Ketan Parekh 1992 Stock Scam Judgement Special Court Mumbai

-,
BEFORE THE SPECIAL COURT AT BOMBAY

CONSTITIITED UNDER THE SPECIAL COURT (TRIAL OF OFFENCES
RELATING TO TRANSACTIONS IN SECURITIES) ACT, 1992
SPECIAL CASE NO. 3 OF 1996
Central Bureau of Investigation
..... Complainant.
V/s
1. Saranathan Mohan
...
2. N. Balasubramaniam
Accused No. l.
....Accused No.2.
Accused No.3.
3. B.R. Acharya
..
....Accused No.4.
4. Mr P.J. Subb arao

5. Hiten P. Dalal
..
Accused No.5.
6. S.K. Jhaveri
....Accused No.6.
7. Pallav Seth
....Accused No.7
8. M.K. Ashok Kumar
....Accused No.8
9. Ketan V. Parekh
....Accused No.9
10. Navinchandra N. Parekh
....Accused No.10
11. B. V. Srinivasan
.... Accused No.11.
Mr. V.G. Pradhan with Mr. S. Mhamane, Special Public Prosecutors

for C.B.I.
--" ,
---- --
-----
Mr. A.Z. Mookhtiar, advocate (Legal Aid) for accused No.1.
Mr. Girish Kulkarni, advocate for accused No.2.
Mrs. B.A. Jakhade (Legal Aid), advocate for accused No.3.
Mr. P.D. Sawardekar, advocate for accused No.4.
Mr. Sunil Kale, advocate for accused No.5.
Mr. Shailesh Shah with Ms. Mamta Sadh Vb Dhru Leeladhar & Co,
advocates for accused No.6.
Mr. Purandhare with Mr. Vivek Sharma & Ms.
Reshma Ruparel,
advocates for accused No.7.

Mr. Mr. Amit Desai with Ms. Maya Sarkar i/b Madhukar Munim &
Co., advocates for accused No.8.
Mr. Mahesh Jethmalani with Mr. Amol Chougule & Mr. Ajit Karwande,
advocates for accused No.9 and 10.
Mr. D.R. Pinge, advocate (Legal Aid) for accused No.11.
CORAM: V.M. KANADE, J.

Judge, Special Court
DATE
: 7th March, 2008 & 1st April, 2008
3
ORAL JUDGMENT:
1.
On 01/06/1994, a complaint came to be registered in the Bank
Securities and Fraud Cell of Central Bureau of Investigation vide R.C.

No.3/BSC/94-BOM under section 120-B read with sections 409, 420,
477-A of the Indian Penal Code and section 13(2) read with section
13(1)(d) of the Prevention of Corruption Act, 1988. In the FIR, it was
stated that reliable information was received in the Office to the effect
that Canbank Financial Services Limited, which had its Headquarters
at Bangalore and which was a wholly owned subsidiary of Canara
Bank, had participated in the secondary market activities.
alleged
in
It was
the FIR th.at during 1991-92, Mr. S. Mohan (Accused No.1)
and Mr. N. Balasubramaniam (Accused No.2) were posted as Assistant

Vice President in the Canfina Headquarters at Bangalore and that Mr.
S. Mohan
was
a dealer and Mr. N. Balasubramniam was looking after
Funds Management Department.
It was alleged that there was a
conspiracy between employees of Canfina and Canbank Mutual Fund

and some brokers and it was agreed between them that the funds
belonging to Canfina and Canbank Mutual Fund would be diverted in
the account of the brokers and, thereafter, the said amount which was
diverted would be returned back with interest and for the said purpose
4
the accounts of Canfina and Canbank Mutual Fund were manipulated.
The details of the said transaction were mentioned in the FI
After
the FIR was lodged, accused No. 7 Mr. Pallav Seth was arrested on
07/07 /1994
and
released
was
on
bail
on
09/07 /1994.
On
25/03/1996, other accused were arrested and were released on bail.

Charge-sheet was filed against the accused. In
the
charge-sheet, it was
alleged that the accused had committed an offence punishable under

section 120-B read with section 409, 420, 477-A of the Indian Penal
Code and 13(2) read with section 13(1)(d) of the Prevention of
Corruption Act. After the charge-sheet was filed, a charge was framed
against the accused.
The prosecution examined 19 witnesses in
support of its case.
2.
The
prosecution
case
in
47, 70,68,200/- was transmitted

Canbank
Mutual
Fund,
brief
is that an amount of Rs
in five instalments from Canfina to
Bombay
ostensibly
for
the
purchase
of
securities by Canbank for canfina. The first transaction took place on

10/10/1991 and the amount involved in this transaction was Rs 17.29
crores. The second transaction took place on 22/10/1991 and it was
for the amount of Rs 12 crores.
The third transaction took place on
16/01/1992 and was for an amount of Rs 5 crores.
The fourth
---------
transaction was initiated on 07/02/1992 and was also for an amount

th
of Rs 5 crores. The 5 transaction was dated 11/02/1992 and
was for
an amount of Rs 7 crores.
3.
During the course of argument, Mr. V.G. Pradhan, the learned
Special Public Prosee utor appearing on behalf of the prosecution

submitted that the prosecution did not wish to press charges in respect
of the transaction dated 07/02/1992 and 11/02/1992 i.e transaction
No.4 and 5 since it was essentially a transaction which was in respect
of the accused Manubhai Maniklal who had expired during the
pendency of the trial
4.
It is the case of the prosecution that so far as the first
transaction
is concerned i.e dated 10/10/1991, the funds to the tune of Rs 17.29

crores were diverted in favour of accused Nos. 9 and 10 and accused
No.6 through the Bank of India. In respect of the second transaction,
which was for an amount of Rs 12 crores, the funds were diverted in
favour of accused Nos.6 and 7 through the Bank of India and in
respect of the third transaction dated 16/01/1992 the funds to the
tune of Rs 5 crores were diverted in favour of accused No.5 through
the Andhra Bank and in respect of the fourth and fifth transaction, the
6
funds were diverted in favour of late Manubhai Maniklal.
5.
The prosecution has examined 19 witnesses in order to establish
that these funds were diverted from Canfn

i a and eventually these
funds landed in the hands of accused/brokers, who utilised the same
and, thereafter, this money came to be refunded to Canfina alongwith
interest.
6.
It is essential to briefly state the transactions which are involved
in this particular case. It is alleged b y the prosecution that S. Mohan accused No.1 made an entry dated
10/10/1991
in Canfina's book
regarding purchase of "RIL'' from Canbank Mutual Fund for Rs 17.29

crores while there was no such deal between Canfina and CBMF. Even
in the absence of any deal, an amount of Rs 17.29 crores was
transferred to CBMf.\,.,on
-iut .
-'.1';'-'
.
lO/lO/f9 91
by Canfina, Bangalore.
receipt of the said amount, voucher dated
10/1 0/1991
was
On
prepared
in CBMF to show that the said amount was wrongly received and that
it was to be paid back in due course of time.
reality,
the
amount
accused No.3
cheque dated
was
not refunded to Canfina
It is alleged that, in
but B. R.. Acharya -
along with B.V. Srinivasan - accused No.11, issu
10/10/1991
o f Rs
8.99
crores in favour of S.K. Jhaveri -
7
accused No.6 and the cheque for Rs 8.30 crores in favour of
Narbharam Harakchand, which was a
firm in which Ketan
Mis
V. Parekh
and Navinchandra N. Parekh, the accused Nos. 9 and 10 respectively

were associated.
Thereafter, this amount of Rs 17.29 crores was
illegally passed on to the said brokers who did not have any deal
either with Canfina or with CBMF in connection with the receipt of the
said amount.
7.
It is further alleged that in furtherance of the aforesaid criminal
conspiracy, N. Balasubramaiam - accused No.2 made an entry dated

22/10/1991 in the Canfina records regarding purchase of "14o/o NC Ds"
for Rs 12 crores from Canbank Mutual Fund while Canfina did not
have any such deal with CBMF.
It is alleged that even then
UW
amount of Rs 12 crores was transferred to Canbank Mutual Fund

Mumbai by Canfina, Bangalore on 22/10/1991.
On receipt of the
amount in CBMF, a voucher was prepared showing the said receipt of
Rs 12 crores as "wrongly remitted" from Canfina which
was
being paid
to S.K. Jh.averi, as per Canfina's instructions and, accordingly, an

amount of Rs 12 crores received in CBMF from Canfina without any
deal was passed on to S.K. Jhaveri - accused No.6 who did not have
any deal either with Canfina or with CBMF in connection with the
receipt of the said amount.
8.
It is alleged by the prosecution that N. Balasubramaniam -
accused No.2 made an entry dated 16/01/1992 in Canfina's record

regarding purchase of l4o/o of NCDs from Canbank Mutual Fund for
an amount of Rs 5 crores, though Canfina did not have any such deal
It is
with Canbank Mutual Fund (herein.after called as ''CBMF").

alleged
that
after
this
amount was received,
accused No.4
P.J.
Subbarao issued directions to Canara Bank, Tamarind Lane Branch,

Bombay to credit this amount
in "Cansigo
Scheme", though CBMF was
not connected in any way with the said amount. It is alleged that after
this amount was credited
in
the Cansigo Scheme, it was transferred to
the account of Hiten P. Dalal - accused No.5 who did not have any
deal with Canfina or CBMF in respect of receipt of the said amount of
Rs 5 crores.
accused
No.2
It is the prosecution case that N. Balasubramaniam made
an
entry
dated
07/02/1992
regarding
the
purchase of 14% NCDs for Rs 5 crores from CBMF though there was
no such deal either from Canfina or with CBMF and this amount was
transferred to CBMF on the basis of the said entry. After this amount
was
received
in
CBMF,
accused
No.4
issued
cheque
dated
10/02/1992 in favour of late Manubhai Maniklal though he did not
have any deal either with Canfina or with CBMF.
9.
It is the prosecution case that, similarly, accused No.2 - N.
Balasubramaniam made entry dated 11/02/1992 in Canfina's record

showing purchase of 14o/o NCDs for Rs 7 crores from CBMF though
Canfina did not have deal with CBMF and th.is amount was transferred
to CBMF for the purchase of NCDs. When this amount was credited in
the account of CBMF, accused No.4 - P.J. Subbarao alongwith another
Officer signed cheque dated 11/02/1992 in favour of late Manubhai
Manildal
who, again, did not have any deal with Canfina or with
CBMF.
The prosecution case, further, is that an amount of Rs
53,77,82,500/-
was
received from Ws Y.B. Desai on 31/03/1992 and
this amount was transferred on 31/03/1992 by Canfina, Mumbai to

