
maintaining the account with the RBI and reconciling the same.
E
7. The incident having come to light, an investigation was
conducted whereafter Charge Sheets were filed against the
accused persons. Charges were framed by the Special Court
on or about 31st October, ·2001 which were as many as
F fourteen in number. We need not advert thereto.

PROCEEDINGS BEFORE THE TRIAL COURT

8. With a view to prove the charges against the accused
persons the prosecutions examined twenty witnesses, viz :-
G 1. Shri Bishwajit Chaudhuri,
Chairman and Managing Director,
United Commercial Bank of India.
Sanctioning Authority
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 787
INVESTIGATION [S.B. SINHA, J.]

. 2.Shri P. Arvindak Shah A
General Manager, Reserve Bank of India, Production
Witness
3. Ravi Vira Gupta
Chairman, National Housing Bank, B
Sanctioning Authority
4. Shri B.L. Sachdeva,

• 'f
Under Secretary in the Ministry of Finance in Banking
Division
c
5. Shri Hiten D. Mehta,
Employee of late Shri Harshad S. Mehta
6. Shri N.A. Shivraman,
Assistant, Funds Department, D
y'
j. National Housing Bank
7. Shri Sunil Pandurang Gondhale,
Peon, National Housing Bank
8. Jeroo Dalal, E
Management Trainee, ANZ Grindlays Bank
~
,., 9. Shri Satish D: Hosangadi,
Chief General Manager, National Housing Bank.
10. Mrs. Jyoti R. Patankar, F

Officer, Reserve Bank of India Production Witness
11. Sujata Milind Nimbalkar,
ANZ Grindlays Bank Production Witness
G
12. Shri Sunil Kakkar,
+
Assistant Chief Officer, UCO Bank, Head Office, Kolkata.
!
13. Shri Chinmoykumar Mukherjee,
Assistant Chief Officer, UCO Bank, H
788 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Kolkata
14. Shri K. Vijayan,
Manager, Accounts Department, D.N. Road Branch, UCO
Bank
B 15. Shri Manohar C. Rupani
Assistant Manager, D.N. Road Branch, UCO Bank
16. Neelam P. Kini
Clerk, Hamam Street Branch, UCO Bank.
" <

c 17. Shri K. Mallikarjunan,
Officer, UCO Bank, Head Office, Kolkata
18. Shri Pradeep A. Karkhanis,
Senior Manager, UCO Bank, Hamam Street Branch
D 19. Shri Sitaram Premaram Paladia, ,, .
Supdt. Of Police, C.B.I.
20. Shri P.K. Mankar,
Dy. S.P. C.B.I.
E
9. For proving charges against accused No.1, evidence
of P.W. No. 4 Shri B.L. Sachdeva, PW-12, Shri Sunil Kakkar; ~

PW-13, Shri Chinkmoykumar Mukehrjee and PW-17, Shri K. •
Mallkarjunan are relevant. Accused No.1 also examined
F defence witnesses inter alia contending that on 6th April, 1992
he was not present at the Head Office till 3.30 p.m. It was
furthermore contended that the transactions in question were
held by and between NHB and accused No.4 and the officers
of UCO Bank had nothing to do therewith. The depositions of
G the said witnesses are also relevant for proving the charges so
far as accused No.2 is concerned. His defence was that the
offence of conspiracy has not been proved. It is his case that
the purported decision to arrange for call money had not been
taken by him alone as per the statement of PW-3, P. Arvindk
H Shah and PW-17, K. Mallikaarjunan, but by the Chairman-cum-
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 789
INVESTIGATION [S.S. SINHA. J.]
Managing Director of UCO Bank. A
lf
10. With a view to prove the charges against accused No.3
the learned Special Court relied upon the evidence of PW-1,
Shri Bishwajit Choudhuri, PW-13, Shri Chinmoykumar
Mukherjee, PW-16, Neelam P. Kini and PW-18, Pradeep A. B
Karkhanis. His defence was that on the basis of the
documentary as well as oral evidence, the prosecution had not
been able to prove his involvement either for commission of the
offence in conspiracy or in commission of any other offence.
• y
The only evidence against him being that on 6th April, 1992 he
had gone to Hamam Street Branch of the UCO Bank and at
c
that time accused No.5 was also present and the fact that he
had sent a letter for reviving the transaction with broker Late
Harshad Mehta from the Hamam Street Branch by itself does
not prove the offence.
D
,. )' 11. So far as accused No.5 is concerned, the prosecution
had relied upon the evidence of PW-5, Shri Hiten D. Metha,
who was an employee of Late Harshad Mehta. He in his
deposition stated that he used to make telephone calls the
· documents were prepared for repayment of Rs.40 crores on E
instructions from accused No.5, Atul M. Parekh. The defence
,. of the said accused was that he was merely an employee and
had been looking after the execution of the transactions after
,;
the deal had been finalized under the instructions of Harshad
Metha. He being an employee could not be a party to the F
conspiracy nor the prosecution had been able to show that he
had any role to play in the transaction.

12. Admittedly accused No.6, C. Ravikumar, was a dealer
with NHB. The prosecution relied upon the deposition of PW-
3, Ravi Vira Gupta to prove the order of sanction, validity G
+- whereof is in question. The prosecution for proving charge
against him relied upon the deposition of PW-5, Hiten D. Mehta,
who was working with Late Harshad Mehta. Reliance by the
prosecution has also been placed on the evidence of PW-6,
H
790 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Shri N.A. Shivraman, who was working as Assistant, Funds
JI
Department, NHB from 27th January, 1991 to 31st December,
1991. Reliance has also been placed in this behalf on the
deposition of PW-9, Shri Satish D. Hosangadi, who at the
relevant time was the Chief General Manager of NHB.
B
13. For proving the charges against accused No.7, the
prosecution has relied upon the depositions of PW-6, Shri N.A.
Shivraman and PW-9, Shri Satish D. Hosangadi.

14. Accused Nos. 1 to 3 and 6 & 7 were public servants. ..,, .
c
Orders of sanction for their prosecution were passed by
the competent authorities. Accused Nos. 6 and 7 challenged
the validity of the said orders of sanction before the courts
below.
D 15. All the accused persons had been charged for
y ..
commission of offences punishable under Section 120-B read
with Section 409 and Section 34 of the Indian Penal Code and
Section 13(1)(d)(iii) r/w Sections 13(2) of the Prevention of
Corruption Act, 1988.
E
JUDGMENT OF THE SPECIAL COURT
4
16. The learned Special Court in its impugned judgment ~
referred to the decision of Ram Narayan Popli v. Central
Bureau of Investigation, [(2003) 3 SCC 641 ] in extenso so
F
as to note the ingredients for commission of the offence of
conspiracy to conclude:-

"It is thus well established that the transaction of call money
which was shown to be between the National Housing
G Bank and the UCO Bank was not a real transaction of call
money between the National Housing Bank and the UCO --4-
Bank. It was really a transaction between the National
Housing Bank and Harshad Mehta and the officers of the
UCO Bank permitted the name of the UCO Bank to be
H used to facilitate the transactions between the National
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 791
INVESTIGATION [S.B. SINHA, J.]

Housing Bank and UCO Bank. Therefore, about the nature A
of the transaction, there is no dispute."
"'· Referring to the statement of accused No.1 it was
furthermore held :-

"From the submissions of accused No. 1 it is clear that B
even according to him in this transaction, the UCO Bank
allowed itself to be used by Harshad Mehta pursuant to the
routing facility that was extended by it to Harshad Mehta.
~ ... Accused No. 1 also relies on the deposition of P.W. 5 Hiten
Mehta in relation to this facility." c
17. Yet again upon referring to the deposition of PW-5,
Hiten D. Mehta and PW-18, Pradeep A. Karkhanis, the learned
court held :-

"Now, so far as the aspect of conspiracy is concerned, D
- P.W. 18 Karkhanis has stated that on 6.4.1992 at 12 -
~

" '12.30 Ramnathan accused No. 3 and Atul Parekh
accused No. 5 had come to the Hamam Stree1 Branch
and before he received call from Vijayan, Atul Parekh told
him that he is expecting a cheque of Rs.40 c~ores from E
the NHB. This clearly indicates that it was already settled

f>..lt
. between the officers of the NHB and the UCO Bank that
on that day the NHB was to route Rs.40 crores to Harshad
Mehta through the UCO Bank and that Ramnathan and Atul
Parekh knew about it. It has come on record that the F
~
transactions with the brokers were stopped in the year
1991 from the Hamam Street Branch. The accused No. 3
Ramnathan wrote a letter dated 17.3.1992 on instruction
from accused No. 1 K. Margabanthu for starting of the
transactions again. P.W. 18 Karkhanis has stated that on G
6.4.1992 accused No. 3 Ramnathan came to the Hamam
~-
Street Branch and insisted on starting the transactions
immediately. He also states that accused No. 3 said that
he is saying so on instructions from accused No. 1. This
shows that accused No. 3 knew that on that day N.H.B. H
792 SUPREME COURT REPORTS [2009] 12 S.C.R.

A was to route Rs. 40 crores to Harshad Mehta through the
UCO Bank and he had gone to the UCO Bank Hamam ._
.

Street Branch to see that the transaction goes through and
that he did so on instruction from the accused No. 1, K.
Margabanthu. The Supreme Court has clearly laid it down
B in the case of Somnath Thapa referred to above that for
establishing conspiracy knowledge about indulgence in
illegal act is necessary. So far as accused No. 1 is
concerned, from the statements that he made in the
meeting on 6.4.1992 it is clear that he knew about the
transaction. (The dispute about the time of the meeting ... 1
c
raised by accused No. 1 is really not relevant considering
the means of communication available and the written
submissions filed by him, where he says that this was a
routine routing transaction). So far as accused No.2 is
concerned, it is he who authorized the call money
D
transaction though the amount of Rs.40 crores was not
needed by the UCO bank on that day. Therefore, his ..,
knowledge about the nature of the transaction is well
established. So far as accused No. 3 Ramnathan is
concerned, his presence at the Hamam Street Branch on
E 6.4.1992 at 12-12.30 with Atul Parekh and his insistence
that the transaction with the broker should be started
immediately show that he was also aware of the ... ,,
transaction. It is pertinent to note that cross-examination
of P.W. 18 by accused No. 3 shows that even an attempt
F is not made to dispute the above referred statement of
";
P.W. 18. So far as accused No.5 Atul Parekh is concerned,
above referred statement of P.W. 18 clearly establishes
his knowledge of the transaction. The statement of P.W.
8 Jeroo Dalal also shows that at his instruction pay order
G for repayment to the NHB was prepared."

18. Referring to the other cases vis-a-vis accused Nos. 6 1,
and 7, it was opined :-

"Thus, the evidence on record clearly shows that all the
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 793
INVESTIGATION [S.B. SINHA, J.]
accused persons had knowledge of the transaction and A
)I that all of them have some part in the transaction."

19. The learned Special Court thereafter considered the
question as to whether the 'transfer' was illegal within the
meaning of Section 43 of the Indian Penal Code in the light of B
the provisions of Section 14 of the NHB Act, holding :-

"It is thus clear that the National Housing Bank in terms of
Section 14 of the Act can only make loans and advances

-· "' to housing finance institutions and scheduled banks or
slum clearance authority constituted under the Central or c
State Legislation. Sub-se.ction (4) of Section 49 of the
National Housing Bank Act lays down that if any other
provision of this Act is contravened or if any default is
;;
made in complying with any other requirement of this Act,
or of any order, regulation or direction made or given or D
... condition imposed thereunder, any person found guilty of
such contravention or default shall be punishable with fine."
20. So far as the purported offence in regard to criminal
breach of trust is concerned, the learned Judge held that the
E
same stood proved against the officers of the Bank. However,
so far as accused No.5 is concerned, the same was held to
~ have not been proved, although it was held that he was guilty
of commission of offence of conspiracy.
·:.: 21. So far as the offences under the Prevention of F
Corruption Act, 1988 is concerned, a finding has also been
arrived at that the charges under the said provisions have been
proved.
- 22. The learned Special Court also negated the contention G
of accused Nos.6 and 7 that the order of sanction passed
+- against them are not valid.
SUBMISSIONS

23. The principal contentions raised on behalf of the H
.
794 . SUPREME COURT REPORTS [2009] 12 S.C.R.

A appellants are :-
~
(1) That the prosecution case even if taken to be
correct in its entirety does not disclose any offence
of conspiracy.
B (2) So far as accused No. 1 and 2 are conc~rned they
were stationed at Kolkata. Only because they had
held a meeting in the Chamber of accused No.1 in
presence of PWs 12 and 13, the same by itself

c
does not prove that they were party to a larger
conspiracy, namely use of call money for causing
unlawful gain to Late Harshad Mehta.
'f

-
(3) The charges of conspiracy vis-a-vis criminal breach
of trust cannot be said to have been proved as even ~

D in terms of Section 14 of the National Housing Bank
Act, such a transaction was legally permissible.

(4) Only because the accused No.3 was present at the
"'
Bank and wrote a letter for reviving the account of
Late Harshad Mehta, the same by itself does not
E prove that he was a party to the conspiracy.

(5) If the prosecution case that there had been a larger
conspiracy because of unlawful favour shown to ..
Harshad Mehta is correct, the other officers of the
F UCO Bank, concerned officers of Reserve Bank of r
India and ANZ Grindlays Bank should have also
been prosecuted.
(6) The orders of sanction for prosecuting accused
Nos. 6 and 7 were illegal.
G
(7) The evidences of PWs. 5, 7, 12, 13 and 17 should
not have been relied upon by the learned Special
Court as they were accomplices to the crime.

H (8) Accused No.1 having come to his office at about

"
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 795
INVESTIGATION [S.B. SINHA, J.]
3.00 - 3.30 p.m. from Chennai and the entire
-.. <

'¥ transaction having been completed by 2 O' clock,
A

he cannot be said to be a party to a decision either
to obtain call money from NHB or the cancellation
thereof.

(9) The documents proved on behalf of the prosecution B
do not disclose that the accused and in particular
accused Nos. 1 and 2 had any intention to commit
the alleged offence.
~ ~
(10) Accused No.2 having signed only two documents c
and accused No.1 having put his initials only on one
document, they could not be held to be a party to
,,;
the alleged oonspiracy.

(11) Witnesses, PW No. 5 - Hiten D. Mehta; PW No.12
., Sunil Kakkar; PW No. 13 - Chinmoykumar
D

. Mukherjee; PW No. 17 - K. Mallikaarjunan and PW
No. 18 - Pradeep A. Karkhanis, having regard to
Section 163 of the Evidence Act, 1872 read with
illustrations appended to clause VIII of Section 114
of the Evidence Act, 1872, could not have been E
relied upon by the learned Special Court without any

•"
corroboration of their statements. In any view of the
matter, evidence of one accomplice cannot be
taken into consideration for the purpose of
corroboration of the evidence of another alleged F
accomplice.