Canfina,
Bangalore through an
IBA which was signed by Mr. R.
Venugopal who was not made an accused in the trial. It is the

prosecution case that by virtue of these five transactions, an amount of
Rs 47,70,68,200/- was utilized by the brokers and again remitted back
with interest. The amount of Rs 53,77,82,500/- was transferred on

31/03/1992 by Canfina, Mumbai to Canfina, Bangalore.
This was
done by an IBA signed by R. Venugopal and after this amount was

received by Canfina, Bangalore, accused No.2 - N. Balasubramaniam
10
made the following appropriations:-
(i)
Rs 17,29,00,000/- (against remittance dated
10/10/1991)
(ii)
Rs 12,96,46,000/- (against remittance of
Rs 12 crores on 22/10/1991 to CBMF)

(iii)
Rs 17,45,22,200 (against remittance of Rs
5 crores
on
16/01/1992,
Rs.
5 crores
on
16/01/1992, Rs 5 crores on 07/02/1992 and Rs

7 crores on 11/02/1992 to CBMF)
It is alleged by the prosecution that n o interest had been deducted i n

respect of placement dated 10/10/1991 although the record shows
that the alleged amount of Rs 8.99 crores had been placed for 15
days @ Rs 24%.
10.
lt has to be noted here that Canfina Financial Services (Caruma)
is a Company registered under the Companies Act and clause 20 of the

Articles of Association authorizes Canfina to make investment in
Government Units and other securities including shares. Under clause
21, Canfina was empowered to lend, advance money with. or without
-1
11
security.
It, however, prohibited Canfina from doing business of
banking as defined in the Banking Regulation Act.

Mutual Fund is a trust and it
was
The Canbank
authorized to make investments in
shares as also to lend money and make advances. Clause 15 (iii) of its
Trust Deed empowered the Trustees of the CBMF to (a) acquire, hold,
manage, trade and dispose off shares and debentures & (b) borrow or
otherwise raise money with or without securities subject to the limits
as may be decided by the Trustees. At the relevant ti.me, accused No.1
- S. Mohan was the Assistant Vice President and dealer of Canfina at
its Headquarters in Bangalore,
was
accused No.2 - N. Balasubramaniam
the Assistant Vice President and the dealer of Ca.nfina at its
Headquarters at Bangalore,
accused No.3 - B.R. Acharya was the
General Manager and member of the Board of Trustees of CBMF,

accused No.4 - PJ. Subbarao
was
the Assistant General
Manager,
Canbank Mutual Fund, Bombay, accused No.5 - Hiten P. Dalal was

share/stock & finance broker, accused No.6 - S.l{.. Jhaveri
was
share/stock broker, accused No.7 - Pallav Seth was share/stock broker,

accused No.8 M.K. Ashok Kumar at the relevant time was the Assistant
Vice President of Canfina, Bangalore, accused No. 9 - Ketan V. Parekh
was also share/stock broker, accused No.10 - Navinchandra N. Parekh
was also a share/stock broker and accused No.11 - B.V. Srinivasan was
12
the Funds Manager, Canbonus.
11.
All the accused were charged for the offences punishable under
section 120B read with section. 403, 409, 467, 471, 477-A of the
Indian Penal Code and section 13 (1)(c) read with section 13(2) of the
Prevention of Corruption Act, 1988.
12.
Accused No.1, 2, 4, 5, 6, 7, 8 and 10 were alleged to have
committed substantive offences under section 403, 409 and 477-A of

the Indian Penal Code .
13.
Accused Nos. 1, 2, 3, 4 and 8 were alleged to have committed
substantive offences under section 13(1)(c) read with section 13(2) of

the Prevention of Corruption Act, 1988 and under sections 403, 477A,
405, 409, 467, 471 of the Indian Penal Code.
14.
In a nutshell, therefore, it is the prosecution case that the modus
operandi in these five transactions whih

c
was adopted by the accused
was that the officials of the three Institutions viz. Canbank Financial
Services Limited, Canbw Mutual Fund and 'F' & 'f Section of Canara
bank entered into criminal conspiracy in Bombay and other places
during 1991-92 with Mis Narbheram Harakchand, Hiten P. Dalal, S.K.
__
13
Jh.averi, Pallav Seth and Manubhai Maniklal who were stock brokers
from Bombay to divert funds from the three Financial Institutions in
favour of the brokers and
to
create
a record
on the basis
of
misrepresentation of facts and falsification of documents so as to

indicate that the Canfina has placed funds with Canbank Mutual Fund
for the purchase of non-convertible debentures but, in actual reality,
no such transaction of purchase of non-convertible debentures had
actually taken place and, in this manner, funds to the tune of Rs
47,70,68,200/- were illegally placed in the hands of brokers.
The
prosecution case is, therefore, that the accused persons during the
period from October, 1991 to April 1992 in order to defraud the
Canbank Financial Services Limited at Bangalore of the said amount,
forged various documents and made five ready forward deals of RIL
and
14o/o NCDs securities with CBMF at Mumbai and, thereby,
diverted funds o f Canfina at Bangalore to Mumbai and thereafter

diverted funds of Canfina at Bangalore to CBMF at Mubai so that the
amount could be diverted for the use of accused Nos. 5, 6, 7, 9 and 10
and, thereafter, again, false and fictitious entries were made to make it
appear that the said deals were reversed.
15.
The prosecution has examined 19 witnesses.
P.W.
1 is Mrs
14
Virakthi S. Hegde who was working as a Secretary in Canbank Mutual
Fund at the relevant time. She has stated in her evidence that, as a
Secretary, her work
work.
was
to prepare vouchers and other fund related
The second witness examined by the prosecution i.e P.W.2 is
Mr B. N. Srikantha.
He was working as a Probationary Secretary in
Canfina at the relevant time.
P.W. 3 is one Mrs. Shalla Madhukar
Dighe who was working as an employee of the Bank of America at the

relevant time. P.W. 4 is Mr Ajay Kumar Nagendranath Kar.
He was
working at Tamarind Branch of Canara Bank as an Officer. P.W. 5 is

one Mr. Jarugumilli Rabindra Nath.
He was, at the relevant time,
working in Canfina as Assistant Vice President from November, 1992.

He has brought on record Articles of Association of Canfi.na. P.W.6 is
Mr. K. Ashok Kumar Kini. He was working as Senior Vice President in

Canfina and he
was
on deputation from Canara Bank. P.W. 7
Mr. M.
Papa Rao was working in the Canbank Mutual Fund at the relevant
time.
He has stated that one Mr. D'souza
was
Department when he was working with CBMF.
the head of the
P.W. 8 is Pronab Ray,
who was, at the relevant time, working in the Accounts Department of

Bank of America. P.W.9 is Ravi Tirumalai. He
time
working
with CBMF.
P.W.
10
Mr.
was,
at the relevant
Dilip
Jagmohandas
Ummergaonwala was working at the relevant time at the Stock
15
Exchange Branch of Bank of India. He has stated that, at the relevant
time, he was handling the account of M/s. Narbheram Harakchand.

P.W.11 is Mr. Ki.shore Mahadeo Ajgaonkar and, at the relevant time,
he
was
working in Stock Exchange Branch of Bank of India between
1992 to 1998. P.W. 12 is Mr. Vasanth Kumar Damaraju and he was

working with the Andhra Bank, Fort Branch as an Officer during the
relevant period. P.W. 13 is Mr Omprakash Kuckian. He was working
with Canfina between 1989 and 1984 as a Secretary and he was

posted in Bombay at that time. P.W.14 is Mr. Narsimba Karnath. He
was the Chairman and Managing Director of Canfina. P.W. 15 is Mr.
Gurpur Anantharama Shenai, who was working
as
Chief Executive
Officer of Canbank Mutual Fund at Bombay. P.W. 16 is one Mr. S.R.

Ramaraj and he
was
in the Canbank. Mutual Fund, Mumbai. P.W. 17
is Mr. Yogesh Ramesh Bhambardekar.
He
was
working with the
Bombay Stock Exchange at the relevant time. P.W. 18

was
Mukesh Joshi
the Accounts Assistant with Mis Narbheram Harakchand. P.W. 19
is the Investigating Officer Shiva Shankar Jha, son of Shyamsunder

Jha.
After the case was initially registered by Mr. Arup Patnaik, the
then S.P., the investigation of the case
was
later on handed over to
him and he recorded the evidence of various witnesses. He also seized
the documents and records under seizure memo or receipt memo.
16
16.
All the accused pleaded not guilty to the charge which was
framed by this Court.
17.
The points for determination are as under:POINTS
FINDINGS
(1) whether the prosecution has proved

beyond
reasonable doubt that between
the period October, 1991 and April, 1992

in Mumbai and Bangalore, all the accused
except
against
Yes,
acrused Nos.2,
4& 11.
entered into criminal conspiracy with an

object of dishonestly siphoning off the
funds
of Canfina
to
the
of Rs
tune
47,70,68,200/-?
(2)
Whether
prosecution
that,
in
it
is
proved
by
reasonable
beyond
furtherance
of
the
the
doubt
criminal
conspiracy of dishonestly siphoning off of

funds of the Canfina to the tune of Rs
47,70,68,200/-, all the accused jointly and

severally decided to execute three bogus,
fictitious and nonexistent
(RF)
transaction
22/10/1991,
securities
dated
16/1/1992,
which
were
ready forward
10/10/1991,
of
certain
vaguely
and
deceptively described as, to wit "RlL" and
Yes, except
against
acrused Nos.2,
4& 11
17
"14oo/ NCD" for the purpose of showing
that Canfina had sold/purchased the said
securities to/from
the Canban.k Mutual
Fund (CBMF) at Mumbai and, by using

this device, diverted the aforesaid funds on
the
aforesaid
dates
and
criminally
misappropriated the proceeds thereof and

diverted
the
funds
in
the
respective
accounts of accused Nos. 5, 6, 7, 9 and 10

and, in order to conceal the said intention,
and
manipulated
created
false
and
fictitious documents and also made entries

in the dealer pads, security stock register,
credit/debit vouchers, inter-bank advises
(IBA) and thereby committed an offence
punishable
Indian
under section
Penal
and/or
Code
120-B
and/or
of the
section
34
109 read with section 403, 405,
409,
and 477A of the Indian Penal Code
read
with
section
section
13(2)
13(1)(c),
of
the
read
with
Prevention
of
Corruption Act?
(3)
Whether
it
is
proved
by
the
prosecution beyond reasonable doubt that

the accused No.l was the Assistant Vice
President and was empowered to deal in
sale and purchase of securities by and on
YES
18
behalf of Canfina to the extent of R.s 50
lacs
and
that
he
had,
with
dishonest
intention, while wrongfully disposing of

the funds of the Canfina, exceeded the
power
delegated
fictitious
and
to
him
nonexistent
involving purchase of
and
made
transaction
Rs 17,29,00,000/
of a so called Security "RIL" with CBMF

and
thereby
committed
the
offence
punishable under section 13(1)(c) read

with section 13(2) of the Prevention of
Corruption Act?
(4)
Whether the prosecution has proved
beyond reasonable doubt that the accused

No.1 had, pursuant to the conspiracy of
entering into ready forward transaction
involving Rs 17.29 crores of the Security
"RIL" with the CBMF issued Jnter Bank
Advise (]BA) No.32100 dated 10/10/1991
for R.s 8,00,00,000/-and IB No.32107 for
Rs 9,29,00,000/- favouring CBMF without

actually receiving any cost memo, contract
note or security in physical or in the form
of Bank Receipt from CBMF and thereby
committed
offecnes
punishable
under
section 13(1)(c) read with section 13(2)

of the Prevention of Corruption Act?
YES
19
(5)
Whether,
it
LS
proved
by
the
YES
the accused No.1 con.spired in remitting

the amount of Rs 17.29 crores to CBMF
ostensibly for the purpose of sale and
purchase of securities, though this was
done
without
any
consideration
and
thereby committed an offence punishable

under section 409 of the Indian Penal
Code?
(6)
YES
No.1 has, with an intention to defraud

Canfina,
falsified
the
books/papers
belonging to Canfina by making a false

entry regarding transaction involving Rs
17.29 crores and committed an offence
punishable
under section 477A of the
Indian Penal Code?
(7) Whether the prosecution has proved

No.2
exceeded
powers
which
were
delegated to him to deal in sale and

purchase of securities on behalf of Canfin.a
and
entered
into
non-existent
NO
20
transaction involving purchase of Rs 12

crores of a so called security "14% NCD"
with CBMF and has committed an offence
with section 13 (2) of the Prevention of
Corruption Act?
Whether
(8)
it
is
proved
by
the

the
accused No.1 was entrusted with the
YES
funds of Canfina lying with the Canara

Bank's
branch
at
Cunigham
Road,
Bangalore and that he has, in violation of

the terms of entrustment, entered into a
non-existent
transaction
involving
an
amount of Rs 12 crores of the Security

"140/o NCD" with the CBMF and transferred
an amount of Rs 12 crores by making

entry in JBA Register favouring CBMF
without any consideration and committed
offence punishable under section 409 of
the Indian Penal Code?
(9)
Whether
it is
proved
by
the

the accused No.2 falsified the books of
accounts/documents belonging to Canfina
by
making
false entry
regarding
the
NO
21
transaction involving Rs 12
crore s
and
committed an offence punishable under

section 477-A of the Indian Penal Code?
(1 O)
Whether
it
is
proved
by
the

the
accused No.2 exceeded the powers
him for the sale
delegated to
of
securities
and
abused
enter
and purchase
his
pretending
to
Bangalore
fictitious
and
transaction
involving
purchase
NO
deal
office
by
pad
at
non-existent
of Rs 5
crores of 1114% NCD" with the CBMF and

under section
13(1)(c) read with section
13(2) of the Prevention of Corruption Act?
(11)
Whether
it
is
proved
by
the

the accused No.1, who was entrusted with
the funds of the Canfina, in furtherance of
the Conspiracy, made a bogus transaction
involving an amount of Rs 5 crores of the
Security "140/o NCD11 with the CBMF and
transferred the said amount in favour of
the CBMF without any consideration and
YES
22
Code.?
(12)
Whether
it
is proved
by
the

the
accused
No.2
books/documents
falsified
belonging
to
the
NO
C anfina
involving transaction of Rs 5 crores and

committed
offence punishable under
an
section 477A of the Indian Penal Code.
(13)
Whether
it
is
proved
by
the
prosecution beyond the reasonable doubt

that
the
accused
No.2
exceeded
the
NO
authority delegated to him by the Canfina

by enteri ng into fictitious and non-eltistent
transaction of Rs 5 crores and committed
an
offence
punishable
under
section
13(l)(c) read with section 13(2) of the

Prevention of Corruption Act?
(14)
Whether
it
is
proved
by
the

the accused No.2 i n furtherance of the
conspiracy
committed
an
NO
offence
punishable under section 409 of the Indian

Penal Code.
23
(15)
Whether
it
is proved
by
the

the accused No.2 made false entry in the
NO
books and documents of the Canfina in

respect of the transaction of Rs 5 crores
and
committed
an
offence
punishable
under section 477A of the Indian Penal

Code?
Wheth.er it is proved
( 16)
by
the

the accused No.2 in furtherance of the said
m
conspiracy
respect
of
NO
fictitious
transaction of purchase of Rs 7 crores of
Security
and
as "14% NCO", abused his office
committed
an
offence
punishable
under section 13(1)(c) read with section

13(2) of the Prevention of Corruption Act?
(17)
Whether
it is proved
by
the

the accused No.2, in furtherance of the
conspiracy,
committed
an
offence

Penal Code in respect of the
so-called
fictitious transaction of Rs 7 crores?
NO
24
Whether
(18)
it
i.s
proved
the
by

the accused No.2 made fictitious entry in
the
books
documents
of
of
accounts
Canfina
and
NO
other
regarding
the
transaction of Rs 7 crores and committed

an offence punishable under section 477A
of the Indian Penal Code?
Whether
(19)
it is proved
by
the

NO
conspiracy, exceeded powers delegated to

him and pretended to enter into ready
forward
(RF) transaction
involving
an
amount of Rs 7 crores of the Security "140/o

NCD" dated 11.2.1992 with CBMF and
abused
his
office
and
com mitted
an
offence punishable under section 13(1)(c)

read with section 13(2) of the Prevention
of Corruption Act?
(20)
Whether
it
JS
proved
by
the

the accused No.2 was entrusted with the
domain of the said funds, entered into
fictitious t ransaction involving Rs 7 crores
NO
25
and caused the said amount of Rs 7 crores
to
paid
be
to
CBMF
by
issuing
IBA
dated 11.2.1992 without any
No.32886
consideration and committed an offence

Penal Code?
Whether
(21)
it
proved
is
by
the

said
conspiracy,
the
regarding
made
transaction
false
NO
entry
involving
an
amount of Rs 7 crores in the books/papers

of
Canfina
punishable
and
committed
under
section
an
offence
477A
of the
Indian Penal Code?
(22)
Whether
prosecution
it
beyond
proved
is
reasonable
by
the
doubt
that, in furtherance of the said conspiracy,

the accused No.3, at
the
material times
being the General Manager of CBMF at

their Office at Mumbai, before crediting of
the proceeds of the aforesaid transaction
dated
10/10/91
directed
accused
of
Rs
No.11
17.29
on
crores,
9/10/1991
itself to issue cheque for Rs 8.99 crores in

favour of Mis S.K. Jhaveri of which the
YES
26
accused No.6
the Proprietor
was
and
accused No.7 was sub-broker and also

signed the said cheque alongwith accused
No. 11 without any authority and for no
consideration favouring accused No.6 and
another
cheque
No.488906
Rs
for
10/10/1991
dated
8,30,00,000/-
favouring Mis Narbheram Harakchand for

wrongly benefiting accused Nos. 9 and 10
and diverted funds to accused Nos. 6,7
and 9 and thereby committed an offence
Corruption Act?
Whether
(23)
it
is
proved
by
the

the
accused
No.6
aided
and
abetted
accused No.3 in the aforesaid transaction

and
committed
an
offence
punishable

Code
section
read
with
13(2)
section
of
the
13(1)(c)
Prevention
and
of
Corruption Act and section 409 of the