(12) In a case of this nature, where the conspiracy was
alleged in regard to a legal act by illegal means,
active participation by each one of them must have G
been held to be imperative in character and in its
absence, they could not be held guilty of
commission of any offence.

(13) Accused No.3, who was only Scale IV officer and
H

I
796 SUPREME COURT REPORTS (2009] 12 S.C.R.

A posted at Hamam Street Branch of UCO Bank,
visited D.N. Road Branch and he had issued a ~ - '

circular for reviving account of three brokers
including Late Harshad Mehta, the same by itself
does not lead to a conclusion that he had committed
B the offence.

(14) On behalf of accused No.5,· it was submitted that
being an employee of Late Harshad Mehta and
having acted on his instructions, he cannot be held
1 •
to have committed an offence of conspiracy only
c because he had visited the banks and /or was in
touch with some of their officers for the purpose of
ascertaining the position of accounts of Mehta.
(15) Accused No.6 merely being signatory to the
•
D cheque of Rs. 40 crores issued in favour of UCO '
Bank which has been cleared by the Reserve Bank .,,
of India cannot be presumed to have any
knowledge of diversion of the said amount by the
officers of UCO Bank in the account of Late
-
E Harshad Mehta and the purported refund of the said
amount with interest by him through ANZ Grindlays
Bank, and as such he cannot be said to have ...
committed the offence of conspiracy .. 4

(16) Accused No. 7 merely being an Assistant Manager
F and having discharged his functions acting under
the directions of accused No.6 and other higher
officers cannot be said to have committed any
offence as alleged or at all.
(17) Departmental proceedings having not been
-
G
initiated by the employers and neither the UCO
Bank nor the NHB having suffered any loss, the
judgment of conviction for criminal breach of trust
is wholly unsustainable.
H
...
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 797
INVESTIGATION [S.B. SINHA, J.]

(18) The learned Special Court having not assigned any A
reason and having not discussed the materials
brought on record in details, must be held to have
acted illegally and without jurisdiction in passing the
impugned judgment.
B
(19) The transfer of money being not 'securities' within
the meaning of the provisions of Special Court (Trial
of Offences Relating to Transactions in Securities)
Act, 1993, the Special Court had no jurisdiction to
try the offences thereunder.
c
(20) Accused No.5 having been acquitted from the
charges of criminal breach of trust, could not have
been held to be guilty of being a party to the
conspiracy as alleged by the prosecution on the
basis of the materials brought on record. D

24. Mr. Mohan Prasaran, learned Additional Solicitor
General appearing on behalf of the Central Bureau of
Investigation, on the other hand, urged:-

(1) The prosecution case that NHB had diverted its E
funds in violation of the provisions of the National
.l Housing Bank Act, 1987 must be held to have been
proved as the accused persons including Late
Harshad Mehta and his associates utilized the
officers of UCO Bank as a conduit, having regard F
to the fact that it stands admitted that a ready
forward deal was entered into by and between
UCO Bank and NHB Bank, in terms whereof a sum
of Rs.40 crores was credited to the account of Late
Harshad Mehta. G

(2) An offence of conspiracy need not be proved by
adducing direct evidence of meeting of mind but the
same can be established by cumulative
consideration of various facts and several events H
798 SUPREME COURT REPORTS [2009) 12 S.C.R.

A which had taken place in quick succession to
~ .
facilitate the routing of the amount.

(3) From the evidence of PW-17, K. Mallikarjunan it
has clear1y been established that both accused Nos.
B 1 and 2 had closely monitored the purchases and
sales of securities in tandem with Late Harshad
Mehta and they in conspiracy with each other had
caused huge losses to the Bank.

(4) Accused No.3 although a Divisional Manager of • ~

c UCO Bank, issued a letter to the Zonal Manager,
UCO Bank, Bombay, on 17th March, 1992,
purported to be containing guidelines issued on BR
transactions whereby recommendations were
made to deal with only three brokers, including late
D Harshad Mehta, in terms of the purported
..,
instructions of the Chairman-cum-Managing '(

Director and as a copy of the said letter was, inter
alia. forwarded to accused No.2, showed that he
had also been a party to the said conspiracy which
E has also been proved by reason of the fact that he
had visited the D.N. Road Branch of UCO Bank
along with accused No.5 on the date of the said .J
transaction. .
F
(5) Accused Nos. 6 and 7 had not-only been a party to ..
the entire transaction but also manipulated other
documents, and in particular, the vouchers, which
clearly show that they not only had the requisite
knowledge that the amount of Rs.40 crores had to
be diverted to the account of Late Harshad Mehta
G but also the fact that the said amount would be
returned with interest by him through ANZ Grindlays y
Bank.

(6) The purported contradiction in regard to absence
H of accused No. 1 from the office of UCO Bank on
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 799
INVESTIGATION [S.B. SINHA, J.]

6th April, 1992, and also the timing of meeting the A
"'"
same does not affect the prosecution case, namely
_the commission of offence of conspiracy by all of
them, as it has been established that the cheque
issued by the NHB was never intended to be
utilised as call money. B
(7) Accused No.2, in fact, in his written statement in
unequivocal terms admitted before the Special
"" ~ Court that the transaction involved was a routing
transaction, absolutely' transparent and clear
transaction in ordinary course of nature, stated that c
had the scam not been attributed to Harshad

- Mehta, nobody would have raised eye brows
thereabout and, thus, admitted that the routing of a
sum of Rs.40 crores belonging to NHB through
..... )f UCO Bank to the account of Harshad Mehta was D
carried out for unknown consideration .
(8) The entire transaction being illegal would come
within the purview of 1 Section 120-A and Section
120-B of Indian Penal Code and, thus, no exception E
can be taken to the judgment of the learned Special
~· Court.
~ ~

OVER VIEW

NATIONAL HOUSING BANK F

25. NHB is a Bank constituted under the National Housing
~. Bank Act, 1987 (in short NHB Act). The Act was enacted to
establish a bank to be known as the National Housing Bank
(NHB) to operate as a principal agency to promote housing G
-)--
finance institutions both at local and regional levels and to
provide financial and other support to such institutions and for
matters connected therewith or incidental thereto. It is a financial
institution. It is also a Bank within the meaning of the provisions
of the Banking (Regulation) Act, 1949.
H
800 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 26. The nature of business of the NHB is contained in
Chapter IV of the Act.

27. 'Housing finance institution' has been defined in
Section 2(d), (as it then stood) to mean -
B "2. (d) "housing finance institution" includes every
institution, whether incorporated or not, which primarily
transacts or has as its principal object, the transacting of
the business of providing finance for housing, whether
directly or indirectly;"
c
28. NHB was established with a view to give effect to the
object and purpose of the said Act. It is a subsidiary of Reserve
Bank of India. Provisions of Section 14 of NHB Act, as they
are relevant for our ourpose may be noticed:-
D "Section 14 - Business of the National Housing Bank

Subject to the provisions of this Act, the National Housing
Bank may transact all or any of the following kinds of
business, namely:--
E
(a) promoting, establishing, supporting or aiding in the
promotion, establishment and support of housing finance
institutions; •

(b) making of loans and advances or rendering any other
F form of financial assistance whatsoever to housing finance
institutions and scheduled banks,

. (c) subscribing to or purchasing stocks, shares, bonds, -
debentures and securities of every other description;"
G
The Hierarchy of NHB is-as under:

1. Chairman-cum-Managing Director
2. Executive Director
H
•
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 801
INVESTIGATION [S.S. SINHA, J.]
3. Chief General Manager/s A

4. General Manager/s

5. Deputy General Manager/s

6. Assistant General Manager/s B

7. Regional General Manager/s

~
)' 8. Manager/s

9. Deputy Manager/s c
10. Assistant Manager

UCO BANK

29. UCO Bank is a nationalized bank having been taken D
-
' ..,:
over in terms of the provisions of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970. Its head
office is at Calcutta. Amongst others it has two branches in
Bombay - one at D.N. Road and other at Hamam Street,
E
30. Functions of the scheduled banks are governed by the
~ provisions of the Banking Companies Act, 1936. UCO Bank
~ is one of the fourteen banks which was nationalized. The
administrative hierarchy of UCO Bank is as under:

1. Chairman & Managing Director F

2. Executive Director

3. General Manager (Scale VII)
4. Dy. General Manager (Scale VI) G
-r
5. Asstt. General Manager (Scale V)
6. Officer in (Scale IV)
H·
802 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 7. Officer in (Scale Ill)

8. Officer in (Scale II)

9. Officer in (Scale I)

B CALL MONEY - THE LEGAL HISTORY

31. The statute relating to business in Banking was the
Bankers Book Evidence Act, 1891. In 1936 Banking
Companies Act, 1936 was enacted which was also known as J( ;

C Indian Companies (Amendment) Act, 1936 wherein Part XA
was inserted providing for far reaching effects on the banking
legislations. Subsequently, the Banking Regulation Act, 1949
(1949 Act) was enacted to consolidate and amend the law
relating to banking. It repealed and replaced Part XA of the
Banking Companies Act, 1936.
0
32. In the meanwhile, however, Reserve Bank of India Act,
1934 came into force. Section 42 of the 1934 Act provided for
"cash reserves" to be kept with the Bank, relevant provisions
whereof read as under:-
E
"Section 42 - Cash reserves of scheduled banks to be kept
with the Bank

(1) Every bank included in the Second Schedule shall
maintain with the Bank an average daily balance the
F amount of which shall not be less than such per cent. of
the total of the demand and time liabilities in India of such
bank as shown in the return referred to in sub-section (2),
as the Bank may from time to time, having regard to the
needs of securing the monetary stability in the country,
G notify in the Gazette of India

Explanation.-For the purposes of this section,-

(a) "average daily balance" shall mean the average
of the balances held at the close of business of
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 803
INVESTIGATION [S.B. SINHA, J.]

each day of a fortnight; A

... (1A) Notwithstanding anything contained in sub-section
(1 ), the Bank may, by notification in the Gazette of India,
direct that every scheduled bank shall, with effect from
such date as may be specified in the notification, maintain
B
with the Bank, in addition to the balance prescribed by or
under sub-section (1 ), an additional average daily balance
the amount of which shall not be less than the rate
t )- specified in the notification, such additional balance being
calculated with reference to the excess of the total of the
demand and time liabilities of the bank as shown in the
c
return referred to in sub-section (2) over the total of its
demand and time liabilities at the close of business on the
date specified in the notification as shown by such return
so however, that the additional balance shall, in no case,
be more than such excess: D

Provided that the Bank may, by a separate
notification in the Gazette of India, specify different
dates in respect of a Bank subsequently included
in the Second Schedule. E

~ ... (3) If the average daily balance held at the Bank by a
y scheduled bank during any fortnight is below the minimum
prescribed by or under sub-section (1) or sub-section (1A),
such scheduled bank shall be liable to pay to the Bank in
F
respect of that fortnight penal interest at a rate of three per
cent, above the bank rate on the amount by which such
balance with the Bank falls short of the prescribed
minimum, and if during the next succeeding fortnight, such
average daily balance is still below the prescribed
minimum, the rates of penal interest shall be increased to G
-~
a rate of five per cent, above the bank rate in respect of
that fortnight and each subsequent fortnight during which
the default continues on the amount by which such balance
at the Bank falls short of the prescribed minimum."
H
804 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 33. Section 42 also provides for penalties. It is, thus,
mandatory in character.

34. Maintenance of 'cash reserve ratio' is, therefore, a
statutory requirement. The consequence of non compliance
thereof has been provided for in sub-section 3 and 3A of
B
Section 42 which was brought into the statute book by Act 38
of 1956 which came into force from 6th October, 1956.

35. In terms of the said provision each bank is to maintain, ~
'
what is known as, 'cash reserve ratio' (CRR) every day. It is
c accepted at the bar that where a bank having an excess
amount would like to invest the same so as to enable it to earn
interest, those who fall short of 'cash reserve ratio' would be
under a statutory obligation to borrow the same so as to
maintain the 'cash reserve ratio' on such interest, as may be
D mutually agreed upon. )'

36. The Banks which are governed under the
aforementioned Act being in the business of banking, besides
other purposes, may grant loans not only to individuals or private
persons or body corporates but also to another bank.
E
37. Control of Banking Companies is vested in the Reserve
Bank of India as would appear from Section 35 of the 1949
Act. Section 35A empowers the Reserve Bank of India to issue
direction, which the banks are bound to carry out; on their failure
F to do so the penal clause contained in Section 46 would be
attracted, sub-section (4) whereof reads as under :-
"Section 46 - Penalties

(4) If any other provision of this Act is contravened or if any
G default is made in- ~ -
(i) complying with any requirement of this Act or of
any order, rule or direction made or condition
imposed thereunder, or
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 805
INVESTIGATION [S.B. SINHA, J.]
(ii) carrying out the terms of, or the obligations A
i under, a scheme sanctioned under sub-section (7)
of section 45,

by any person, such person shall be punishable with fine
which may extend to fifty thousand rupees or twice the B
amount involved in such contravention or default where
such amount is quantifiable, whichever is more, and where
a contravention or default is a continuing o_ne, with a further
fine which may extend to two thousand and five hundred
~ ~ rupees for every day, during which the contravention or
default continues."
c
38. In view of the aforementioned provision the 'cash
reserve ratio' as specified in the statutes, is mandatorily
required to kept with Reserve Bank of India. Such average daily
balance is not to be less than 3% of the total demand and time D
/
'( liabilities of such Bank in India.

39. Liabilities of a Bank may be in the form of demand or
time deposits or borrowings or other miscellaneous items of
liabilities. Liabilities of the Banks may be towards banking E
system (as defined under Section 42 of RBI Act, 1934) or
towards others in the form of Demand and Time deposits or
~
borrowings or other miscellaneous items of liabilities. Reserve
·~
Bank of India has been authorized in terms of Section 42 (1 C)
of the RBI Act, 1934 to classify any particular liability as either
F
a demand or a time liability.

40. 'Demand Liabilities' include all liabilities which are
payable on demand. 'Time Liabilities' are those which are
payable otherwise than on demand and they include fixed
deposits, cash certificates etc. G
- )
41. ·~can money" transactions are thus indisputably banking
transactions. It is no doubt true that in the event any irregularity
is committed, the Reserve Bank of India would be entitled to
take action against the erring Bank. H
806 SUPREME COURT REPORTS [2009] 12 S.C.R.

A JURISDICTION OF THE SPECIAL COURTS.

42. During the period April, 1992 and June, 1992 certain
large scale irregularities and malpractices were detected in
transactions of both governmental and other securities, carried
out by some brokers in collusion with the employees of various
B
Banks and Financial Institutions. To have a more close look into
the matter the RBI appointed a committee under the
chairmanship of the then Deputy Governor of RBI, Shri R.
Jankiraman ("the Jankiraman Committee"). The committee
submitted its report between May, 1992 and April 1993. On the
c basis
• '
of the said report and to deal with the situation as also
to ensure the speedy recovery of the huge amount ·involved the
Parliament enacted the Special Court (Trial of Offences
Relating to Transaction in Securities) Act, 1992 ("the Special
Courts Act"), establishing the Special Court, from whose
D judgment this appeal arises.