Indian Penal Code?
YES
27
(24)
Whether
the
prosecution
has
established beyond reasonable doubt that

the accused No.3, at the material time
being general Manager of CBMF at their
at
Office
crediting
before
Mumbai,
the
proceeds
of
aforesaid
transactions dated 10/10/1991 amounting

to Rs
17,29,00,000/-, directed
No.11 on
cheque
9/10/1991
dated
itself
Harakchand
to
10/10/1991
8,30,00,000/- favouring
which
of
accused
prepare
for
Rs
M/s. Narbheram
accused
No.10
Navinchandra Parekh was partner and on

behalf of which firm accused No.9 - Ketan
V. Parekh was dealing with CB:MF and

since accused No.3 was not to be available
on 10/10/1991 in Mumbai, he had signed
cheque
bearing
10/10/1991
accused
delivered
to
No.3 knew
Rs
for
alongwith
Narbheram
No.488906
8,30,00,000/-
No.11
and
representative
Harakchand
that CBMF
dated
while
got
of
it
M/s
accused
had no dealing with
Ws N arbheram Harakchand for which

said
cheque
authority
had
and
been
with
no
issued
without
consideration
favouring accused Nos. 9 and 10 and that

at the time of drawing of the aforesaid
YES
28
cheque accused No.3 knew that funds lil
the account of CANBONUS from which the
cheque had been drawn, were insufficient
and,
yet,
cheque
accused
drawn
N o.3
had
the
said
knowing
that
necessary
funds would wrongly be made available

through CANFINA by accused N o.1 and
that
his said
act
amounts
to
criminal
breach of trust and as such, accused no.3

is guilty of abusing his office as a public
servant and thereby committed an offence
punishable
under section
13 (1)(c) read

Corruption Act?
(25)
Whether
prosecution
that,
in
it
beyond
furtherance
is
proved
by
reasonable
of
the
the
doubt
criminal
conspiracy, the accused No.9 got the said

cheque credited to the account of
Mis.
Narbheram Harkchand without any deal

and consideration and the accused N o.10
utilized the said amount by issuing cheque
dated 10/10/1991 for Rs 8.25 crores and
thereby aided and abetted accused No.3
and
committed
an
offence
punishable

Code read with section 13(l)(c) and 13(2)
YES
29
of the Prevention of Corruption Act and
section 409 of the Indian Penal Code?
Whether
(26)
it
is
proved
by
the

NO
said conspiracy, being an Assistant General

Manager of the CBMF, received an amount
of Rs 5 crores vide IBA No.32686 dated
16/1/1992 for crediting the same to the
of Canbank
account
illegally credited
Nc
Scheme
Tamrind
the
with
Road
Mutual
same
the
Branch,
Fund
but
in Cancigo
Canara
Bank,
Mumbai
and
thereby illegally transferred the same to

the account of accused No.5 and thereby
section
13(1)(c)
and
13(2)
of
the
by
the
Prevention of Corruption Act.
Whether
(27)
prosecution
that,
in
it
b e yond
lS
proved
reasonable
doubt
funherance of the said conspiracy,
the accused No.5 got the amount of Rs 5

crores credited to his account without any
deal or consideration
and committed an

the Indian Penal Code read with section
YES
30
13(1)(c)
and
section
13(2)
of
the
Prevention of Corruption Act and section

409 of the Indian Penal Code?
(28)
Whether
it
is
proved
by
the
YES
the accused No.8, being the Vice President

of
Caniina, exceeded powers delegated
him and abused
to
his Office by making an
entry in IBA Register being IBA No.32886

dated 11/2/1992 regarding fictitious and
non-existent transaction s howing purchase
of "14o/o NCD" and thereby committed
an
offence punishable under section 13(1)(c)
read with section 13 (2) of the Prevention

of Corruption Act?
(29)
Whether it is
proved by
the

YES
conspiracy, falsified the books of Canfina

and committed an offence in respect of
transaction dated 11/2/1992 involving Rs
7
crores
punishable
and
committed
an
under section 4 77A
offence
of
the
Indian Penal Code.
''
___J
31
(30)
Whether
it is
proved
by
the

the accused No.4, who was at the material
NO
time the Assistant General Manager of

CBMF, transferred the amount of Rs 7
crores th.at was credited to the account of
Cancigo Scheme of CBMF and transferred
the same to the account of the deceased
stock
broker
Manubhai
Maniklal
by
passing a voucher dated 11/2/1992. and

section 13(1) (c) read with section 13(2)
of the Prevention of Corruption Act?
(31}
Whether
it
is proved
by the

the accused No.8 exceeded the authority
which was delegated to him and on
25/3/1992 made entry in the Sauda Book
regarding purchase of 85,000 shares of
Ws.
Nahar
Spinning
Mills
through
accused No.7 Pallav Seth and caused loss

of
Rs
5.10
crores
to
Canfina
and
corresponding illegal gain to Pallav Seth accused No.7 and also issued IBA No.3334
dated 2/4/1992 for consolidated amount
of Rs 20,92,14,300/-
inclusive
of Rs
12,75,00,000/- without any receipt of any
YES
32
cost memo, contract note or the security in
ph ysical or in the form of bank receipt
(BR) and caused illegal transfer of funds

of the Canfina without any security in
hand and abused his position as public
servant
and
committed
an
offence
punishable under section 13(l)(c) read

Corruption Act?
(32)
Whether
it
is
proved
by
the

the accused No.7 got the said amount
YES
credited to his account without any deal

and consideration and aided and abetted
the
accused No.8
and
committed
the

13(1)(c) and 13(2) of the Prevention of
Corruption Act and section 409 of the
Indian Penal Code?
(33)
Whether
it
is
proved
by
the

criminal
conspiracy,
exceeded
YES
the
authority delegated to him and entered

into purchase transaction of 40,000 shares
..J
------- - - ------- - - - - -
33
of A.C.C. aggregating to Rs 25,00,00,000/

from Pallav Seth (accused No.7), that was
not within his competence,
though he
knew that the transaction was of fictitious

nature and thereby committed an offence
punishable under section
13(1)(c)
read

Corru ption Act?
(34)
Whether
it
is
proved by the
the accused No.8 was entrusted with the
YES
funds of Canfina and made an entry dated

08/04/1992 in dealers pad and illegally
transferred Rs 25 crores to accused No.7 Pallav Seth without any deal, security, BR,
cost memo etc and committed an offence
Penal Code.
(35)
Whether
it is
proved
by the

the accused No.11 wrongfully credited the
said amount by issuing cheque No.488905
dated 10/10/1991 for Rs 8,99,00,000/
favouring M/s. S.K. Jhaveri for wrongfully
benefiting the accused No.6 and another
cheque No.488906 dated 10/10/1991 for
NO
- -
,-- --1
34
Rs.
8,30,00,000/
Narbharam
benefiting
favouring
Harakchand
accused
M/s.
for wrongfully
No. 9
and
10
and
diverted funds of Canfina to accused Nos.

6, 7 and 9 and committed an offence
punishable under section 13(1) (c) read
Corruption Act?
(36)
Whether
it
is
proved
by
prosecution beyond reasonable doubt
the
that
the accused Nos. 6, 7, 9 and 10 aided and

abetted accused No.11 and committed an
offence punishable under section 109
of
the Indian Penal Code read with Section

13(1)(c) and 1 3 (2) of
the Prevention of
Corruption Act?
(3 7)
Whether
it
is
proved
by
the

the accused Nos. 9 and 1 0 deposited the
Rs 8,30,00,000/ issued by the accused
No. 3 and 1 1 and deposited
the same in
their account with the Bank of India, Stock

Exchange
amount
Branch,
did
knowing
not belong
that
the
to them
and
dishonestly received the same without any
NO
35
Penal Code.
Whether
(38)
it
is
proved
by
the

the
accused
Nos.
and
11,
being
except
acrused No.11.
Yes,
employees of CBMF, aided and abetted the

accused Nos. 9 and 10 to commit criminal
misappropriation
and
committed
an

(39)
Whether
it
is
proved
by
the

the accused No.6 received and deposited
cheque No.488905 dated 10/10/1 991 for
an amount of Rs 8,99,00,000/- issued by
the accused Nos.3 and 1 1 and deposited
the same in his account, knowing that the
said cheque did not belong to him and
under section 403
of the Indian Penal
Code?
(40)
Whether
it
is
proved
by
the
YES
36
the
accused
No.3
being
employee
of
CBMF, in furtherance of the conspiracy,

aided and abetted accused No.6 to commit
the
aforesaid
act
of
criminal
misappropriation and committed an act

punish.able under section 109 read with
section 403 of the Indian Penal Code.
Whether
( 41)
it is proved
by
the
prosecution beyond the reasonable doubt

that
the
accused
22/10/1 991
deposited
Nos.
at Mumbai
cheque
and
received
No.587347
on
and
dated
22/10/1991 for Rs 12 crores which was

issued
as per the instructions
accused
No.3,
their joint
of the
account
No.0478601 1 with the Bank of America,

Mumbai knowing that the said cheque did
not
belong
received
to
the
them
same
and
dishonestly
without
any

Penal Code?
(42)
Whether
it is
proved
by
the

the accused No.3, being an employee of
YES
37
aided and abetted accused Nos. 6 and 7 to
commit
an
offence
misappropriation
by
issuance I realization
of
criminal
facilitating
and
or
the
criminal
misappropriation of the amount against

the said cheque and committed an offence
Penal Code read with section 403 of the
Indian Penal Code?
Whether
(43)
is proved
it
by
the

the accused No.5 on 16/1/1992 received
Rs 5 crores issued/passed by the accused
No.4 vide voucher dated 16/1/1992 and
deposited the same in his account with
Andhra
Bank,
Fort
Branch
Mumbai,
knowing that the amount against the said

cheque did not belong to
was
dishonestly
without
any
him
receiving
consideration
or that he
the
same
thereof and

under section 403
Code.
of the Indian Penal
YES
38
( 44)
Whether
it
is
proved
by
the

the accused No.4, being the employee of
NO

aided and abetted accused No.5 to com mit
the
criminal
of
act
aforesaid
misappropriation and thereby committed

an offence punishable under section 109
of the lndian Penal Code read with section
(45)
beyond
reasonable
accused
have
doubt that all the

committed
offence
NO
punishable under section 467 & 471 of the

Indian Penal Code?
(46) Whether the prose cution has proved

that
they
had
obtained
sanction
to
prosecute the accused Nos. 2 and 4 ?
(4 7)
Whether
it
is
proved
by
the
prosecution that the sanction to prosecute

the
YES
accused Nos. 1,3,8 & 11 was not
YES
necessary?
(48)
What order?
As per final order
39
18.
Before I consider the rival submissions, in my view, it would be
appropriate if the submissions of the learned Counsel appearing on

behalf of the accused are noted. This has become necessary because
the submissions of some of the accused
are
contradictory to each other
and some of th.em in their submissions have tried to shift the burden
on the other accused. This being the case, it would be appropriate to
briefly note down the submissions made by each of them.
SUBMISSIONS MADE ON BEHALF

OF ACCUSED NO. I - S. MOHAN:
19.
The learned Counsel appearing on behalf of accused No.1 has
submitted that the accused No.1 was charged under section 34, 109,
120-B, 409, 477-A of the Indian Penal Code and section 13(l)(c) and
read with section 13 (2) of the Prevention of Conuption Act in respect
of the said transactions.
The Counsel for accused No.1 made the
following submissions:-
(i) He submitted that there was no conclusive

proof to show that the accused No.1 entered into
any of these transactions.
(ii) He submitted that the prosecution has not

produced rough sheet which, according to him,
was the foremost primary record of deals.
(ii)i He submitted that the entries in deal pad
'--------
40
and IBA Register are not relevant for deciding

who was the person who concluded the deals.
(iv) He submitted that the top management was

fully aware of the transactions and did not raise
any objection at any point of time.
He submitted that the deals in question
(v)
were reversed and the Canfina earned profit of

Rs
20.
1,41,68,200/- on these
transactions
In respect of individual charges he submitted as follows:
(a)
CONSPIRACY
He submitted
that
an essence
of
criminal conspiracy was the agreement to do

illegal act and such agreement could be
proved either by direct or circumstantial
evidence or by both.
He submitted that,
admittedly, there was no direct evidence

available
circumstances
this
case
are
and
so
concerned,
far
as
the
prosecution was not in a position to establish

these circumstances by cogent and reliable
evidence. He submitted that the prosecution
had not been able to prove the case beyond
the reasonable doubt.
r
I
41
(b) APVKRSE INFERENCE
He submitted that the prosecution has

not brought on record material evidence
both oral and documentary before this Court
and that though the
statements of Mr.
Praveen Bhat, Mr. P.N. Narayana Rao and

Mr. A.P. Rao
were recorded under section
161 of the Criminal Procedure Code, these

witnesses were not examined and, therefore,
adverse inference was liable to be drawn
against the prosecution.
(c)
CRIMINAL BREACH OF TRUST

It is submitted that the accused No.1
was
no
entrusted
with
the
funds
dominion over the funds of Canfina.
or
He
submitted that the accused No.l had nb

power to enter into any deals. He submitted
that the accused No.I had not signed arty
cheques on behalf of Canfina for the purpose
of transferring the funds (IBAs) towards the
transactions entered into and the persons
who signed the cheuqes were,
in fact, from
the back up Office and the Executive Vice

President
from
Merchant
Banking
42
Department
or
from
the
General
Administration Department. It is submitted

that the accused No.1 has not committed
any criminal breach of trust. He submitted
that none of the witnesses had deposed
against accused No.1 or made any statement
incriminating the accused in the offence. He
submitted that only three documents were
produced by the prosecution against accused
No.1 viz. Exhibits 39, 40 and 59 and that
none of the witnesses has stated that the
accused No.1 committed breach of the duty
in respect of the said exhibits.
submitted that
so
far
as
He th.en
the offences under
sections 34, 109, 120-B, 409, 477A of the

Indian Penal Code and section 13(1 ) (c) read
Corruption
Act
are
concerned,
the
prosecution has not been able to prove

"mens-rea" against accused No.1 which was
the necessary ingredient in these offences.
In support of the said submissions he

relied upon the following judgments:-
(1) Ramesh Kumar Vs. State (N.C.T. of

Delhi) - 2006 AIR sew 1021.
(2) State of Haryana Vs. Bhajan Lal -
43
AIR
(3)
1992 SC 604
Judgment of the Supreme Court in
Jacob Mathew Vs. State of Punjab & Anr in
Appeal (Cri.) 144- 145 of 2004 decided on

August 5, 2005.
(4)
M/s Hindustan Steel Ltd., V. State of
Orissa, 1969 (2) sec 627.
(5)
Mohammed Yusuf & another V/s D. and
another, AIR 1968 Bombay 112.
(6)
Ramji Dayawala & Sons (P.) Ltd. V/s.
Invest Import, AIR 1981 SC 2085.
(7)
Hanumant Vs. State of M.P., AIR 1952,
SC 343.
(8)
State of Karnataka Vs. L Muniswartiy
(1997) 2 sec 699
(9)
P.K. Narayanan V/s State of Kerala,
(1995)
(10)
sec 142
Varkey Joseph V/s. State of Kerala,
AIR 1993, SC 1892
------
(11)
Mehraj Singh (VNk.) Vs. State of U.P.,
(1994) s sec 1ss
(12) Harl.sh Chandra and another etc. Vs.

Stateof U.P., 1991
21.
Cri. W. 2815
Jn support of the said submissions, he invited my attention to the
documents on which reliance was placed by the prosecution as also

the evidence of P.W.2, 6, 13 and 14 and 19. He also made comments
on the said documents. The oral evidence of these witnesses shall be
dealt with at the later stage.
SUBMISSIONS ON BEHALF OF
ACCUSED N0.2
22.
- N. BALASUBRAMANIAM:
Mr. Girish Kulkarni, th learned Counsel appearing on behalf of
accused No.2 submitted that the following charges have been levelled
against this accused viz Charge Nos. 1, 6, 8, 9, 11, 12, 13, 14, 15, 16;
17. Out of these charges, Charge Nos.2, 4, 6, 9 and 15 are in respett
of the offence punishable under the Prevention of Corruptiott Act.

Charge Nos. 13 and 16 are for the offence punishable under section
409 of the Indian Penal Code.
Charge No.1 is
in respect of the
offence of conspiracy, punishable under section 120-B of the Indian
45
Penal code.
Mr. Kulkarni submitted that the sanction which was
accorded to prosecute the accused No.2 was bad in law. He submitted

that the said sanction is invalid. He submitted that the draft sanction
was not produced and, therefore, an adverse inference was liable to be
drawn.
He submitted that the documents on which reliance
was
placed by the prosecution were forwarded by the accused Nos. 1 & 8

and the accused No.4 had acted on it. He submitted that, therefore,
the sanction was accorded without any application of mind.
He
submitted that the co-signatory having been exonerated, the accused

No.2 also was liable to be acquitted. Thirdly, he submitted that even
if the evidence is accepted as it is, the offence under section 477-A and
409 was not made out. He also submitted that the offence punishable
under Prevention of Corruption Act also was not made out. He invited
my attention to the evidence of P.W.14, P.W.6, P.W.2.
He also
submitted that the accused No.2 was working in the backup

Department to record the transactions put through by
th
dealing
department and he was reporting to Vice President Mr. K.B. Shenoy.

He submitted that the job of accused No.2
was
to write down the
transactions put through by the dealing department based on the

instructions given by the dealers in the rough sheets. He was neither a
dealer nor had been bestowed with the powers or authority
to
buy,
sale or otherwise deal in shares or securities.
ACCUS ED N0.3 - B.R. ACHARYA:
23.
Ms. Jakhade,
the learned Counsel appearing on behalf of
accused No.3 made the following submissions:-
(i)
She
submitted
Management
Persons
that
were
the
Senior
neither
made
accused nor examined by the prosecution.
(ii)
She submitted that no injury was caused
to the public since no loss was caused to

Canfina and, m fact, Canfina had earned
handsum profit.
(iii)
She submitted that sections 403 and
405 were mutually exclusive and both these

sections could not go hand in hand .
She
submitted that the transactions were of civil

nature and, therefore, there
was
no criminal
liability attached to the said transactions.
(iv)
She submitted that no evidence has been
adduced to prove that there was a general

criminal conspiracy between all the accused
47
or between any of them. She submitted that
no complaint has been filed by the employer
viz. Canfina against the accused.
(v)
She submitted that the accused No.3 was
not a public setvant and, therefore, charges

under the Prevention of Corruption Act were
not attracted.
(vi)
She further submitted that the accused
No.3 was neither entrusted with the funds nor

had he any dominion over the said funds and,
therefore, section 409 of the Indian Penal
Code was not attracted.
(vii)
She submitted that, at the most, it
would be said that there was an irregularity

and therefore the provisions of the Indian
Penal Code and the Prevention of Corruption
Act were not attracted.
$t.JlJMISSIONS ON BEHALF
tit- ACCUSED N0.4 P J SUBBARAO:
-
24.
, .
Mr. Sawardekar, the learned Counsel appearirig on befuilf of the
accused No.4 made the following submissions:-
48
SANCTION
(i) He submitted that the sanction which was

given by P.W. 15 - G.A. Shenai suffers from
vice
of
non-application
submitted
that
the
of
mind.
charge-sheet,
He
in
its
entirety, was not placed before the authority

when the
sanction
order was
passed
on
04/03/1996. He invited my attention to the

evidence
of
P.W.15
G.A.
Shenai
and
submitted that from the deposition of the said

witness, it was obvious that his mind was
totally influenced by the Legal Department
into giving sanction.
JURISDICTION
(ii) He submitted that the prosecution was in

of
respect
10/10/1991,
five
transactions
22/10/1991,
dated
1 6/1/199.2,
7/2/1992 and 1 1/2/1992. He submitted that
all
these transactions had taken place prior to
06/06/1992 which was the date on which
th
Special Court Act was deemed to have come

into force.
He submitted that, therefore,
the
said transactions were beyond the jurisdictibn

of this Court.
- ------
49
OMISSION
ON
THE
PART
OF
TO
NAME
PROSECUTION
CERTAIN
PERSONS AS ACCUSED:
(iii)
He submitted that certain bankers who
had signed the documents which were the

subject matter of the prosecution were not
named as accused.
Ashok Kumar
prosecution.
One such Officer Shri
Kini has deposed
for the
Other Officers viz. S.M. Satish
and Anil Narichania were not prosecuted. No

explanation was given for the said omission.
He submitted, therefore, that charge under
section 120B could not be attracted since the
persons who were similarly situated were not
prosecuted.
CHARGE
UNDER
PREVENTION
OF
COAAUPTION ACT IS NOT ATTRACTED:
(iv) He then submitted that the charge under
section 13(1) (c) and 1 3 (2) of the Prevention
of Corruption Act was not attracted to the
accused No.4 since he was
Canbank Mutual Fund which
an
employee of
was
admittedl
a trust and, therefore, as an employee
oi
CBMF, the accused No.4 was not a publl

servant. In support of the said submissions
ile
relied upon the judgment of the Supreme

Court in
Canara Bank & Ors Vs. National
---
--
50
Thermal Power CoIJ>. & Anr. reported in
c2001) i sec 43.
He then invited my
attention to the evidence of P.W. 1 6 - S.R.