43. The learned counsel for the appellants contend before
us that the special court so constituted did not have the
>
- .

jurisdiction to try this matter. They argue that Section 7 read
E with Sub Section 2 of Section 3, of the Special Court Act,
limiting the jurisdiction of the Special Court only to 'offences
relating to transaction in securities' would not attract the A
transactions which have been attributed to the appellants in the ~

present case. It is argued that the definition of the term
F 'Securities', as provided for in Section 2 (c) of the Act does
not bring within its ambit 'call money transactions' for which they
are being tried. It must be noted that the order passed by the
learned Special judge is silent on the issue of jurisdiction even
though the issue is said to have been raised at the trial.
G 44. The Special Courts under the Act were established 'for
the trial of offences relating to transaction in securities and for ( -
matters connected therewith or incidental thereto.'

45. Section 3 of the Act deals with the appointment of, and
H the functions of custodians under the Act. Section 3 (2)
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 807
~INVESTIGATION [S.B. SINHA, J.]

empowers the Custodians to notify the name of any person who A
i are involved 'in any offence relating to transaction in securities'.
The relevant part thereof reads as under:

"3. Appointment and functions of custodians.- ... (2) The
Custodian may, on being satisfied on information received
B
that any person has been involved in any offence relating
to transaction in securities after the 1st day of April, 1991
and on and before the 6th June, 1992 notify the name of
such person in the official gazette." [Emphasis supplied]
• f·
46. Section 3, it must be noted, deals only with offences t
relating to transaction in securities within the period of time
specified in the Act. The time period of carrying out the call
money transactions is not in dispute before us, for those
transactions admittedly took place within the time period
referred to in the section. What is disputed however is whether D
-.._
/
-.( the said transactions do not relate to transactions in securities,
as is required by the section. The definition of the term
'securities' as provided for in section 2 (c) of the Act, reads as
under:
E
" ... (c) "securities" includes -

~ (i) shares, scrips, stocks, bonds, debentures, debenture
........ stock, units of the Unit Trust of India or any other mutual
fund or other marketable securities of a like nature in or
of any incorporated company or other body corporate; F

(ii) Government securities; and

(iii) rights or interests in securities;"[Emphasis added]

47. Section 4 of the Act gives the Custodians the requisite G
- t power to cancel certain contracts entered into fraudulently and/
or to defeat the provisions therein. Section 5 of the Act provides
for the establishment of a special Court with a sitting judge of
a High Court for speedy trial of such offences. Section 6
H
808 SUPREME COURT REPORTS [2009] 12 S.C.R.

A empowers the Special Court to take cognizance or try such
cases as are instituted before it.

48. Section 7, which is of relevance in determining the
present issues before us, defines the jurisdiction of the Special
Courts in criminal matters. It reads as under:
B
"7. Jurisdiction of Special Court.- Notwithstanding anything
contained in any other law, any prosecution in respect of
any offence referred to in sub section (2) of section 3 shall
be instituted only in the Special Court .... " [Emphasis 'i •
c supplied]

The said section begins with a non obstante clause
providing that the Special Court shall have jurisdiction to try
matters in respect of the offences referred to in Section 3 (2)
D of the Act.
)t
49. The definition of 'securities' in the Act is an inclusive
one. It is not exhaustive. It takes within its purview not only the
matters specified therein but also all other types of securities
as commonly understood.
E
50. In the State of Bombay and others v. The Hospital
Mazoor Sabha and others, [AIR 1960 SC 610] this Court while
interpreting the definition of "industry" as contained in Section
;. ,,_
20) of the Industrial Disputes Act, 1947 noted as under:-
F "It is obvious that the words used is an inclusive definition
denote extension and cannot be treated as restricted in
any sense. Where we are dealing with an inclusive
definition it would be inappropriate to put a restrictive
interpretation upon terms of wider denotation" [Internal
G citations omitted]
j -

{See also Regional Director, Employees State Insurance
Corporation v. High Land Coffee Works of P.X.S. Saldanha
and sons and another, [(1991) 3 sec 617) and Commercial
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 809
INVESTIGATION [S.8. SINHA, J.]

Taxation Officer, Udaipur v. Rajasthan Taxchem Ltd.. [2007 A
i (2) SCALE 120]. Kamataka Power Transmission Corpn. &
Anr. v. Ashok Iron Works Pvt. Ltd. [(2009) 3 SCC 240]}

51. However, even if we hold call money transactions not
to be within the scope and ambit of the definition of the term 8
'securities', it must still be remembered that the jurisdiction of
the Special Court extends even to offences relating to
transaction in securities. Therefore, the jurisdiction of the
Special Court could be invoked even in cases where the
'f
" transaction is somehow related to securities. It would extend
also to the utilization of any amount relating to transactions in
c
securities and for matters connected therewith or incidental
thereto.

52. The jurisdiction of the Special Court is an exclusive one.
It exercises original jurisdiction to try offences relating to the D
<i securities scam. It, having regard, to the peculiar nature of the
offences sought to be dealt with, should receive a liberal
• construction.

53. It was so held in Harshad S. Mehta and others v. E
State of Maharashtra, [(2001) 8 SCC 257].

~ "The use of different words in Sections 6 and 7 of the Act
- )' as already noticed earlier also show that the words in
Section 7 that the prosecution for any offence shall be
instituted only in Special Court deserve a liberal and wider F
construction.•

54. Similarly the court in L. S. Synthetics Ltd. v. Fairgrowth
Financial Services Ltd. and another, [(2004) 11 SCC 456] also
noted that '[t]he jurisdiction of the Special Court is of wide· G
amplitude. Subject to a decision in appeal therefrom, its
- 't
decision is final.'

55. Further Section 4 of the Code of Criminal Procedure
provides that all offences under the Indian Penal Code shall be
investigated and tried as per the provisions of the Code. The H
...
810 SUPREME COURT REPORTS [2009] 12 S.C.R.

A same, however, would be subject to special provisions to the
contrary. Section 5 of the Code of Criminal Procedure contains
a saving clause in terms of which the jurisdiction of special
legislations is saved. The Jurisdiction of the Special Court was
required to be determined with reference to the said provision.
B The Act is a special Act. The section conferring jurisdiction on
the Special Courts under the Act contains a 'Non Obstante'
clause. It, thus, prevails over any other Law. [See Solidaire
India Ltd. v. Fairgrowth Financial Services Ltd. and others,
[(2001) 3 sec 71 J. ~
'
c 56. The Jurisdiction of the Special Court may be invoked
when an offence committed relate to transactions in securities;
the logical corollary whereof would be that all parties connected
in diverting the funds of the public sectors and/or financial
institutions would also come within the purview thereof. For
D considering the provisions of the said Act, it has to be borne
in mind the object and purport thereof. We have noticed ,,
heretobefore that the Reserve Bank of India constituted ~

Janakiraman Committee for the purpose of looking in to the
Securities Scam of the early 90's. A report pursuant thereto was
E submitted. It was on the basis of that report that the said Act
was enacted and the Special Court was constituted. These
background facts, in our opinion, would be relevant for A
determining the issue. '(_ -
57. For the purpose of determining the question as to
F
whether the Special Court had the jurisdiction to try the offences
•
in question or not, in our opinion, the principle of purposive
construction must be resorted to. The rule which is also known
as the 'mischief rule' enables consideration of four matters in
construing an Act: (i) What was the law before the making of
G
the Act, (ii) What was the mischief or defect for which the law
did not provide (iii) What is the remedy that the Act has 1 -

provided, and (iv) What is the reason of the remedy. The rule
then directs the courts to adopt that construction which
suppresses the mischief and advances the remedy. [S.ee
H
...
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 811
INVESTIGATION [S.B. SINHA, J.]

Bengal Immunity Co. v. State of Bihar, AIR 1955 SC 661, life A
Singh v. State of Haryana, AIR 2000 SC 5100]. Simply stated
'the courts should identify the mischief which existed before
passing of the statute and then if more than one construction
is possible, favour that which will eliminate the mischief so
identified.' [Anderton v. Ryan, (1985) 2 All ER 355, per Lord B
Roskill].

58. The phrase 'offence relating to transaction in
securities' as used in section 3 (2) is clearly subject to more
than one meaning. It is anything but clear. For the
aforementioned purpose we may notice the meaning of the C
word 'in relation to'.

59. In Mis. Doypack Systems (Pvt.) Ltd. v. Union of India
& ors., ((1988) 2 sec e99], it was observed :-
D
"In view of the language used in the relevant provisions, it
appears to us that Section 3 has two limbs: (i) textile
• undertakings: and (ii) right, title and interest of the company
in relation to every such textile undertaking .... The
expressions "pertaining to", "in relation to" and "arising out E
of' , used in the deeming provision, are used in the
expansive sense, as per decisions of courts, meanings
found in a standard dictionaries, and the principles of
broad and liberal interpretation .... We are of the opinion
that the words "pertaining to" and "in relation to" have the F
same wide meaning and have been used
interchangeably .... The e_xpression "in relation to" (so also
"pertaining to"), is a very broad expression which pre-
supposes another subject matter. These are words of
comprehensiveness which might both have a direct
significance as well as an indirect significance depending G
on the context.... In this connection reference may be
made to 76 Corpus Juris Secundum at pages 620 and
521 where it is steted that the term "relate" is also defined
as meaning to ring into association or connection with. It
H
812 SUPREME COURT REPORTS [2009J 12 S.C.R.

A has been clearly mentioned that "relating to" has been held
to be equivalent to or synonymous with as to "concerning
,,
with" and "pertaining to". The expression "pertaining to"
is an expression of expansion and not of contraction."
[Emphasis supplied]
B
These lines were also quoted with approval in T.N.
Kalyane Mandapam Association v. Union of India, [(2004) 5
SCC 632]. (See also Bismag v. Amblins (Chemists), [1970]
3 All ER 1053 (QB) and Re National Federation of Retail
~
Newsagents', Booksellers' and Stationers Agreement) (Nos. '(

c 3 & 4), [1971] 1 WLR 408.)

60. Regard, therefore, in the matter of establishing and
constitution of the Special Court must also be had to the object
of creating the Special Courts.
D
61. In Minoa Mehta v. Shavak D. Mehta, [AIR 1998 SC :.
831), this Court held:

"As the Preamble of the Act shows, the Act is to provide
for the establishment of a Special Court for the trial of
- ~

E offences relating to transactions in securities and for
matters connected therewith or incidental thereto.
Therefore, every offence pertaining to any transaction in ).

securities which is covered by the sweep of the Act, that "
is, if such transaction has taken place between 1-4-1991
F and on or before 6-6-1992 would be subjected to the ·-
provisions of the Act regarding trial of such an offence."
62. If the purport and object of the Act was to bring home
an offence of the nature discussed heretobefore, in our opinion,
G the Special Court would have jurisdiction to try that offence. The
money belonging to National Housing Bank had been diverted ~ -
to Harshad Mehta's account who was a broker dealing in
securities so as to enable him to enter into transactions in
securities during the period 1st April, 1991 and on or before
6th June, 1992, which was an offence triable exclusively by the
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 813
INVESTIGATION [S.B. SINHA, J.)

Special Court. The Special Court, therefore, rightly exercised A
the jurisdiction vested in it.

VALIDITY OF THE SANCTION ORDERS.

63. All the appellants before us, except accused No. 5 Atul
M Parekh, were at the relevant point of time public servants. B
Whereas Accused 1, 2 & 3 were employees of UCO Bank,
Accused 6 & 7 were employees of the National Housing Bank.
~
They, therefore, have also been charged for commission of
" offences under the Prevention of Corruption Act, 1988. Section
19 of the Act however requires previous sanction for c
prosecution of the Public Servants. The relevant part thereof
reads as under:

"19. Previous Sanction necessary for prosecution.- (1) No
Court shall take cognizance of an offence punishable under D
{

- sections 7, 10, 11, 13 and 15 alleged to have been
committed by a public servant, except with the previous
sanction,-

... (c) in the case of any other person, of the authority
competent to remove him from office." E

,, " 64. Indisputably the competent authority had passed the
orders of sanction against all the concerned accused persons.
Whereas accused 1, 2 & 3 have raised no objection as regards
validity of orders of sanction issued against them; accused 6 F
& 7 who were employees of the National Housing bank have
questioned the same.

65. The order of sanction as against accused No. 6 was
passed by the Chairman-cum-Managing Director of NHB, Shri
... ~ R.V. Gupta, who has been examined as PW 3. The relevant
G
portion of the order granting sanction reads as under:-
"AND WHEREAS, I R.V. Gupta, Chairman National
Housing Bank, being the Authority competent to remove
the said Shri C.Ravi Kumar from office, after fully and H
814 SUPREME COURT REPORTS [2009] 12 S.C.R.

A carefully examining the materials and investigation report
in regard to said allegations and circumstances of the
case, consider that the said Shri C. Ravi Kumar should be
prosecuted in the Court of Law of competent jurisdiction
for the said offences.
B
NOW THEREFORE, l.R.V. Gupta, Chairman National
Housing Bank, do hereby accord sanction under Section
19(1 )( c) of Prevention of Corruption Act, 1988 for
prosecution of the said Shri C. Ravi Kumar for the said -t <
offences and any other offence punishable under other
c provisions of law in respect of the acts aforesaid and for
taking cognizance of the offences by the Court of
competent jurisdiction."

66. It is contended by accused no. 6, C Ravi Kumar that
D he had come to NHB on deputation from the RBI, and therefore
the conditions of his service were governed by the RBI
,.
regulations and not those of NHB Act. According to him, the
Governor of RBI was the only competent sanctioning authority.

67. Indisputably accused No.6 was initially appointed by
E
the Reserve Bank of India and was sent to NHB on deputation
in the year 1988. He was, however, permanently absorbed }
there in 1992 and the Order of sanction in respect of him was •
passed on 26th February, 1993. It is a fundamental principle
of service jurisprudence that an employee, subject to statutory
F interdict, cannot have two masters. If from the date of his
absorption the relationship of employer and employee came
into being between him and NHB, it is fallacious to suggest that
the Reserve Bank of India continued to be his employer. It is
not in dispute that if accused No.6 is treated to be the an officer
G of the Bank, the Chairman-cum-Managing Director, being its
1 ~
highest authority would be competent to pass the order of
sanction.