Ramaraj, P.W. 14 - K.N. Karnath and P.W.9 T. Ravi and submitted that no case has been
made out "Qy the prosecution against the

accused No.4. He further submitted that the
questions were asked to accused No.4 under
section 3 1 3 of the Criminal Procedure Code
and his
comments were
invited
on the
documents marked as X-1, X-2, X- 1 1 , X-15

and X-16. He submitted that these documents
were not proved and hence did not constitute
evidence and could not be relied upon as
evidence against the accused No.4. He relied
upon the following judgments:-
(1) Sait Tarajee Khimchand V/s Yelamarti

Satyarn - AIR 1971 SC 1865.
(2) Narbada Devi Gupta V/s Birendar
Kumar Jaiswal - 2003(8) SCC 745
(3) Dhafa.pldas Lilaram V/s Emperor
AIR
1932 Sind 169.

(4) Santosh Kumar and others Vs. The King
- AIR (39) 1952 calcutta 193.
(5) Chandrika Prasad V/s. Emperor -
AIR 1930 Oudh 324

(6)Rasul
Mohd.
V/s.
The
State
of
51
Maharashtra-AIR 1972 SC 521.
(7)
Ramaswami Nadar V/s. The State of

Madras - AIR 1958 SC 56
He also invited my attention to the provisions of section 403, 405 and

submitted that the ingredients of these offences were not established
by the prosecution so far as accused No.4 is concerned.
ACCUSED N0.5 IDTEN P. DAIAL:
25.
Mr. Kale, the learned Counsel appearing on behalf of accused
No.5 submitted that the defence taken by the accused No.5 was not
an
afterthought since he had already given
an
explanation and notice
was issued under section 91 of the Criminal Procedure Code.
He
further submitted that the information which was furnished had been
corroborated by the respective replies by the other persons involved in
the transaction. He thirdly submitted that no investigation has been
carried out to find out whether the explanation which was given by
the accused No.5 was false.
He further invited my attention to the
notice which was given to the Corporation Bank being Exhibit A-5(4)
and the Credit Voucher dated 16/01/1992.
He also invited my
attention to the notice given to the Andhra Bank at Exhibit A-5 (2) and
the reply given by the Canfina at Exhibit-A-5(1) confirming what was
52
said by the accused No.5. He submitted that the Canfina has, in fact,
paid that amount on 16/01/1992.
He submitted that the accused
No.5 was involved by the prosecution in Charge Nos. 1, 9, 10, 11, 22,
23, 39 and 40.
He invited my attention to the statements of P.W.2,
P.W.4, P.W.9, P.W. 12 and P.W. 13. He submitted that the statement
of these witnesses cannot establish the case of the prosecution.
He
invited my attention to the various documents such as Cheque No.

587664,
Exhibit-106,
Exhlbit-51
and
Exhlbit-52.
He
has
also
commented on the statement of P.W. 1 2 and submitted that the

evidence given by
accused No.5 with
this
witness does
the commission of
not
in any way connect the
the alleged offence.
He further
submitted that the adverse inference was liable to be drawn on

account of the non-examination of
the witnesses p articularly
respect of the evidence to establish the agreement.
He relied upon
the following judgments of the Apex Court:-
(1) S.P. Bhatnagar Vs. State of Maharashtra -
AIR 1979 SC 826
(2) Sharad V/s. State of Maharashtra
AIR 1934 sec 1622

(3)
Lieu tenant Hector Thomas
Emperor -
in
Huntley V/s.
AIR (31) 1944 Federal Court 66
53
He has also tendered written submissions. In a nutshell his arguments

can be summarized as under:-
(a)
In respect of the charge of conspiracy, he
submitted that the charge, as framed, does not

arise out of the charge-sheet filed in the Court
and, therefore, the charge was unsustainable
in law.
He submitted that the charge was
silent as to which part of the conspiracy was

invoked by the prosecution in respect of the
alleged offence. He submitted that the charge,
even on the basis of the evidence led by the
prosecution, falls to the ground as no evidence
has been ld in support of the prosecution
case.
He the n submitted that so far as charge
Nos. 9th and 11th are concerned, accused
No.5 was not in any way connected which

could be seen from the evidence of witnesses.
He further submitted that the charge Nos.
22ndly and 23rdly are based on the allegation
that the accused No.4 was instrumental in
ma.king payment to the accused No.5 and
this
was falsified by the evidence of P.W. 9.
(b)
He submitted that the prosecution has not
examined the witnesses from CBMF who were
L.
------
54
signatories of Exhibit-51 who could have been
deposed about the payment of 16/01/1 992
which would have established the innocence
of accused No.5.
(c)
is
He submitted that so far as accused No.5

concerned,
16/01/1992.
the
only
relevant
date
was
He submitted that the defence
of the accused No.5 is that on 15/01/1992, at

the instance of CBMF, he had issued a cheque
of Rs 5 crores favouring Corporation Bank by
way of accommodation
and
that the said
amount was returned on 16/01/1992 and that

he did not receive any amount from Canfina.
(d)
He submitted that none of the documents
on which reliance has been placed by the

prosecution establish their case.
oral
evidence
None of the
which is brought on record
supports the prosecution case.
He further
submitted the reliance has been placed by the

prose cu tion on the judgment of the
Court
in
Maruti's
case
but
it
Apex
can
be
distinguished in the facts and circumstances of

this case.
55
Further detailed submissions of Mr. Kale will be discussed at the

appropriate stage.
ACCUSED NO. 6 SJ{. JHAVERI
-
26.
No.6
Mr. Sh.ah, the learned Counsel appearing on behalf of accused

-
S.K. Jhaveri, submitted that the accused No.6 was concerned
with charge Nos.1, 19, 32, 35, 37 and 38. He submitted that so far as
the first transaction is concerned dated 10/10/1991, none of the
witnesses had named the accused No.6
attention to the statement of P.W.9.
S.K. Jhaveri. He invited my
He further submitted that Anil
Narichania, who was the co-accused at the relevant point of time, was
later on dropped as an accused and he was also not examined by the
prosecution.
He submitted that even if the prosecution case is taken
as it is, it would establish that the accused No.6 had no way of

knowing that the amount belonged to Canfina. He submitted that the
P.W.9 in his statement has categorically admitted that he had never
informed the accused No.6 - S.K. Jhaveri.
attention
to
the
statement
Investigating Officer.
of accused
He also invited my
No.11
and
P.W.19
He invited my attention to the documents at
Exhibit A-6(5) & Exhibit A-6(6).
He also pointed out that the
56
documents at Exhibit A-6(18) clearly established that a substantial
payment was made by the accused No.6 to Canbank after 1 1/10/1991
and
this
was not in consonance with the conduct of the person who
wanted to misappropriate the amounts from Canfina or Canbank. In a

nut shell he submitted as under:-
(a) The evidence adduced by the prosecution

did not disclose the criminal conspiracy.
(b)
There was no evidence to indicate that
the accused No.6 had knowledge that money

belonged to CBMF
(c)
There was no evidence to indicate that
the accused No.6 induced any bank official to

issue cheque of Rs 8. 99 crores.
(d)
There was nothing to indicate that there
was any deficiency in the bank account on
11/10/1991
(e)
The documentary evidence which was
brought on record by the prosecution clearly

indicated that it was a regular transaction
and that, in fact, he never had any direct
connection with the Bank and that Pallav
57
Seth - accused No.7 was dealing with the
Canbank.
The evidence clearly indicated that
(f)
there were regular transactions with accused

Nos.
and
connected
10
and he was
with
the
in no way
transaction
dated
10/10/1991.
(g)
He also invited my attention to the
statement
of
P.W.18
Assistant with Ws
invited
my
was
Accounts
Harackchand.
He also
attention
Exhibit A-6(8),
who
to
Exhibit A-9(1),
Exhibit A-9(4),
9(16) . and Exhibit A- 6(1).
Exhibit a-
He submitted that
all these documentary evidence as also the

oral evidence could not establish the case of
the prosecution.
(h)
He further invited my attention to the
statement of P.W.7 wherein he has stated
that the shares belonging to S.K. Jhaveri were

handed over to Canfina worth about Rs 12
crores and the suit was filed by accused No.6
for recovery of the said amount which was
pending in this Court.
(i)
He submitted th.at in respect of the first
58
charge of conspiracy there was no evidence

regarding involvement of accused No.6.
He
relied upon the judgment of the Apex Court

in Ram Nath Mad.hoprasad and otbers vs.
State of Madhya Pradesh reported in
1953
SC 420 and in Pandurang. and otbers Vs.