68. Next it was urged before us on behalf of accused no.
H 7, S Suresh Babu that since the terms and conditions of
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 815
INVESTIGATION [S.B. SINHA, J.]

i
service of the employees of NHB till as late as 1995 used to A
be governed by the Service Regulations framed by Reserve
Bank of India, Shri R.V. Gupta, the Chairman-cum-Managing
Director, NHB had no authority to issue the sanctioning order.
It was argued that NHB's own staff regulations governing
conduct and discipline came into effect only in the year 1995. B
69. The said contention in our opinion is wholly
misconceived. Even if till the framing of Regulations by NHB, it
~ +-
adopted the Service Regulations governing the employees of
the Reserve Bank of India, the same would not mean that the
appointing authority would also be an officer of the Reserve c
Bank of lndfa and not the appropriate authority of NHB.
Chairman-cum-Managing Director of NHB being a highest
executive authority, would be, subject to any delegation of
powers conferred in terms of the Regulations or through
Resolutions adopted by the Board of Directors, the appointing D
~

- authority. As an appointing authority, therefore, he will have the
requisite jurisdiction to accord sanction for prosecution of the
employees.
70. Even though, in our opinion, the sanction orders are E
legal and valid, even if any doubt exists, the same becomes
J,, clear in view of the provisions of Section 19 (3). It is reproduced
~
heretobelow:
"(3) Notwithstanding anything contained in the Code of
Criminal Procedure, 1973 (2 of 1974),- F

(a) no finding, sentence or order passed by a special
,. judge shall be reversed or altered by a court in
appeal, confirmation or revision on the ground of
the absence of, or any error, omission or G
>~ )_
irregularity in, the sanction required under sub-
section (1 ), unless in the opinion of that court, a
failure of justice has in fact been occasioned
thereby; ...
H
816 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Explanation.- For the purpose 'of this section.-
•
(a) error includes competency of the authority to grant
sanction; ... " [Emphasis supplied]

71. What has been challenged here before us by both the
B accused is in fact the competence of the sanctioning authority
to issue sanction orders against them. As per the said section,
'a finding' or a 'sentence' shall not be reversed by a court of
appeal on the ground of any error, omission or irregularity in .t
the sanctioning order unless a failure of justice has been
•
c occasioned thereby. In our considered opinion even if we
assume for the sake of argument that the Chairman cum
managing director of NHB, Shri RV Gupta was not the
competent authority to pass the orders of sanction against the
officials of NHB, the prosecution could still rely on the said s.
D 19 (3) of the Act; especially since there has been no failure of ~
justice in the present case by the said error in the orders. The
contentions of the accused, as to the validity of the Sanctioning
orders, in view of the said sub section must be rejected.

RELIANCE ON THE JANKIRAMAN COMMITEE
E
72. Before we move on to deal with the substantive ,..
criminal charges under the Indian Penal Code and th~
Prevention of Corruption Act invoked against the appellants
herein, we must first deal with a grievance which has been
F raised by the learned counsel for the appellants and, in our
opinion, rightly that in the impugned judgment the Special Court
had acted illegally and without jurisdiction in relying upon the
report of the "Janakiraman Committee" while imposing the
sentence on respondent No.6; the relevant portion whereof is
G as under:-
'.
"So far as accused No.6 is concerned, it is clear from what
has been observed [by the] Jankiraman Committee that
there was virtually no supervision on accused No.6 and he
was managing the affairs or mismanaging the affairs of the
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 817
INVESTIGATION [S.B. SINHA, J.]
N.H.B. according to his own acts, wish and ultimately at A
-t the wish and fancy of the brokers. He was giving loans to
the brokers which the law prohibited him from doing."

73. We have noticed hereinbefore the premise on which
the said Committee was constituted. We have also noted its B
objects and reasons. There is no dispute that the Committee
was appointed and it submitted its report. It is one thing to say
that the court records to the constitution of the Committee for
the purpose of tracing the history for enactment of the Act. But
t
" it is another thing to say that the contents of the said report
c
would be admitted in evidence in a criminal case without proof
thereof. The Committee was not a court. It did not render any
decision. It was merely a fact finding body. It was constituted
for a limited purpose. Contents of the report, therefore, without
formal proof, could not have been taken in evidence.
D
<,
'1 74. A Division Bench of the Nagpur High Court in M. V.
Rajwade v. Dr. S.M. Hassan, (AIR 1954 Nag 71] following the
judgment of the Privy Council In Re. Maharaja Madhava Singh
LR, [(1905) 31 IA 239], held that a Commission is a fact finding
body meant only to instruct the mind of the Government without E
producing any document of a judicial nature and that findings
... of a Commission of Inquiry were not as definitive as a judgment.
: -.,,
75. Similarly in Branjnandan Sinha v. Jyoti Narain [1955]
S.C.R. 955, this Court held that the Commission appointed
F
under the Public Servants (Inquiries) Act, 1850, was not a court
within the meaning of the Contempt of Courts Act, 1952.[See
--i also Ram Krishna Dalmia ·V. Justice S.R. Tendo/kar, 1959
SCR 279, Puhupram v. State of Madhya Pradesh, (1968)
MPLJ 629. Sham Kant v. State of Maharashtra [1992 Suppl.
(2) sec 52111 G
> ~

76. Accordingly, the Janakiraman committee report was
not admissible in evidence. The report in terms of the
provisions of the Evidence Act, 1872 is not a judgment. The
report may facilitate investigation but cannot form basis of H

<
818 SUPREME COURT REPORTS [2009) 12 S.C.R.

A conviction and sentencing of the accused. For the said purpose
the report was wholly inadmissible in evidence.

CRIMINAL CONSPIRACY

77. It would now be appropriate to deal with the offence
B of criminal conspiracy of which all the appellants herein have
been charged with and convicted of. It is alleged by the
prosecution that K Margabanthu (A 1), R Venkatrrishnan (A-2)
and SV Ramanathan (A 3), who all were at the relevant time _.
officials of UCO Bank, along with C Ravikumar (A 6) and S '
c Sureh Babu (A 7), both of whom were at the relevant time
officials of the National Housing Bank, at the behest of Late
Harshad S Mehta and Atul M Parekh (A 5) entered into a
criminal conspiracy with the object of diverting funds from the
National Housing Bank to Late Harshad Mehta's Account in
D UCO Bank. The funds were diverted to enable Harshad Mehta
~
to invest the same in the Securities Market. It is alleged that in
furtherance of the said conspiracy K Margabathu (A 1), R
Venkatkrishnan (A 2), C Ravikumar and S Suresh Babu (A 7)
created certain fake documents to facilitate the transfer of
E funds. It is further alleged that SV Ramanathan (A 3) along with
Atul M Parekh (AS) then persuaded the officials of UCO bank
to allow the said transaction to proceed without any hindrance. )>.
-f
78. Criminal conspiracy in terms of Section 120B of the
Code is an independent offence. It is punishable separately.
F Prosecution, therefore, must prove the same by applying the
legal principles which are applicable for the purpose of proving
a crimin:il misconduct on the part of an accused.

79. A criminal conspiracy must be put to action and so long
G a crime is merely generated in the mind of the criminal, it does
not become punishable. Thoughts, even criminal in character, ••
often involuntary, are not crimes but when they take concrete
shape of an agreement to do or cause to be done an illegal
act or an act which is not illegal but by illegal means then even
H if nothing further is done, the agreement would give rise to a
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 819
INVESTIGATION [S.S. SINHA, J.]

criminal conspiracy. A
1
80. The ingredients of the offence of criminal conspiracy
are:

(i) an agreement between two or more persons;
B
(ii) the agreement must relate to doing or causing to
be done either

(a) an illegal act;
.+
~

(b) an act which is not illegal in itself but is done c
by illegal means.

81. Condition precedent, therefore, for holding accused
persons guilty of a charge of criminal conspiracy must,
therefore, be considered on the anvil of a fact which must be D
established by the prosecution, viz., meeting point of two or
I
more persons for doing or causing to be done an illegal act or
an act by illegal means.

82. The courts, however, while drawing an inference from
E
the materials brought on record to arrive at a finding as to
whether the charges of the criminal conspiracy have been
proved or not, must always bear in mind that a conspiracy is
~
hatched in secrecy ~nd it is, thus, difficult, if not impossible, to
obtain direct evidence to establish the same.
F
83. The manner and circumstances in which the offences
have been com.mitted and the level of involvement of the
accused persons therein are relevant factors. For the said
purpose, it is necessary to prove that the propounders had
, expressly agreed to or caused to be done the illegal act but it G
may also be proved otherwise by adduction of circumstantial
.- )..
evidence and/ or by necessary implication. [See Mohammad
Usman Mohammad Hussain Maniyar & Ors. v. State of
Maharashtra (1981) 2 SCC 443]
H
820 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 84. The following passage from Russell on Crimes (12th
Edn. Vol 1) referred to by Jagannatha Shetty, Jin Kehar Singh
and Ors. v. State (Delhi Administration}, [1988 (3) SCC 609
at 731] brings out the legal position succinctly:

"The gist of the offence of conspiracy then lies, not in doing
B
the act, or effecting the purpose for which the conspiracy
is formed, nor in attempting to do them, nor in inciting
others to do them, but in the forming of the scheme or
agreement between the parties. Agreement is essential.
Mere knowledge, or even discussion, of the plan is not, per -t ~

c se enough"

It was further noted in that case that to establish an offence
of criminal conspiracy '[i]t is not required that a single
agreement should be entered into by all the conspirators at one
D time. Each conspirator plays his separate part in one integrated
and united effort to achieve the common purpose. Each one is \
aware that he has a part to play in a general conspiracy though
he may not know all its secrets or the means by which the
common purpose is to be accomplished.'
E
85. Dr. Hari Singh Gour in his Commentary on Penal Law
of India, (Vol.2, 11th Edn. p. 1138) elaborates:
}
"In order to constitute a single general conspiracy there
must be a common design ..... The evil scheme may be
F promoted by a few, some may drop out and some may
join at a later stage, but the conspiracy continues until it is
broken up. The conspiracy may develop in successive
stages. There may be general plan to accomplish the
common design by such means as may from time to time
G be found expedient."

86. In some cases, intent of unlawful use being made of ••
the goods or services in question may be inferred from the
knowledge itself. This Court in State of Maharashtra v. Som
Nath Thapa [(1996) 4 sec 659] opined that it is not necessary
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 821
INVESTIGATION [S.B. SINHA, J.]

1 for the prosecution to establish that a particular unlawful use A
was intended, so long as the goods or services in question
could not be put to any lawful use, stating:

"... to establish a charge of conspiracy knowledge about
indulgence in either an illegal act or a legal act by illegal B
means is necessary. In some cases, intent of unlawful use
being made of the goods or services in question may be
inferred from the knowledge itself. This apart, the
--3- 4 prosecution has not to establish that a particular unlawful
use was intended, so long as the goods or service in
question could not be put to any lawful use. Finally, when
c
the ultimate offence consists of a chain of actions, it would
not be necessary for the prosecution to establish, to bring
home the charge of conspiracy, that each of the
conspirators had the knowledge of what the collaborator
~ would do, so long as it is known that the collaborator would D
put the goods or service to an unlawful use."

[See a.lso K.R. Purushothaman v. State of Kera/a (2005)
12 sec 6311
E
87. We may also notice a decision of this Court being
~ State (NCT) of Delhi v. Navjot Sandhu @ Afsan Guru [(2005)
11 SCC 600], commonly known as the Parliament Attack case,
wherein upon taking note of various earlier decisions of this
Court, it was opined that as conspiracy is mostly proved by
F
circumstantial evidence, usually both the existence of
conspiracy and its objects have to be inferred from the
circumstances and the conduct of the accused, stating :

"101. One more principle which deserves notice is that the
cumulative effect of the proved circumstances should be G
" ~.
taken into account in determining the guilt of the accused
rather than adopting an isolated approach to each of the
circumstances. Of course, each one of the circumstances
should be proved beyond reasonable doubt. Lastly, in
regard to the appreciation of evidence relating to the H
822 SUPREME COURT REPORTS [2009] 12 S.C.R.

A conspiracy, the Court must take care to see that the acts
or conduct of the parties must be conscious and clear
enough to infer their concurrence as to the common design
and its execution.

8 In Ram Narayan Popli (supra), this Court noted:

"... Law making conspiracy a crime is designed to curb
immoderate power to do mischief which is gained by a
combination of the means. The encouragement and
support which co-conspirators give to one another
c rendering enterprises possible which, if left to individual
effort, would have been impossible, furnish the ground for
visiting conspirators and abettors with condign
punishment. .. "

D {See also Esher Singh v. State of A.P. [(2004) 11 SCC
585]}:

Recently, in Yogesh @ Sachin Jagdish Joshi v. State of
Maharashtra [(2008) 6 SCALE 469], a Division Bench of this
Court held:
E
"23. Thus, it is manifest that the meeting of minds of two
or more persons for doing an illegal act or an act by illegal
means is sine qua non of the criminal conspiracy but it may
not be possible to prove the agreement between them by
F direct proof. Nevertheless, existence of the conspiracy and
its objective can be inferred from the surrounding
circumstances and the conduct of the accused. But the
incriminating circumstances must form a chain of events
from which a conclusion about the guilt of the accused
G could be drawn. It is well settled that an offence of
conspiracy is a substantive offence and renders the mere ••
agreement to commit an offence punishable even if an
offence does not take place pursuant to the illegal
agreement. n
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 823
INVESTIGATION [S.B. SINHA, J.]

88. A conspiracy may further be a general one and a A
separate one. A smaller conspiracy may be a part of a larger
conspiracy. It may develop in successive stages. [Nirmal Singh
Kah/on v. State of Punjab and Others, 2008 (14) SCALE 639]
New techniques may be invented and new means may be
devised for advan·cement of common plan. For the said B
purpose, conduct of the parties would also be relevant.

89. Applying the principles of law to the facts of the present
case, we may take note of certain broad features. Indisputably,
maintaining of cash reserve ratio is a statutory requirement. All C
the Scheduled Banks are bound to carry on the statutory
instructions issued by the Reserve Bank of India in this behalf.
It is for the maintenance of this cash reserve ratio that UCO
Bank used to participate in call money transactions in the
money market, decision in respect whereof used to be taken
at its Head Office at Kolkata. For the said purpose, however, D
the Head Office used to be in touch with the D.N. Road Main
Branch in Bombay.

90. It is neither .·n doubt nor in dispute that Mr. K.
Venkatkrishnan (Accused No. 2) at the Head Office in Kolkata E
was authorized for the said purpose. P.W. 12 - Sunil Kakkar
in his statement before the learned Special Judge, stated as
under:

"6 .... The General manager Mr. Venkatakkrishnan [A 2]
used to decide upon the requirement of borrowing of call .F
money on a particular date. He also used to decide about
lending of call money to other banks. Instructions in this
respect were given by the treasury and investment
department head office, Kolkatta by the General Manager
to the DN Road branch in Bombay. .... Mr G
•r Venkatakrishnan, Genara/ manager used to take
decisions after knowing the requirement, the rate of
interest etc. The call money transactions are authorized by
him and are recorded in a register known as call money
H
824 SUPREME COURT REPORTS [2009] 12 S.C.R.

A register. "

91. Such a power had been conferred upon various officers
to deal with call money transactions. Indisputably, accused
No.2 was one of them. Although, those various other officers
might have been taking decisions in this behalf, but there is no
B
reason to disbelieve P.W. 12 that ordinarily Accused No. 2 used
to take a decision.

92. For the purpose of exercise of power furthermore it may
not be necessary that he would be given instructions only by ~ ..,.
c Accused No. 2 and no other. If he had been given instructions
in this behalf from time to time by the Assistant General
Manager or Assistant Manager, the same would not necessarily
mean that Accused No. 2 was not exercising his power.