State of Hyderabad reported in AIR 1955 SC
216.
He submitted that the charge for the
offence under section 409 and 403
was
not
established. He relied upon the judgment of

the Apex Court in
Ramaswamy Nadar Vs.
The St;ate of Madras reported in 1958 SC 56

U. Dhar and another Vs. State of
and in
Jharkhand and others reported in AIR 2003

SC 974.
ACCUSED N0.7 PALIAV SETH:
-
27.
Mr. Purandhare, the learned Counsel appearing on behalf of
accused No.7 submitted that the prosecution had not examined

certain witnesses and also had not produced relevant documents viz.
Stock Register and the Register regarding movement of shares in the
Department. He submitted that, therefore, the adverse inference
was
liable to be drawn for non examination of the relevant witnesses and
59
for non production of material documents. He invited my attention to
the evidence of P.W.6 K. Ashok Kumar Kini, P.W. 13
Omprakash,
P.W.7, P.W. 9 and P.W.8. He submitted that the evidence which was
brought on record did not indicate in any manner that the accused
No. 7 was in any way involved with the alleged offence. In a nutshell,
he submits as under:-
(a)
An adverse inference was liable to be
drawn against the prosecution.
(b)
There
substantial
was
contradictions
in
the
internal
depositions
of the
witnesses of the prosecution.
(c)
There were substantial transactions
between f'
..anfina, Canbanl< and the brokers
and thee were as many as 300 transactions
in respect of Canbank.
(d)
The
books
of accounts
were
not
properly maintained.
(e)
The charge of conspiracy has not been
established against the accused No. 7.
60
SUBMISSIONS ON Bf!.HALF OF
ACCUSED N0.8 - M.K. ASHOK KUMAR
28.
Mr. Amit Desai, the learned Counsel appearing on behalf of the
accused No. 8 - M.K. Ashok Kumar,
submitted that the charge No.1,
24, 25, 27, 29 and 30 were framed again.st accused No.8.
He
submitted that, at the stage of final arguments, the prosecution had

made a statement that they were not pursuing charges in respect of
transactions dated 7/9/1992 and 1 1/9/1992. He invited my attention
to the statement of witnesses on which reliance was placed by the
prosecution viz. P.W.2, P.W.6, P.W.7, P.W. 17 as also the relevant
documents on which reliance was placed by the prosecution.
nutshell, he submitted as under:-
(a) An adverse inference was liable to be drawn

against the prosecution for not examining Mr.
Joseph
D1souza
who
Manager of CBMF.
was
the
He submitted
Divisional
that the
prosecution made an attempt to show that such

person, in fact, did not exist.
(b)
There was no material against accused
No.8.
The documents on which reliance was
In a
61
placed by the prosecution in support of the
charge, did not establish that the accused No.8
was involved in the commission of the offence.
(c)
None of the documents on which reliance
was placed,
w
as
either signed by the accused
No.8 or had his initials.
(d)
It was urged that no witness had given any
incriminating
evidence
against
the
accused
No.8.
(e)
There was neither direct nor indirect or
circumstantial
evidence
against
the
accused
No.8 in respect of any of the charges.
(f)
The only circumstance against the accused
No.8 was he was Chief Dealer of Canfina at the

relevant time.
He made his detailed submissions in respect of the evidence and

documents on record which would be considered at the relevant stage.
The learned Counsel relied on number of judgments of the Apex Court
which will be dealt with at the relevant stage.
1
62
ACCUSED N0.9 - KETAN V. PAREKH &:
ACCUSED N0.10 - NAVINCHANDRA N. PAREKH
29.
Mr. Mahesh Jethmalani, the learned Counsel appeanng on
behalf of accused Nos. 9 and 10 invited my attention to the FlR and

the charge-sheet. He submitted that the accused Nos. 9 and 10 were
involved only in one transaction, namely, dated 10/10/1991.
He
submitted that accused Nos. 9 and 10 had purchased 5 lakhs shares of

R1L from accused No.6 - S.K. Jhaveri. He submitted that these accused
Nos. 9 and 10 were said to have been committed offences mentioned

in charge Nos. 1, 20, 21, 31, 32 and 33.
He invited my attention to
the evidence of P.W.l, P.W. 2 P.W.7, P.W.16 and P.W.18.
He also
invited my attention to the statement of P.W.19 - Investigating Officer.

He invited my attention to the documents at Exhibits A-9(3), A-9(4),
A-9(8), A-9(9), A-9(10), A- 9(11), A-9(12) and A-9(13).
He also
invited my attention to the the deposition of defence witness Manish

Thakkar at Exhibit A-9(1). He further submitted that in response to
the notice which was is.sued under section 91 of the Criminal
Procedure Code, accused Nos. 9 and 10 had already given an
explanation. He submitted that the Investigating Officer had not taken
into consideration the explanation which was given by these accused
63
and did not take any steps to verify whether the explanation was
correct or not. He submitted that no case therefore is made out by the
prosecution against these accused.
ACCUSED N0.11 - B.V. SRINIVASAN:
30.
The learned Counsel appearing on behalf of accused No.11
Srinivasan, submitted that the accused No.1 1 was the Junior
B.V.
Officer
and was Fund Manager of Canbonus Fund of Canbank Mutual Fund.

He submitted that
the
accused No.11 was subject to dayto-day
superintendence and direction and control of accused No.3 - B.
Achacya and also Assistant General Manager, Divisional Manager etc.

He submitted that the
accused No.11 was merely one
of the signatories
along with the General Manager B.R. Acharya - accused No.3 for the
operation of the Current Account of the Canbonus Fund. He submitted
th.at since there were no clear cut duties and responsibilities specified
by the
Management,
investment decisions
the Fund
and
Managers were
not taking
any
they were merely doing accounting work of
the fund i.e bringing the transactions into books of accounts as per
bank entries, receipts and payments.
No.11,
while issuing
crores dated
He submitted that the accused
cheque for
10/10/1991
which are
Rs 8. 99 crores and Rs. 8.30

at
Exhibits
14
and
15,
64
had merely adhered to the instructions given by accused No.3

Acharya.
B.R.
He submitted that accused No.3 - B.IL Acharya had
instructed him to issue the said two cheques on 9/10/1991 itself and
these cheques were signed by the accused No.3 as signatory No.1 and
accused No.11 has sign.ed
as
the other signatory for current account
operation. He submitted that the accused No.3 had neither given any
information nor details of the
transactions.
He submitted that the
attendance register indicated that B.R. Acharya
was
not in Mumbai on
10/10/1991. He submitted that, therefore, accused No.11 had acted

merely on instructions of accused No.3.
He further invited my
attention to the statement of P.W.19 - Investigating Officer.
He
submitted that the I.O. had admitted in his cross-examination that the
name of accused No.11 was not mentioned in the FIR.
He also
admitted that during investigation, it transpired that the accused No.3

had given instructions on 9/10/1991 to accused No.1 1 to prepare two
cheques dated 10/10/1991 and one cheque was given to accused No.9
and other cheque was given to accused No.7, being the representative
of accused No.6. He submitted that this fact was confirmed by P.W.9 -
T.Ravi when the entries in the attendance register were shown to him.
He submitted that, therefore, the accused No.11 had acted in good
faith and had carried out the instructions of the higher authorities i.e.
65
accused No.3 and that the accused No.11 had no freedom of choice or
authority to question the bonafides of accused No.3.
FINDINGS AND CONCLUSION:
31.
After having perused the oral and documentary evidence on
record, in my view, prosecution has proved beyond reasonable doubt

the charges against accused Nos. 1, 8, 3, 5, 6, 7, 9 & 10. However, it
has failed to establish charges levelled against accused Nos. 2, 4 & 11

for the following reasons set out hereinafter.
32.
Between 01/04/1991 to 06/06/1992, it was noticed by the
Government that there were large scale irregularities in banking

transactions
and funds of Public Sector Undertakings which were
invested in Nationalized and other Banks were siphoned off for the
purpose of dealing in public securities and these. huge amounts which
were utilized for the purchase of public securities were not backed up
by any physical securities or other collateral securities such a.S BR, SGL
etc.
Soon, thereafter, the scam broke out and the investigation was
made and a report was submitted by a Committee which is popularly

known
as
Jankiranian
Committee, which
disclosed
large
scale
66
irregularities which were committed by Public Sector Undertakings,
Mutual Funds, Nationalized Banks with the help of brokers.
The
investigation was made by the Central Bureau of Investigation (CBJ)

and criminal complaints were re.gistered against various persons.
In
the present case, complaint was lodged on 1/6/1994 at 15.00 hours

and, in the complaint 1 1 persons were shown as accused viz (1) Shri
S. Mohan, Assistant Vice President, Canfina Bangalore, (2) Shri N.
Balasubramaniam, Assistant Vice President, Can.fina, Bangalore, (3)
Shri B.R. Acharya, General Manager, Canbank Mutual Fund, Bombay,
(4) Shri Anil Narichania, Chief Dealer, Canbank Mutual Fund,
Bombay, (5)
Shri B.S Subba Rao, Assis tant General Manager, Canbank
Mutual Fund, Bombay, (6) M/s Narbharam Harakchand, Share &

Stock Broker, Bombay, (7) Shri Hiten P. Dalal, Share & Stock Broker,
Bom,bay, (8) Shri S.K. Jhaveri, Share & Stock Broker, Bombay, (9) Shri
Pallav Seth, Share & Stock Broker, Bombay (10) Shri Manubhai
Maneklal, Share & Stock Broker, Bombay and (11) Shri R. Venugopal,
Officer, Canara Bank, F & I Section, Bombay. In the said complaint, it
was alleged that all the accused and other stock brokers of Bombay
had entered
into
crirnin.al
conspiracy
and
had
siphoned
off Rs
47, 70,68,200/- and that the said amount was returned back without
interest illegally. In the complaint, details of these five transactions
67
have been mentioned and the refund alongwith interest
indicated.
was
also
It was alleged that certain amounts were paid to Pallav
Seth, though, at that time, he owed several crores of rupees to Canfina

and, in the said process, Canfina suffered a loss of Rs 3,12,58,715.76
and interest with effect from 2/4/1992 till filing of the complaint.
33.
The charge-sheet was filed on 24/9/1996 and, out of the
accused mentioned in the FIR, the name of Shri R. Venugopal was

dropped.
Shri Manubhai Maniklal had expired by that time and,
therefore,
his
name
was
also
dropped
Similarly, though the charge-sheet was
from
the
charge-sheet.
filed against Shri Anil
Narichania and Shri Vinaychandra N. Parekh, their names were also

dropped.
The sanction to prosecute was granted by K.N. Karnath,
Chairman and Managing Director of Canbank Financial Services Ltd

vide letter No.2477:NR:96 dated 23/2/1996 for the prosecution of N.
Balasubramaniam - accused No.2.
Shri G.A. Shenai, Chief Executive
Officer Canbank Mutual Fund, accorded sanct.ion to prosecute PJ.