D 93. P.W. 13 in his evidence categorically stated that Mr.
Mallikarjunan (P.W. 17) would take instructions from all the
fourteen centres on the basis whereof the General manager Mr
Venkatkrishnan [A2] used to take a decision. P.W. 17 in his
deposition categorically stated:
E "2. The deals of lending or borrowing money market were
done at Calcutta Head Office by Mr. Venkatakrishnan.
This is in respect of call money borrowing and lending ... t

3. Mr Venkatkrishnan used to decide from whom call
F money to be borrowed and to whom it is to be lent. The
necessary information could be supplied by the Bombay
main branch. Bombay main branch informs us between
10:30 to 2:30 pm. Once a decision is taken for borrowing
or lending call money to some institute at particular rate,
the entries are entered in Head Office in call money register
G
of Calcutta office. The decision is communicated to the
branch where the transaction is to be executed."
~ .
94. Indisputably again, however, a decision taken by the
General Manager would be subject to any direction which may
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 825
INVESTIGATION [S.B. SINHA, J.]

be issued by Margabanthu (Accused No. 1}, Managing Director A
1 of the Bank. Keeping that aspect of the matter in mind, we may
also take notice of the call money transaction which took place
on 6.4.1992 around which the prosecution case revolves.

95. Indisputably, call money was required on the 6th of April, B
1993 although there may be some dispute with regard to the
quantum thereof. P.W. 17 in his deposition produced a 'Chit'
which was marked as Exhibit 56 to show that call money was
to be procured from Can Mutual, State Bank of Saurashtra, and
... ~
State Bank of Hyderabad amounting to Rs. 21 crores, Rs.30
crores and Rs. 50 crores besides of National Housing Bank
c
for a sum of Rs.40 crores.

96. It is profitable to notice the relevant portion of his
testimony, which reads as under:
D
j "6. On 6.4.1992, I was informed by Mr. Venkatakrishnan
that Rs. 40 crore are borrowed as call money from NHB .
... It was sometime in the afternoon and must be at 2.00
pm. Mr Venkatkrishnan informed me and I noted it down
on a chit in my own handwriting. I noted on that chit the
E
names of four institutions and the total borrowing from four
institution Rs. 144 crore. [. . .} I gave this chit to Mr Sunil
1 Kakkar for making necessary entries in the call money
register. He made the entries and sent [the call money
register] through me to General Manager, Venkatkrishnan.
I am shown the call money register( ... ] for identification F
[... ]. I identify the handwriting of Sun ii Kakkar. The enteries
in Call Money Authorization register would be made
.. subsequently by Sunil Kakkar and register would be
signed by Venkatkrishnan. I am shown the register (... ]
These are in the handwriting of Mr Kakkar and signed by G
" ~ Venkatkrishnan. [... ]"

97. With respect to the said chit in which Mr. Mallikarjun
had noted down the details regarding the call money transaction
after receiving information from A2 [Mr Venkatkrishnan], he H
826 SUPREME COURT REPORTS [2009] 12 S.C.R.

A further stated:
I-
"On this sheet, I wrote the names, Can Mutual, SB
Saurashtra, and SBH, with the amounts and interest
against them as 21 crores. Can Mutual 23%, 30 crores
B Saurashtra at 26% and 50 crores SB Hyderabad at 26%
and these three were totaled after drawing a line below it
and the total of 101 crore was written. Thereafter I wrote
NHB and against that 40 crore and 26% and again after
drawing line the total of 141 crores is made. Exactly I do
~
not remember what happened but I can say that [K
c Venkatakrishnan (A2)] must have told me three names
of the banks and there figures and after totaling, he must
have told the fourth name and the figure which is added
and the amount is retotaled but I say that I noted down
all the four names and figures at the same time."
o
98. It is true that in his cross-examination, this witness ~

stated that the same was in his handwriting. Existence of the ,..
said Chit is thus not in dispute. It matters little whether it is in
the handwriting of P.W.17 or Accused No.2. The fact that the
E decision had been taken by the Accused No.2 to obtain call
money to the tune of Rs. 40 crores is, thus, not in dispute.
P.W.17 also notes that he had noted the details in the chit after
receiving information from Accused No. 2 in this behalf. The
. /

said Chit containing the details of the call money transactions
,
F was thereafter handed over to P.W.12 - Sunil Kakkar. It ha~
been brought on record that this witness used to maintain the
call money register, and was, therefore, required to note the
same in the said register.
,,
99. The learned counsel appearing on behalf of the
G appellant, however, would submit that the entries in respect of
the said transactions had been made post facto. For the
_. .
aforementioned purpose our attention has been drawn to the
deposition of P.W. 12 - Sunil Kakkar who stated,

H "the entries of the transactions would be made post facto.
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 827
INVESTIGATION [S.B. SINHA, J.]

It was the responsibility of superior officer to verify the A
entries in the register. By superior officers, I mean General
Manager, Assistant General Manager."

100. It was principally, therefore, the responsibility of those
two officers to make verification. The entry in relation to the said
B
transaction inter alia finds place in Exhibit 45 for daily funds
records to the CMD dated 6.4.1992. This witness has proved
the entries in the said registers.
,. t-
101. Yet again, a comment has been made with reference
to his statement that a number of pages of the register were c
written at one time and i.e., post facto and Accused No. 2
signed the same after the entries had been made post facto.
The signature of the Accused No. 2 in those registers, therefore,
stands proved.
~
D
102. The significance of this aspect of the matter would
... be dealt with a little later. Before, however, we do so, we may
notice the evidence of P.W. 12 - Sunil Kakkar in this behalf
which is to the following effect:

"8. [ ... ]There is reference in the daily Report of call money E
i
borrowing on 6.4.1992 amounting to Rs. 141 crore [... ]the
last borrowing is from National Housing Bank Rs. 40 crore
at 26 % interest due date 7.4.1992 i.e. for one day. These
figures are collected from a slip of papergiven to me by
Assistant general manager Mr. Mallikarjun. The signature F
of the Assistant General Manager on this document
signifies that he has noted the daily funds position as
mentioned in the sheet"

He, upon making entries with regard to the said transaction G
~- "' in the register, in his deposition, stated:

"11. [ ... ] I am shown the entry of 6.4.1992. the entry reads
as borrowing transaction on 6.4.1992 call money of
canbank mutual fund 21 crores payable next date i.e.
H
828 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 7.4.1992 rate of interest 23% [ ... ]This entry is in my
handwriting.[... ] The other three entries on that day are of
State Bank of saurashtra, state bank of Hyderabad and
National Housing Bank. These three entries are also in my
handwriting[... ]"
B
103. The question as to whether the aforementioned
amount of Rs.40 crores, which was to be taken on loan from
National Housing Bank was really needed or not is, however,
a matter of some controversy. We may, at this juncture, take 1 or
note thereof.
c
104. The prosecution in view of the aforementioned
documentary and oral evidence must be held to have proved
the following facts:

D (i) That the decisions regarding the lending or borrowing
...
of call money were usually taken at the Head Office in
Kolkata based upon the information received from the DN ...
Road Branch in Bombay.

(ii) These decisions in Kolkatta were primarily taken by K.
E Venkatakriahnan (A 2) who at the relevant time was the
General Manager of UCO Bank Kolkatta. r
/

(iii) The decision as to the call money borrowing on the 6th
April, 1992 was also taken by K Venkatakrishnan. On that
F day he had communicated his decision of borrowing of call
money to K Mallikarjun, who at the relevant time was an
official there. K Mallikarjun had noted the information
regarding the borrowing in a chit of paper. He had noted
down information regarding call money borrowing
G amounting to a total of Rs. 141 crore from four different
banks. One of these banks was the NHB from which call
. .
money amounting to Rs. 40 crore had been borrowed for
a period of one day at 26% interest.

(iv) K Mallikarjun had then handed over this chit with the
H call money information to Sunil Kakkar who had the
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 829
INVESTIGATION [S.B. SINHA, J.]
responsibility of noting the details in the call money register. A
He accordingly noted the details of the Call Money
transactions of the day, including the one from NHB worth
Rs. 40 Crore.

105. But that is not the end of the story. B
Subsequently, however, a meeting has been alleged to
have taken place in the chamber of Accused No. 1. According
to P.W. 17, it was at this meeting that Accused No. 1 had
informed him and others present at the meeting that the call
money which had been borrowed from the National Housing C
Bank had in fact been arranged by Harshad Mehta for the
purpose of carrying out his security transactions. He further
informed them that the money was required by Harshad Mehta
at UCO Banks, Hamam Street Branch in Bombay. As per the
deposition of the said witness, Venkatakrishnan (Accused No. D
2) and C.K. Mukherjee (P.W. 13) were also present in the said
meeting. He stated:

"7. On 6.4.1992 there was meeting at about 2.00 p.m. in
a chamber of Mr. Margabanthu where Mr R. E
Venkatakrishna, myself and CK Mukherjee were present.
Mr Margabanthu who is accused in this case told us that
this amount from NHB of Rs. 40 Crore meant for Harshad
S Mehta account."

In his cross-examination to which our attention has been F
drawn by the learned counsel appearing on behalf of the
appellant, he is said to have accepted that he did not remember
to have heard from Accused No. 2 that it was not a call money
and that the said amount was raised from the Bank by Harshad
Mehta. He further accepted : G
• 1.
"I did not tell the CBI about this as I was not asked any
question about the same by the CBI,[ ... ) I was not knowing
for what purpose the inquiry was made. I did not tell CBI
of my own regarding the meeting in the Chamber of Mr H
830 SUPREME COURT REPORTS [2009) 12 S.C.R.

A Margabanthu, as I was only answering the questions."

106. We have noticed hereinbefore that he, ther~fore, has
•
given some explanation as to why we could not disclose as to
what had taken place in the said meeting in his statement
recorded by the Central Bureau of Investigation. The fact that
B
such a meeting had taken place was also the subject matter
of deposition by P.W. 13, stating:

"7. On that day in the afternoon I and Mallikarjunan were

c
called by General Manager Venkatakrishnan. Mr.
Venkatakrishnan told us that we had to go to the chamber
~
.
.:....

of Managing Director Margabanthu and report to him
about all the treasury transactions. Then we, means, I ,
Mallikarjunan [PW 17) and Venkatakrishnan [A 2] went to
Mr Margabanthu's office [A 1] and Venkatkrishnan
D informed him the day's transactions. While referring to
NHB's call money transaction of 40 crore Mr. .,.
Margabanthu said that it was not UCO bank's call money
transaction. It was money arranged by Harshad Mehta ...
from NHB. He also said that the money was required by
E Harshad Mehta at our Bank at Hamam Street Branch for
undertaking certain securities operations by him. [ ... ] He
also told that Mr. Venkatkrishnan General Manager that this
amount of Rs. 40 Crore should be immediately sent to
Hamam Street branch so that Security transactions could
F be completed by Mr. Harshad Mehta"

107. P.W. 13, allegedly on this basis, had called up Vijayan
(P.W. 14) who was the Manager, Accounts Department, D.N.
Road Branch of the Bank to inform him of the development,
stating:
G
"[ ...] After the meeting was over we, i.e. I and Mr .4 •
Mal/ikarjun came down to our department and as per
instructions of Mr Venkatkrishnan, General Manager I
conveyed this message to Mr Vijanan ON Road Branch,
H Mumbai"
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 831
INVESTIGATION [S.B. SINHA, J.)

108. Such a telephone call to P.W.14 is further A
f.
corroborated by P.W. 17, stating:

"8. Mr CK Mukherjee phoned to Mr. Vijayan at Bombay
and informed him about this decision.[. . .}

11. Mr Venkatakrishnan told me that he telephoned and B
informed Mr. Vijayan, Bombay. My statement that Mr
Mukherjee telephoned Mr Vijayan is on the basis what Mr.
Venkatkrishnan told me. Mr Venkatkrishnan told me most
~ t- probably after the meeting but I do not recollect the exact
time." c
109. Our attention, however, has been drawn to the
evidence of P.W. 14 by Mr. Narasimha, learned counsel
appearing on behalf of the accused No. 2 that the instructions
for cancellation was received at 1:00 p.m. or so. Although, D
. "( according to P.W. 17, the meeting had taken place at about
2:00 p.m.

110. It must, however, be borne in mind that in a case of
this nature where the witnesses were being examined more
than ten years later i.e. in the 2003, some amount of discrepancy E
with regard to time would not be of much significance. We
i
....
,
would deal with this aspect of the matter at some details at an
appropriate stage. Keeping in view the statement made by P.W.
14 which was not shaken in the cross examination, there is no
reason for us to disbelieve that part of the material brought on F
record that call money from NHB was, in fact, sought to be
cancelled. In any event, as would appear from the discussions
to be made hereinafter, the prosecution cannot be said to have
failed to prove its case. We may, however, notice that at one
stage, according to this witness, such a telephone call had been G
•• • made at about 2:00 or 2:30 p.m ..

111. Our attention has also been drawn that P.W. 13
before the C.8.1. stated:

"Mr. Kakkar also told me that the telex message received H
832 SUPREME COURT REPORTS [2009] 12 S.C.R.

A at Head Office from D.N. Road, Bombay branch showing
position of call money borrowed lend on that day does not
contain the borrowing item of Rs.40 crores from National
Housing Bank."

112. Telex message has not been produced. Nothing much
B
turns on the said purported admission. It appears from the
records that at a later stage the General Manager (l&M) was
asked to make an investigation. A report was filed by P.W. 17.
Only because in the said report again the factum of the meeting
did not find place, the same by itself should not be taken to be
-1 ..
c a ground to ignore the depositions of all these witnesses.

113. Apart from the supposed contradictions and
inconsistencies, it is also pointed by the learned counsel for the
appellants that no such meeting had taken place in the chamber
D of Accused No.1 on 6.4.1982. Our attention has been drawn
to the evidence of D.W 1-Ajit Sadhukhan, who at the relevant 'f

time was the driver of the Accused No. 1 to contend that
Accused No.1 came to his chamber only at about 3.30 p.m.
although the transaction was over at 3.00 p.m., stating:
E
"On 6th April when in the morning I went to the flat of
Margbanthu, Mrs. Margbanthu informed me that Mr.
Margbanthu is coming to Calcutta by flight from Madras ;

and that I have to take the vehicle to airport for
Mr.Margbanthu. Shri Margbanthu came to Calcutta Airport
F by flight at about 12.30 p.m. He was having luggage with
him. The suitcase was having a registered tag. I took him
to his residence. Mr. Margbanthu told me that he will leave
for the office after his lunch. We started the office at about
3.15 pm and reached the office at 3.30 pm. We tell the
G airport with Mr. Margbanthu at about 1 O'clock and
reached the residence at 2 0 clock." ~ '

114. The prosecution case must be judged on a broad
based fact. The Indian Airlines Flight reached Kolkata Airport
H at about 12.30 p.m. on that date. Evidences brought on record
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 833
INVESTIGATION [S.B. SINHA, J.]
show that it takes about 45 minutes to reach the Head Officer A
from the Airport. According to the prosecution witness to which
we have already adverted to, the meeting took place round
about 2'0 clock. Even if Accused No. 1 had gone to his house
for taking lunch, the possibility of his coming to his office round
about 2'0 clock cannot be ruled out. The Ctiairman cum B
Managing Director of a Bank presumably would like to attend
to his duties during banking hours and particularly when vital

- ~
decisions as regards the borrowing of call money was required
to be taken. That amount of concern from a highly responsible
officer should be expected. c
115. We must, however, nqtice that the evidence of
P.W.14, who at the relevant point of time was working at the
....
Bombay Branch of UCO Bank, categorically stated :

- •,

">(
"7. The head office had instructed that call money
transaction of Rs. 40 crore was cancelled. This instruction
was received at about 1:00 pm or so. From Head office
D

Mr Mukherjee talked to me about this cancellation of call
money transaction from NHB. Mr Mukherjee first told me
that there are four call money transaction from NHB and E
subsequently informed that Rs. 40 crore transaction from
i NHB has been cancelled."

Mr. Vijayan (PW 14) in his testimony further goes on to
clarify about the cancellation of the call money.
F
116. Though the entry for the call money transaction occurs
in the Note Book which was being maintained, but the final Call
money register which was being maintained only had three call
money transactions, since by the time the entries in the register
had to be noted down the fourth transaction had already been G
~ j.
cancelled:

"9. I am shown note Book [ ... ] These four entries in my·
handwriting are of all call money. [ ... ] and last entry is of
NHB Rs. 40 crore rate of interest@ 26 % and this entry H
834 SUPREME COURT REPORTS [2009) 12 S.C.R.

A has subsequently cancelled on receipt of instruction from
head office. [ ... ] The entry of call money transaction is
taken in the call money register[ ... ] Mr Rupani made entry
in call money register from the note book.

10. The register shown to me is call money register in
B
which enteries are taken from note book. Only three call
money transactions of 6.4. 1992 are mentioned in this
register where as fourth transaction of NHB is not

c
mentioned and there is no entry in this register. [... )

11. [ ... ]In respect of other three banks they issued call
~
-
money receipts to the said banks and collected the
cheques. It was between 2:00 to 3:00 pm. In case of NHB
Receipt was not prepared and sent as transaction was
cancelled. Before 2:00 pm it was cancelled. [... ]" ,.
0 ,,.
117. However, despite being informed that the call money
from NHB had been cancelled, when the ON Road Branch,
UCO Bar.ik received a cheque for Rs. 40 crores from NHB, Mr.
Vijayan (PW 14) [ON Road Branch) called Mr. Ravikumar (A
6) [NHB) to seek clarification in this respect. Mr Vijayan in his
E
testimony notes:
t
"7. [... ]By 3.00 pm we received a cheque of Rs. 40 crores
from NHB. Thereafter I telephoned Mr. Ravi Kumar at
NHB and asked why he had sent the cheque when
F transaction is cancelled, he told me on phone in reply
that this cheque of Rs. 40 crore pertains to Hamam street
Branch.[...]

He further went on to state:
G "12. [ ... ] I called up Mr Ravi Kumar because he should _. .
have sent the cheque to Hamam street branch instead he
sent the cheque to ON Road Branch.[ ... ]"
118. Mr Vijayan (PW 14) also clarified that he had also
H received information from Mr. Mukherjee (PW 13) that the
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 835
INVESTIGATION [S.B. SINHA, J.]

cheque was to be transferred to the Hamam street branch of A
UCO Bank.

119. However, since there was little time left to transfer the
cheque to the Hamam street Mr Vijayan directly deposited the
cheque with RBI. He also informed this information to Mr B
Karkhanis (PW 18) from the Hamam street branch:

"7. [ ... ]Since there was no time left and since the Hamam

- ~
street Branch cannot deposit the cheque. I informed .the
Hamam street branch that we have received the cheque
and I am depositing it with RBI. Mr Karkhanis was the c
Hamam street Branch Manager and I talked with him in
connection with the transaction. I told him that we received
cheque of Rs. 40 crore from NHB on behalf of Hamam
street branch and we have deposited it with RBI."

.. 120. Mr. Karkhanis (PW 18) [Senior Manager, Hamam
Street Branch] stated in his testimony as regards the said phone
D

call which was received by him from Mr Vijayan (PW 14):

"2. On 06.04.1992 the current account of Harshad Mehta
was credited by 40 crores. The cheque was deposited in E
DN Road Branch but I have not seen that cheque. Sr.
Manager of ON Road Branch, Mr Vijayan informed me
on phone that he had received a RBI cheque of 40 crores
and he was depositing it directly with RBI because of time
constraint. He gave instructions to credit it to the account F
of Harshad Mehta. The instruction were received from Mr.
Vijayan at about 3.00."
-
121. However, Mr Vijayan, (PW 14) [DN Road Branch] in
his testimony disclosed that he had only received information G
1 '/... from NHB that the cheque was to be transferred to the Hamam
Street Branch in the following terms :

"It did not happen that I contacted Ravi Kumar on telephone
and he told me that amount of Rs. 40 crores is meant for
H
836 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Harshad Mehta, he only told me that it is meant for
•
Hamam Street Branch"

122. There is a discrepancy between the two testimonies
of Mr Vijayan [ON Road] and Mr Karkhanis [Hamam Street],
as Mr Vijayan in his testimony stated that the amount of Rs. 40
B
Crore was meant for Hamam Street Branch and that he himself
had not been informed that the amount was meant for Mr.
Harshad Mehta. Mr Pradeep Kharkhanis stated that Mr. Vijayan
specifically informed him that the said amount was meant to -I ..
be credited to the account of Mr Harshad Mehta. If Mr Vijayan
c himself did not know that the 40 crore were meant to be
deposited in the account of Mr. Harshad Mehta at Hamam
Street Branch how could he have informed Mr Kharkhanis that
it was for Mr Harshad Mehta.?

D 123. The matter, however, must be considered from
another angle. A bankers' cheque for a sum of Rs. 40 crores
was received by the Hamam Street Branch of the UCO Bank.
The records of the UCO Bank reflect that the same amount was
to be repaid on 7.4.1992. The said sum was to carry interest
E at the rate of 26% per annum.
124. Had the transaction related to call money, it should
have been deposited in the D.N. Road Branch and not in the
Hamam Street Branch. The Hamam Street Branch does not
deal with call money. On 6.4.1992 itself the amount was
F credited to the account of Harshad Mehta. Although a lot of
arguments had been advanced to contend that National
Housing Bank is entitled to enter into the security transactions
but neither the deceased Harshad Mehta nor the accused No.
5 made any attempt to show that any transaction had been
G entered into by and between the deceased Harshad Mehta and
-'< •
National Housing Bank.

125. The accused in their statement under Section 313 of
the Code of Criminal Procedure accepted that the transaction
H in question was a routine transaction. Such ;:i transaction
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 837
INVESTIGATION [S.B. SINHA, J.]

indisputably was utilized for the personal gain of Harshad A
Mehta. If such transaction was a routine transaction, it goes to
show the long standing agreement between the said bank and
Harshad Mehta. Why on one pretext or the other UCO Bank
would allow itself to be used as a conduit thereto is the
question. B

126. P.W 5 - Hiten D. Mehta who used to work with
Harshad Mehta admitted that he knew Ravikumar (Accused
No. 6) since 1990 and the remittance facilities were available.
·~
A sort of arrangement by and between the said Bank and
· Harshad Mehta, thus, stood established.
c
127. This is one of the links in the chain to show how the
arrangement developed so as to bring the ma!ter within the
purview of conspiracy amongst the accused.
D
.... 128. In between 11:00 a.m. and 3:00 p.m. things took
place in quick succession. The transaction in question was
' shown to be a call money transaction. While assuming it to be
so for the time being, if it was a call money transaction it could
not have been used for any other purpose. The amount was
E
required to be retained in the Bank and should have ordinarily
been deposited at the D.N. Road Branch .. This was not done.
/.
Why the amount had been deposited in the Hamam Street
branch remains a mystery. Indisputably, the money which had
been lent to UCO Bank had been credited to Harshad Mehta's
F
Hamam Street Bank account on the very same day. Any call
money operation could not have been carried out without the
knowledge and involvement of Accused Nos. 1 and 2. The
involvement of the accused No. 1 and 2 in tandem for the
purpose of entering into such agreement, thus, stands
established. G
,. "
129. It would be appropriate also to deal with the rote
played by SV Ramanathan (A 3) in carrying out the said call
money transactions at this stage. As per Mr CK Mukherjee (PW
13) [Kolkata], Mr Margabanthu (A 1), in the meeting which took H

~ ..•

't
838 SUPREME COURT REPORTS [2009) 12 S.C.R.

A place in his chambers, reference whereto has been made
heretobefore, had informed him that Mr SV Ramanathan (A3)
had been authorized him to deal with security transactions of
Mr Harshad Mehta at the Hamam Street Branch, Bombay.

130. It has also been emphasized by the prosecution that
B
Mr. SV Ramanathan was present at the Hamam Street Branch
on the day the said transaction took place. The testimony of
Pradeep Kharkhanis (PW 18) is relevant which reads as under

c "On that day at about 12:00 to 12:30 Noon, Mr SV
Ramanathan, the Divisional Manager had come to our
office. Mr SV Ramanathan came to our office at about
12:00 to 12:30 noon and told me that he will take care of
any difficulty about the transaction as required by Parekh.
D These were brokers transactions. Mr SV Ramanathan was
presenting the Bank when Mr Atul Parekh was there" )'

~
(Emphasis added)

131. Mr Kharkhanis, in his testimony, further clarified the
E role of Mr SV Ramanathan in insisting the starting up of security
transactions through the account of Mr Harshad Mehta,
regarding which Mr Ramanathan had even addressed the
following letter:

F "This letter was in connection with the restarting of brokers
transaction of Mr Harshad Mehta and two other brokers. I
identify the signature of the Divisional Manager Mr SV
Ramanathan. I have made the endorsement to the effect
that Mr SV Ramanathan, DM visted the Branch on
G 6.4.1992 from 12:30 to 3:15 pm and insisted on starting
switch transactions which he said were as per the
chairman's instructions."
' .
132. It is evident therefore that SV Ramanathan (A3) also
played an important role in ensuring that the call money from
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 839
INVESTIGATION [S.B. SINHA, J.)
NHB which was meant from UCO bank got transferred to A
, Harshad Mehta's Account.

133. It is pertinent to note that the money which was
supposed to be borrowed by UCO Bank as a call money was
ultimately repaid by Harshad Mehta through his account in ANZ
B
Grindlays Bank directly.

134. Mr. Jeroo Dalal (PW 8) who at the time was an official
at ANZ Grindlays states in his testimony thus:
t-
"2. Deceased Shri Harshad S Mehta was having an c
account with ANZ Grindlays Bank ...

4. I am shown document No. 14. It bears my signature. I
would have received instruction on phone from Shri Atul
Parekh on the basis of which this is prepared. I can say
D
that this was prepared on pursuance of telephone of Shri
Atul parekh and I have mentioned in the document
favouring National Housing Bank for Rs. 40,27,52,421-
and below that Debit Shri Harshad Mehta and I have
signed."
E
135. Satish D Hosangadi (PW 9) [Chief General Manager,
NHB] also, in his deposition, notes with regard to the repayment
~
of the said call money from ANZ Grindlay Bank stated, thus:

"From the record, it appears that the cheque dated
F
16.4.1992 was given to the National Housing Bank by
Grindlays Bank. [Technically] the amount of Rs. 40 crore
is not yet repaid by the UCO Bank ...

6. The cheque of Grindlays bank was directly deposited
with RBI and credited to the account of NHB" G
~ .~
During his re-examination, Mr Satish D. Hasangadi
furthermore to the following questions :
"Q: During the period of 6th of April and 16th April, 1992
H
840 SUPREME COURT REPORTS {2009] 12 S.C.R.

A did the ANZ Grindlays Bank owe Rs. 40,27,52,42~ to the
National Housing Bank in connection with any transaction."

answered in negative.

136. The testimony of Mr Jeroo Dalal also brings out the
B involvement of Mr Atul Parekh (AS) in the entire chain of
conspiracy, stating :

"7. We used to get instructions from Atu/ Parekh on
behalf of accused No, 4 and as per instmctions from the
c bank, the amount used to be debited in the account of
Harshad Mehta."

137. Mr Pradeep Anant Karkhanis (PW 18) [Hamam
Street branch] notes in his testimony, stated :
D "Shri Atul Parekh accused in this case had also come in
our branch on that day. Shri Atul Parekh had come to me
for starting transaction in brokers account. I raised certain
queries in this respect and I told Shri Atul Parekh that I was
seeking replied (sic) to the queries ... These were brokers
E transactions. Before I received telephone from Vijayan.
Shri Atul Parekh told me that he was expecting a cheque
of Rs. 40 crores from National Housing bank."
" '
138. Whatever doubt had been left regarding the
involvement of Shri Atul Parekh (A5) has been cleared by the
F
above stated testimony. He knew that he was to receive 40
crores from NHB and that is why he had on the said day come
to the Hamam Street Branch of the Bank.

139. It must however be noted that the entire transaction
G could not have been carried out, had the officials of the NHB
been not involved. ' •
140. We must here deal with the involvement of C Ravi
Kumar (A6) and Suresh Babu (A7). NA Shivraman (PW 6)
H [NHB] in his testimony in this regard stated thus:
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 841
INVESTIGATION [S.B. SINHA, J.]

- 1
"I am shown Voucher D 11 .... It mentions deal no. 395 A
amount Rs. 40,27,52,442/- It mentions Rs 40 crores call
money and interst. .. The rate of interest for 1 day is 26%
and for 9 days it is 25% and the date of maturity is
16.04.92. the date of deal is 6.4.92. Accused C Ravi
Kumar was authorized to decide the date of maturity or B
of extending the date of maturity ... The particulars of call
money were being first mentioned in his diary by C Ravi
Kumar and thereafter the entries were taken in call
money register ....

11. I am shown the concerned page containing entry of 6th
c
April, 1992 .... The entry mentions the deal no 395 and the
name of the institution as UCO Bank with rate as 26 %
... and due date as 7.4. 92. ... The period extension to 9
days from 1 day is written in the diary by C Ravi Kumar.
Interest of 25% was for 9 days and 26% for 1 day" D
" 141. It is amply clear from above testimony that the C. Ravi
Kumar (A6) was the person responsible for the extension of the
call money transaction from 1 day to 9 days and the reduction
of the interest from 26% to 25%. The involvement of C Ravi E
Kumar (A6) is also corroborated by the testimony of Mr Vijayan
(PW 14) where he made reference to the fact that it was the
f
former who had informed him that the cheque from NHB worth
Rs. 40 crore was to be transferred to the DN Road Branch of
UCO Bank. F
142. What survives is the involvement of the Suresh Babu
(A7) who was working under C Ravi Kumar (A6) at NHB. In this
regard, reliance has been placed by the prosecution and even
by the Special Court in its judgment on the testimony of Mr. Sunil
Pandurang Gondale (PW 7) who deposed that Suresh Babu G
~ , (A 7) had sent him to UCO Bank, Hamam Street Branch on
the 16.4.1992 to collect the cheque for the return of the call
money advanced:
"For the first time, I had gone on 6.4. 1992 I went to UCO H
842 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Bank and handedover the cheque. After about 10 days
on 15th or 16th April, 1992 I again had gone to UCO Bank
on instructions of Shri Suresh Babu. When I went for the
second time, I was directed to receive cheque from UCO
,
-
bank, Hamam Street Branch ... .However I did not get the
B cheque from there as directed by shri Suresh Babu. On
Coming from UCO Bank I told Shri Suresh Babu that I
did not get the cheque and the person to whom I was
asked to meet had told me that cheque was sent directly
by UCO Bank"
c 143. In our opinion, reliance on the said testimony is not
enough. Just because Sunil Pandurang Gondale (PW 7) had
been sent by Shri Suresh Babu (A7) is not enough for his
involvement in the criminal conspiracy which was hatched on
behalf of the other accused. Something more substantial would
...
D be needed to bring him within its fold. In fact in his cross
examination he admits: .,
"It is not true to say that on 16.4.92 Suresh Babu [A 7] told
me to go to Hamam Street Branch. It is not true to say that
E when I was sent to UCO bank accused C Ravi Kumar [A
6] was not present"

144. The burden of proof is always heavy on the ~

prosecution. The prosecution must stand on its own legs basing
its findings on the evidence that has been let in by it. The
F prosecution has however failed in this task at least with respect
to A7, Shri Suresh Babu who was an officer working with NHB.
145. Now that it has been established that the accused had
the knowledge of the call money transaction which took place ,.
G between the National Housing Bank and Harshad Mehta on the
6th April 2008, next we would have to consider the question ~

as to whether the said transaction was illegal or not. To '
establish a charge of conspiracy, indulgence in either an illegal
act or a legal act by illegal means is necessary.
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 843
INVESTIGATION [S.B. SINHA, J.]

.... , of the146.Indian
The definition of 'illegal' is provided for in section 43 A
Penal Code.

"43. 'Illegal', 'legally bound to do'.-The word 'illegal' is
applicable to everything which is an offence or which is
prohibited by law, or which furnishes ground for a civil B
action; and a person is said to be 'legally bound to do'
whatever it is illegal in him to omit."

147. The word 'illegal' in the section has been given a very
t" wide meaning. It consists of three ingredients: (1) everything
which is an offence; (2) everything which is prohibited by law; c
and (3) everything which furnishes ground for civil action.

148. It is contended on behalf of the respondent that the
routing of call money from the National Housing Bank to the
Account of the deceased Shri Harshad Mehta who was a stock D
"f broker was contrary to the provision of the National Housing
Bank Act, 1987.
149. To adequately deal with this leg of the submission we
must notice the provisions of the National Housing Bank Act,
1987 (The 1987 Act). The NHB was created 'to operate as a E
principal agency to promote housing finance institutions both
;.. at local and regional levels and to provide financial and other
support to such institutions.' It was thus created to provide
finance to housing finance institutions. Section 14 of the 1987
Act which is of some relevance deals with the 'Business' of F
NHB, the relevant portions whereof read as under:
"14. Business of the National Housing Bank.-Subject to the
provisions of this Act, the National Housing Bank may
transact all or any of the following kinds of business G
~ I namely:

... (b) making of loans and advances or rendering any other
form of financial assistance whatsoever to housing finance
institutions and scheduled banks. (or to any authority
H
844 SUPREME COURT REPORTS [2009] 12 S.C.R.

A established by or under any Central, State or provincial Act
and engaged in slum clearance)."
..
150. In terms of Section 14 the 1987 Act, NHB could
advance loans to 'housing finance institutions' and 'scheduled
banks' or 'slum authority' constituted under a Central or State
B
Legislation. Furthermore, Sub-section 4 of Section 49 of the
Act lays down that if any other provision of the Act is
contravened or if any default is made in complying with any
other requirement of this Act, or of any order, regulation or
direction made or given or condition imposed thereunder, any
c person guilty of such contravention or default shall be punishable
with fine.

It reads as under:

D "49. Penalties .... (4) If any other provision of this Act is
contravened or if any default is made in complying with any .,
other requirement of this Act, or of any order, regulation
or direction made or given or condition imposed
thereunder, any person guilty of such contravention or
default shall be punishable with fine which may extend to
E two thousand rupees and where a contravention or default
is a continuing one, with further fine which may extend to
one hundred rupees for every day, after the first, during
which the contravention or default continues."

F 151. The NHB cannot, therefore, advance loans to anybody
except housing finance institutions, scheduled banks and
statutory slum clearance body, and in case it advances any loan
to any individual the same would amount to an offence under
the provisions of the 1987 Act.
G
152. It has been contended by the learned counsel for the
appellants that it was for the Reserve Bank of India to take
I •
some action and the very fact that it did not take any action
against UCO Bank and NHB are pointers to show that no
offence had been committed. The said contention is untenable.
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 845
INVESTIGATION [S.B. SINHA, J.]

_I It was the Reserve Bank of India, which having regard to the A
magnitude of the scam constituted Janakiraman Committee to
look into the real nature of the transactions and to find out if
any fraud or irregularity had been committed. Only pursuant to
or in furtherance of the report a first information report was
lodged by the Central Bureau of Investigation. It was only with B
a view to achieve a speedy trial and pass consequential orders
in regard to the properties acquired by illegal means, the
Special Court was constituted in terms of the provisions of the
~ said Act. Reserve Bank of India in the circumstances could not
have done anything more. c
15~. Therefore, advancement of loan to Harshad Mehta by
NHB under the disguise of a call money transaction was illegal.
The accused had the knowledge of the said transaction.
Therefore they have been rightly convicted by the courts for
commission of the offence of criminal conspiracy. D

- "
154. In conclusion we hold that there is sufficient evidence
to hold all accused A 1 to A3, all official of UCO Bank & A5 who
was working under Harshad Mehta and A6, official of NHB guilty
of criminal conspiracy. But there is not sufficient evidence to i=
show the involvement of A7, NHB in the said transactions.
,l
CRIMINAL BREACH OF TRUST

155. The next charge we have to deal with is one arising
under Section 409 IPC. For the offence of Criminal Breach of F
Trust by a public servant the punishment is provided under
Section 409 IPC. We must also in this respect have regard to
the provision of S 405 which defines Criminal Breach of Trust

G
• 1 "405. Criminal Breach of trust. Whoever , being in any
manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his
own use that property in violation of any direction of law
prescribing the mode in which such trust is to be
H
846 SUPREME COURT REPORTS (2009] 12 S.C.R.

A discharged, or of any legal contract, express or implied,
which he has made touching the discharge of such trust
or willfully suffers any other person so to do, commits
'criminal breach of trust"'

156. Punishment for criminal breach of trust is provided in
B Section 406. Punishment for an aggravated form of criminal
breach of trust is provided in Sections 407 to Section 409.

157. The terms of the section are very wide. They apply to
one who is in any manner entrusted with property or dominion -1
c over property. The section does not require that the trust should
be in furtherance of any lawful object. It merely provides, inter
alia, that if such a person dishonestly misappropriates or
converts to his own use the property entrusted to him; he
commits criminal breach of trust. This section requires
D
(1) Entrusting any person with property or with dominion

-
'I

over property.

(2) That person entrusted (a) dishonestly misappropriates
or converts to his own use that property; or (b) dishonestly
E uses or disposes of that property or willfully suffers any
other person so to do in violation -
~

(i) of any direction of law prescribing the mode in
which such trust is to be discharged, or
F (ii) of any legal contract made touching the discharge
of such trust.
158. In Onkar Nath Mishra and Ors. vs. State (NCT of
Delhi) and Anr., [(2008) 2 sec 561] this court noted that in the
G commission of the offence of criminal breach of trust, two
distinct parts are involved. The first consists of the creation of I •
an obligation in relation to the property over which dominion or
control is acquired by the accused. The second is a
misappropriation or dealing with the property dishonestly and
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 847
INVESTIGATION [S.B. SINHA, J.]

contrary to the terms of the obligation created. A
159. In Jaikrishnadas Manohardas Desai and Anr. v. ·
State of Bombay, [AIR 1960 SC 889), this Court observed :

"To establish a charge of criminal breach of trust, the
prosecution is not obliged to prove the precise mode of B
conversion, misappropriation or misapplication by the
accused of the property entrusted to him or over which he
has dominion. The principal ingredient of the offence being
dishonest misappropriation or conversion which may not
ordinarily be a matter of direct proof, entrustment of C
property and failure, in breach of an obligation, to account
for the property entrusted, if proved, may in the light of other
circumstances, justifiably lead to an inference of dishonest
misappropriation or conversion. Conviction of a person for
the offence of criminal breach of trust may not, in all cases, D
be founded merely on his failure to account for the property
entrusted to him, or over which he has dominion, even
when a duty to account is imposed upon him but where
he is unable to account which is untrue, an inference of
misappropriation with dishonest intent may readily be E
made."

- 160. However, Sections 407 to 409 make special
provisions for various cases in which property is entrusted to
the enumerated categories of persons who commit the offence.
F
161. Criminal breach of trust by a Public servant is dealt
with under s. 409.

"409. Criminal breach of trust by public servant, or by
banker, merchant or agent.- Whoever, being in any G
t I 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, commits criminal breach of trust in
respect of that property shall be punished with H
848 SUPREME COURT REPORTS (2009] 12 S.C.R.

A imprisonment of life, or with imprisonment of either
descript;')n for a term which may extend to ten years, and
shall also be liable to fine."

162. This section classes together public servants,
bankers, merchants, factors, brokers, attorneys and agents. The
8 duties of such persons are of a highly confidential character,
involving great powers of control, over the property entrusted
to them and a breach of trust by such persons may often induce
serious public and private calamity. High morality is expected
of these persons. They are to discharge their duties honestly.
c
163. The following are the essential ingredients of the
offence under this section :

(1) The accused must be a public servant;
D (2) He must have been entrusted , in such capacity
with the property ;

(3) He must have committed breach of trust in respect
of such property.
E
164. In Raghunath Anant Govilkar Vs. State of
Maharashtra and Ors, (2008 (2) SCALE 303] the court noted
that Section 406 which provides the punishment for criminal
breach of trust simplicitor and 409 of IPC are cognate offences
in which the common component is criminal breach of trust.
~

-
F When an offence punishable under under Section 406 is
committed by a public servant (or holding any one other of the
positions listed in the Section) the offence would escalate to
Section 409 of the Penal Code.

G 165. In Superintendent and Remembrancer of Legal
Affairs, W.B. v. S.K. Roy, ((1974) 4 SCC 230), this Court held:
I •

"12. To constitute an offence under Section 409 IPC, it is
not required that misappropriation must necessarily take
place after the creation of a legally correct entrustment or
H
· R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 849
INVESTIGATION [S.B. SINHA, J.]

dominion over property. The entrustment may arise in any A
manner whatsoever. That manner may or may not involve
fraudulent conduct of the accused. Section 409 IPC,
covers dishonest misappropriation in both types of cases;
that is to say, those where the receipt of property is itself
fraudulent or improper and those where the public servant B
misappropriates what may have been quite properly and
innocently received. All that is required is what may be
described as entrustment or acquisition of dominion over
property in the capacity of a public, servant who, as a result
of it, becomes charged with a duty to act in a particular c
way, or, atleast honestly."

166. In Chel/oor Mankkal NarayarJ lttiravi Namhudiri v.
State of Travancore, Cochin, [AIR 1953 SC 478], this Court
held:
D
"... to constitute an offence of criminal breach of trust, it is
essential that the prosecution must prove first of all that the
accused was entrusted with some property or with any
dominion or power over it. It has to be established further
that in respect of the property so entrusted, there was E
dishonest misappropriation or dishonest conversion or
-J dishonest use or disposal in violation of a direction of law
" or legal contract, by the accused himself or by someone
-; else which he willingly suffered to do."
F
167. In Ram Narayan Popli (supra), this Court stated the
law, thus:-

"81. To constitute an offence of criminal breach of trust,
there must be an entrustment, there must be
misappropriation or conversion to one's own use, or use G
• t
·•
I in violation of legal direction or of any legal contract: and
the misappropriation or conversion or disposal must be
with a dishonest intention. When a person allows others
to misappropriate the money entrusted to him that
amounts to a criminal appropriation of trust as defined by H
850 SUPREME COURT REPORTS [2009] 12 S.C.R.

A Section 405. The section relatable to property in a positive
part and a negative part. The positive part deals with
criminal misappropriation or conversion of the property and
the negative part consists of dishonestly using or
disposing of the property in violation of any direction and
B of law or any contract touching the discharge of trust."

NON-INSTITUTION OF DEPARTMENTAL PROCEEDINGS

168. In this regard, it must be emphasized that the
'i
submission of the learned counsel that the Banks have not
c initiated any proceedings and suffered any loss and thus the
judgment of conviction and sentence of criminal breach of trust
is wholly unsustainable cannot be accepted for more than one
reason.
.

D 169. It is not the law that complaint petition under all
circumstances must be made by the Banks and Financial
Institutions whose money had been the subject matter of
offence. It is also not the law that suffering of loss is a sine qua
non for recording a judgment of conviction. It is now trite that
criminal law can be set in motion by anybody. The prosecution
E
was initiated on the basis of the information received by the
Central Bureau of Investigation. It would entitled to do so not ~
only in regard to its statutory powers contained in the Delhi •
Special Police Act but it was also entitled to take cognizance
in terms of the report submitted by 'Janakiraman Committee'.
F The money involved in the transfer is public money belonging
to Public Sector Banks.
170. The first allegation of criminal breach of trust is
against accused No.6 and 7 as they had for allowed the
G diversion of a huge sum meant to be used for specific purpose,
namely - 'call money' to be lent to another Nationalized Bank. • •
We have already hereinbefore dealt with the question as to the
legality of the transactions having regard to the provisions of
the NHB Act. If the transaction was illegal, as result whereof, a
H private person, who was not expected to reap the fruit of 'call
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 851
INVESTIGATION [S.B. SINHA, J.]
'money' was allowed to retain the same for a period to make A
• an unlawful gain therefrom, offence of criminal breach of trust
must be held to have been committed.

171. It is for the same reason, the submission that as no
body ultimately suffered any loss, an offence under Section 409
B
of the Indian Penal Code was not made out, cannot be
accepted. A Bank or Financial Institution may not suffer ultimate
loss but if the money has been allowed to be used by another
'f
person illegally for illegal purposes, the ingredients of Section
405 of the Indian Penal Code would get attracted. A .case
involving temporary embezzlement also attracts the ingredients c
of Section 405 of the Indian Penal Code.

172. Furthermore, in terms of the above referred judgments
of this Court, when a person allows others to misappropriate
the property entrusted to him, that also amounts to criminal D
" breach of trust.
173. In the present case the amount of Rs. 40 crore was
entrusted to accused No. 6, C Ravi Kumar to be dealt with in
accordance with the provisions of the NHB Act. As has already
been noticed herein before, the 1987 Act does not permit grant E
,_ of loan to an individual. Accused No 6 in violation of the law
- handed over the amount to the UCO Bank with full knowledge
that the amount would be credited to the account of accused
No.4 Harshad Mehta. The call money transaction with UCO
Bank was only a cover up. Thus the property which was trusted F
to accused No. 6 was misappropriated by him.

174. It must in this regard be emphasized that an act of
breach of trust simpliciter involves a civil wrong of which the
person wronged may seek his redress for damages in a civil G
• 1 court but a breach of trust with mens rea gives rise to a criminal
prosecution as well. [SW Palanikar v. State of Bihar, (2002) 1
SCC 241]. The element of 'dishonest intention' is therefore an
essential element to constitute the offence of Criminal Breach
of Trust. H
852 SUPREME COURT REPORTS (2009J 12 S.C.R.

A 175. So far as the aspect of dishonest intention is •
concerned, the term 'Dishonestly' is defined by Section 24 of
the IPC:

"'Dishonestly'- Whoever does anything with the intention of
causing wrongful gain to one person or wrongful loss to
B another person, is said to do that thin 'dishonestly'."

176. Thus, an act done with the intention to cause 'wrongful
gain' can be said to be dishonest.

c 177. The term 'wrongful gain' is defined in Section 23 of
the IPC as follows:

"Wrongful gain'- 'Wrongful gain' is gain by unlawful means
of property to which the person gaining is not legally
entitled."
D
178. The most essential ingredient of proof of criminal
breach of trust, therefore, is misappropriation with a dishonest
intention. Breach of trust simplicitor is not an offence as is it
not associated with intention which is dishonest.
E
179. The term dishonestly defined in Section 24 IPC
means doing anything with the intention of causing wrongful ,\

gain to one person or wrongful loss to another. So the offence
is completed when misappropriation of the property has been
made dishonestly. Accordingly, even a temporary
F misappropriation falls within the ambit of the said offence. [See
the Judgment of the Orissa High Court in Kartikeshwar Nayak
v. State, 1996 Cr.L.J. 2253].
180. In the present case accused No. 6 parted with money
G of NHB which was entrusted to him so that Harshad Mehta f •
could get it although not entitled therefor in Law. The conduct
of accused 6 was therefore dishonest. He is guilty of the
offence of criminal breach of trust. With regard to accused No
7, Suresh Babu we have already mentioned that there is not
H enough evidence to show his involvement in the said
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 853
INVESTIGATION [S.B. SINHA, J.]

transactions. A

181. So far as the involvement of accused 1 to 3 is
concerned, we are of the opinion that they also played an
important role in diverting the supposed call money from NHB
which was meant for UCO Bank to the account of Harshad B
Mehta. As soon as the cheque for Rs 40 crore was recei
ed by UCO Bank the amount stood entrusted to the officials of
UCO Bank. However accused 1 to 3 in violation of law and in
the absence of any contract permitted the amount to be
t. transferred to the account of accused no. 4 Harshad Mehta who C
was not entitled to it. Therefore, the offence of criminal breach
of trust stands proved against them also.

, 182. We must also make reference to the following
observations of the Supreme Court in Ram Narayan Popli
(supra) which was a case arising from the connected securities D
" market scam, to bring home the point as to the impact of the
transactions:

"100. The offence in these cases were not of the
conventional or traditional type. The ultimate objective was E
to use public money in a carefully planned manner for
personal use with no right to do it.
J
101. Funds of the public bodies were utilized as it they
were private funds. There was no legitimacy in the
transactions .... Their acts had serious repercussions on F
the economic system of the country, and the magnitude of
financial impact involved in the present appeal is only tip
of the iceberg. There were several connected cases and
interestingly some of the prosecution witnesses in the
present case are stated to be accused in those cases. G
~ 1 That itself explains the thread of self-perseverance running
through their testimony. Therefore, the need to pierce the
facadial smoke screen to unravel the truth to lift the veil so
that the apparent, which is not real can be avoided. The
proverbial red herrings are to be ignored, to find out the H
854 SUPREME COURT REPORTS (2009] 12 S.C.R.

A guilt of the accused.

102. The cause of the community deserves better
treatment at the hands of the Court in the discharge of its
judicial functions. The Community or the State is not a
persons non grata whose cause may be treated with
B
disdain. The entire community is aggrieved if economic
offenders who ruin the economy of the State are not
brought to book. A murder may be committed in the heat
of moment upon passions being aroused. An economic
offence is committed with cool calculation and deliberate
c design with an eve on personal profit regardless of the
consequence to the Community."

PREVENTION OF CORRUPTION ACT

0 183. Apart from the charges under the IPC, accused 1 to
3 [UCO Bank officials] and accused 6 & 7 [NHB officials] have
also been charged of committing the offence under s 13 (1) (d)
(iii) read with s 13 (2) of the Prevention of Corruption Act. It
must be placed on record that in this regard that the Prevention
E of Corruption Act, 1988 replaced the Prevention of Corruption
Act, 1947. The new Act was enacted 'to consolidate and amend
the law relating to the prevention of corruption and for matters
connected therewith.' Relevant portions of section 13 which
provide for criminal misconduct by a public servant read as
under.
F
"13. Criminal misconduct by a public servant.- (1) A public
servant is said to commit the offence of criminal
misconduct,-

G ... (d) if he,-

... (iii) while holding office as a public servant, obtains for I '

any person any valuable thing or pecuniary advantage
without any public advantage; or

H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 855
INVESTIGATION [S.B. SINHA, J.]

(2) Any public servant who commits criminal misconduct A
shall be punishable with imprisonment for a term which
shall be not less than one year but which shall may extend
to seven years and shall also be liable to fine."

184. Section 13 in general lays down that if a public
8
servant, by corrupt or illegal means or otherwise abusing his
position as a public servant obtained for himself or for any other
person any valuable thing or pecuniary advantage he would be
guilty 'criminal misconduct'. Clause (2) thereof speaks of the
punishment for such misconduct. [See CK Damodaran Nair v, C
Government of India, AIR 1997 SC 551.] ·

185. The ingredients of Sub-clause (iii) of S 13 (1) (d)
contemplate that a public servant who while holding office
obtains for any person any valuable thing or pecuniary
advantage without any public interest would be guilty of criminal D
misconduct. Sub section (2) of section 13 provides for the
punishment for such criminal misconduct.

186. Minimum sentence is prescribed under Section 13(2)
of the 1988 Act and a public servant who abuses his position E
as such for obtaining for himself or for any other person any
valuable thing or pecuniary advantage cannot be punished for
_, a term of imprisonment, which is less than for the duration of
one year. For convicting the person under Section 13(1 )(d)(iii),
there must be evidence on record that accused 'obtained' for
any other person any valuable thing or pecuniary advantage F
without any public advantage.

187. In Dalpat Singh v. State of Rajasthan, [AIR 1969 SC
17] while interpreting an analogous provision in the unamended
Prevention of Corruption Act, this opined noted: G

"The ingredients of the offence under section 5 (1) (d) are:
(1) that the accused should be a public servant, (2) that
he should use some corrupt or illegal means or otherwise
abuse his position as a public servant, (3) that he should
H
856 SUPREME COURT REPORTS [2009] 12 S.C.R.

A · have obtained a valuable thing or pecuniary advantage, and
(4) for himself or any other person"

188. The Madras High Court in B. Ramachandran and
S.S. Abdul Hameed vs. State rep. by The Inspector of Police,
Special Police Establishment, Central Bureau of
8
Investigation, Anti-Corruption Branch, Crl. A. No. 553 of 2000
decided on 23.03.2007 noted thus:

"Section 13(1 )(d) of the said Act also deals with the criminal
misconduct by a public servant by means of corrupt or
C illegal means, obtains for himself of for any other person
any valuable thing or pecuniary advantage; or by abusing
his position as a public servant, obtains for himself or for
any other person any valuable thing or pecuniary advantage;
or while holding office as a public servant, obtains for any
D person any valuable thing or pecuniary advantage without
any public interest."

189. In the light of the provisions already enumerated by
us we per the law laid down we therefore hold that the accused
E A1 to A3 [officials of UCO Bank] & A6 [officials of NHB] are
guilty of criminal misconduct under the Prevention of Corruption
Act. For the reasons already mentioned by us we do not find
sufficient evidence to bring in the involvement of A7, Suresh
Babu within the fold of the said transaction.

F 190. All the accused were at the relevant time public
servants. Each one of them played a specific role in diversion
of funds from NHS to the account of Harsad Mehta, all
ostensibly under a call money transaction. They thereby in our
opinion facilitated Harshad Mehta to obtain pecuniary
G advantage within the meaning of the section. The acts were
anything but intended to be in public interest. On the contrary t •

the public loss and suffering occasioned thereby was
immeasurable. Though it is true, as has been argued before
us that all the funds diverted have subsequently been returned
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 857
INVESTIGATION [S.B. SINHA, J.]

to NHB and no actual loss has been occasioned there by either A
• to the UCO Bank or the NHB. But it must not be forgotten that
white collar crimes of such a nature affect the whole society
even though they may not have any immediate victims. We,
accordingly, hold accused A1 to A3 and A6 guilty of criminal
misconduct under s. 13 (1) (d) (iii) of the Prevention of B
Corruption Act.

SENTENCING

f 191. A sentence of punishment in our opinion poses a
complex problem which requires a balancing act between the c
competing views based on the reformative, the deterrent as well
as the retributive theories of punishment. Accordingly a just and
proper sentence should neither be too harsh nor too lenient. In
judging the adequacy of a sente~ce, the nature of the offence,
the circumstances of its commission, the age and character of D
the offender, injury to individual or the society, effect of
:...
" punishment on offender, are some amongst many other factors
which should be ordinarily taken in to consideration by the
courts. We may also place on record that as the CBI has not
preferred any appeal against the quantum of sentence, this E
Court cannot impose a higher sentence.

• j 92. We must first accordingly take into consideration the
sentence imposed by the Special Court :

193. As regards A 1, K Margabanthu, the court stated that F
he had been the Chairman and the Managing director of a
public sector bank when he committed the offence. Though the
court was of the opinion of giving him a harsh sentence
because of the key role played by him in the entire transaction,
it, however, while considering his age and health condition, G
• ·l sentenced him to undergo only six months Rigorous
Imprisonment and ordered him to pay a fine of Rs.1,00,000/-
and in default to undergo SI for two months. We find no reason
to interfere with the sentence imposed by the special court.

-
H
858 SUPREME COURT REPORTS (2009] 12 S.C.R.

A 194. As regards A2, R Venkatakrishnan the Special Court
again for the reasons of his age and the financial status of his
family imposed exactly the same sentence as that was imposed
on A 1. We do not intend to interfere with the sentence of A2
either as regards to the punishment that he had to undergo or
B the amount of fine imposed on him.
195. As regards A3, SV Ramanathan the court
considering his lower rank in the hierarchy of the bank imposed
on him only a sentence of one month RI and ordered to pay a
fine of Rs. 10,000/- and in default SI for 15 days. Though we
c are of the opinion that he deseNed to be dealt more harshly
by the trial court but after five years having passed since the
pronouncement of the judgment we do not propose to effect any

D
change the said sentence.

196. As to A 5, Atul M Parekh the court took note of the
fact that he was working under the orders of A4, the deceased
-
Harshad Mehta, being his employee, and handed him a ' ,,.
sentence of merely 15 days and ordered him to pay a fine of
Rs. 10,000 and in default SI for 15 days. We need not interfere
E with the said sentence.

197. As to A6, C Ravi Kumar the court gave him a
sentence of three years and ordered him to pay a fine 1,00,000
in default SI for 3 months. We have herein before already
deprecated against the reference by the Special Court on the
F Jankiraman Committee Report while awarding the sentence.
Though we too are of the opinion that A6 played a very
instrumental role in the entire scheme of things, but feel that the
Special Court might have been influenced by the obseNations
of the Report while awarding the sentence. In our opinion the
G transaction could not have been possibly carried on without the
..
help of A6. But so long as there is doubt that the co.urt was not
wholly correct in awarding the sentence we would not be in a
f •

position to uphold it. This is also visible from the wide difference
in the sentence of imprisonment which has been given to him

-
H
R. VENKATAKRISHNAN v. CENTRAL BUREAU OF 859
INVESTIGATION [S.B. SINHA, J.]

as compared to other accused who also played a equally A
instrumental role in the illegal transactions. We accordingly
reduce his sentence of his imprisonment to six months but
uphold the amount of fine which has been imposed upon him.

198. Since we have acquitted A7, S Suresh Babu of all
B
charges no question as regards the sentence to be imposed
on him arises.

CONCLUSION

199. 1. A1, K Margabanthu is sentenced for the offence c
punishable under s. 1208 ands. 409 of the IPC as also s.13
(1) (d) (iii) read with s. 13 (2) of the Prevention of Corruption
Act to undergo RI for a period of six months and to pay fine of
Rs. 1,00,000 in default to undergo SI for two months

2. A-2 , R Venkatkrishnan is found guilty of offence D
1
under s. 1208 ands. 409 of the IPC as also s. 13
( 1) (d) (iii) read with s. 13(2) of the Prevention of
Corruption Act and is sentenced to undergo RI for
a period of six months and to pay fine of Rs.
1,00,000 and in default SI for two months. E

3. A3, SV Ramanathan is sentenced for the offence
punishable under s. 1208 and s. 409 of the IPC as
also s.13 (1) (d) (iii) read with s. 13 (2) of the
Prevention of Corruption Act to undergo RI for a F
period of one months and to pay fine of Rs. 10,000
and in default SI for two months.

4. A5, Atul M Parekh is sentenced for the offence
punishable under section 120 B of the IPC to
undergo RI for a period for 15 days and to pay a G
• i
fine of Rs. 10,000 and in default to undergo a SI
for 15 days.

5. A6, C Ravikumar is sentenced for offences under
punishable s. 1208 ands. 409 of the IPC as also H
860 SUPREME COURT REPORTS (2009] 12 S.C.R.

A s 13 (1) (d) (iii) read with s. 13(2) of the Prevention
of Corruption Act and is sentence to undergo
imprisonment for 1 year and to pay a fine of Rs.
1,00,000 and in default to undergo a imprisonment
for SI for two months.
B
6. A7, S Suresh Babu is hereby acquitted of all
charge as the prosecution has failed to prove the
case against him beyond all reasonable doubts.

200. Each accused should be given a set off for the period
C for which he has already undergone imprisonment in this case.
So far as the payment of fine is concerned, a period of 2
months time is given to all accused persons, on whom ·fine has
been imposed, to pay the said fine.

D R.P. Appeals disposed of.

I •