Subbarao - accused No.4 vide letter No.CMF/P & A/011/96 K.J. dated
4/3/1996. Shri S. Mohan - accused No.1 and S.hri M.K. Ashok Kumar
- accused No.8 were removed from service during investigation.
Similarly, Shri B.R. Acharya - accused No.3 and Shri B.V. Srinivasan -
.____
68
accused No.11 had left the service during the course of investigation.
34.
The case of the prosecution, therefore, is that the funds of
Canfina were diverted in five different transactions as shown below:-
Sr.No.
Date
Scheme
Diverted to
Can bonus
Accused No.9 and
Can cl.go
Accused Nos. 6 and

7 B.O.A.
Amount
17.29 crores
1.
10.10.1991
2.
22.10.1991
12 crores
3.
16.01.1992
5 crores
4.
07.021992
5 crores
Can cigo
10, accused No.6.

B.0.1.
Accused No.5
Andhra Bank
Late
Manubhai
Maniklal
5.
11.021992
7 crores
Manubhai
Late
Maniklal
and thereafter the funds were returned back th.rough illegal means.
The amount was received from Canara Bank "F11 & "I" Section to the
tune of Rs 53,77,82,500/-.
Thus the amount was remitted in the
following manner and excess amount was received.
Principal
(Rs)
Particular.i
Amount&2nronriated
(Rs.)
17,29,00,000
Ril.
17,29,00,000
12,00,00,000
14% NCD
12,96,46,000
17,00,00,000
14%NCD
17,45,22,200
47.70,68,200
Amount received from

Canara Bank F & I
Section, Bombay
Excess received
53,77,82,500
6,07,14,300
69
Out of these amounts,
the
following amounts were paid to the four
accused:-
35.
S. K Jhaveri
Narbharam Haracl<dumd
Hi.ten P. Dalal
Rs.
Manubhai Maneklal
Rs.
11,25,638.50
Rs.
3,15,05,231.19
Rs.
1,56,01,6 10.41
Rs.
1,31,91 ,246.04
15,86,736.24
During the course of arguments, the learned Public Prosecutor
Mr. V.G. Pradhan made a statement that he was not pressing charges
in respect of transactions dated 7/2/1992 and 11/2/1992 in respect of
remittance of Rs 5 crores and Rs 7 crores from Canfina to late
Manubhai Maneklal.
Hence, we are concerned with only three
transactions of remittances viz dated 10/10/1 991, 22/2/1991 and
16/01/1992 and reversal to the tune of Rs 53,77,82,500/-.
36 .
Before I deal with the evidence on record and consider the rival
submissions, it is essential to take into consideration the organizational

set up of the three financial institutions viz
Services, Bangalore (Canfina),
(CBMF) and
to
briefly
(c)
Canbank
consider
the
(F
(b)
(a)
Canbank Financial
Canban.k Mutual Fund, Bombay
& I Section), Bombay. It is also necessary
manner
in which
transactions of sale and purchase of securities.
Canfina
entered
into
70
37.
Qmfina
on business
is 100% subsidiary of Canbank.

of leasing,
higher purchase
Canfina was carrying
and
merchant banking
activities. As a part of merchant banking activities, Canfina made

investments in stocks and also in the secondary market i.e sale and
purchase of shares.
P.W.5 in his evidence
has
stated that he joined
Canara Bank in December, 1971 and in November, 1992 he was

deputed to Canfina as an Assistant Vice President and he
has brought
on record Memorandum and Articles of Association and the
marked at Exhibit-57.
Act and
clause 20 of
same are
Canfina is registered under the Companies
the
Articles/Memorandum of Association,
authorized Canfina to m.ake investtnents in unit Government and other

securities, including shares. Under clause 21 Canfina was empowered
to lend, advance money with or without security.
However, by virtue
of the said clause, it was prohibited from doing any business of

banking as defined in the Banking Regulations Act.
Canfina has its
local Office in Mumbai and also has its accounts in Canara Bank,
Mumbai. (Emphasis supplied).
38.
Accused No 1 - S. Mohan was Assistant Vice President and was

.
working at the registered Office of Cafina at Bangalore. Accused No.8
71
- M.K. Ashok Kumar was Executive Vice President, working in the

same Office and accused No.2
N. Balasubramaniam was Assistant
Vice President working in the back-up department of the same Office.

P.W.2
Mr. B.N. Srikantha has said so in
has also stated that

No.1
his evidence
in para 6. He
accused No.8 - M.K. Ashok Kumar and accused
S. Mohan were authorized to buy and sale securities on behalf
of Canfina.
39.
Canbank Mutual Fund (CBMF) is a trust and it was authorized
to make investments in shares and also lend money and make

advances and it had accounts in Tamarind Lane Branch of Canara
Bank, Bombay.
trustees
Clause 15 (iii) of the Trust Deed empowered the
(a) to acquire, hold, manage, trade and dispose off shares and
debentures & (b) borrow or otherwise raise money with or without
securities subject to the limits as may be decided by the Trustees.
athara Bank is a nationalized Bank and it is a main trustee of CBMF
40.
All the scheduled banks which are nationalized or otherwise
were regulated through the directions issued by the RBl from time to
time and these directions were issued under section 21 and 35A of the
Ban.king Regulations Act.
.
72
PROSEClITION WITNESSF.S:
41.
Prosecution has examined in all 19 witnesses. Out of these 19
witnesses, P.W. 1 Ms. Virakthi Sudhakar Hegde (Exhibit-13), P.W. 7
Mr. M. Papa Rao (Exhibit-71), P.W. 9 Mr. Ravi Tirumalai (Exhibit101), P.W. 15
Mr. Gurpur Anantharama Shenai (E:xhibit-128) and
P.W.16 - Mr. S. Rakraj (Exhibit-130) are all Canbank witnesses.
P.W.
2 - Mr.
B.N.
Srikantha (Exhibit- 16), P.W. 5
- Mr.
Jarugumilli Rabindra Nath (Exhibit-56), P.W. 6 - Mr. K. Ashok Kumar
Kini (Exhibit-SS), P.W. 1 3 - Mr. Omprakash Kuckian (Ex.h.ibit- 123)

P.W. 14
&
Mr. K. Narasimha Karnath (Exhibit-126) are witnesses from
Canfina.
P.W. 3 - Mrs. Shaila Madhukar (Exhibit-35) and P.W. 8 - Mr.
Pronob Ray (Exhibit-75), both were working in Bank of America.
P.W. 4
Mr. Ajay Kumar Nagendranath Kar (Exhibit-49) is a
witness who was working in the Tamarind Lane Branch of Canara

Bank.
P.W. 10- Mr. Dilip Jagmohandas Ummergaonwala (Exhibit- 110)
and P.W. 11
Mr. Kishore Mahadeo Ajgaonkar (Exhibit-114) were
working in the Stock Exchange Branch of Bank of India.

P.W. 12 - Mr. Vasanth Kumar Damaraju (Exhibit- 188) was
73
working with the Andhra Bank,
Fort Branch.
P.W. 1 7 - Mr. Yogesh Ramesh Bhambardekar (Exhibit-136) was

working with the Bombay Stock Exchange.
P.W. 18 - Mr. Mukesh Joshi (Exhibit-144) was working a

Accounts Assistant with M/s Narbheram Harakchand.
P.W. 19 - Shiva Shan.kar Jha (Exhibit- 145) was the Investigating
Officer who investigated the said complaint.
DEFENCE WITNF.SSF.S:
On behalf of defence, three witnesses have been examined viz.
42.
(1) D.W. A-6(1) - Nishit Rasiklal Joshi [Exhibit A-6(9)] who was
working as accountant with
Shrenikbhai Jhaveri
accused No.6,
(2) D.W. A- 7( 1) - Surendran Nair [Exhibit A-7(7)], who was working

in the Administrative Department of Nahar Group of Companies in its
Mumbai
Office
and its Head Office was situated at Ludhiana and
(3) DW A-9( 1 ) - Mani.sh Mahendra Thakkar [Exhibit A-9(14)], who

was
share
Harakchand.
sub-broker
and was
employed
with
Mls
Narbheram
His work involved delivery of contracts and shares and
he was handling institutions business.
43.
Prosecution,
--
---
in
order to establish its case
has
not been m a
74
position to bring on record any direct evidence in respect of the
alleged criminal conspiracy hatched between the accused.
It has,
however, attempted to prove the charge of criminal conspiracy by

trying to bring on record movement of funds from Canfina to Canbank
Mutual Fund (CBMF) and from there to the respective brokers and
again return of funds from the brokers to Canbank Mutual Fund
(CBMF) and, ultimately, to Canfina. Through the evidence of Canfina
employees, the prosecution has stated the manner in which the
purchase and sale of securities were made and the procedure that was
The prosecution has
followed in respect of keeping of record.
examined CBMF employees to show that they had received funds and
the documents to establish conspiracy have been brought on record.
Thereafter, the accounts of the individual brokers in various
ban.ks,
such as Bank of India, Bank of America, Andhra Bank etc. have been
brought on record to show that these amounts were credited in the
said accounts.
Correspondingly, the prosecution case is that though
the purchase or sale of securities
is
reflected
in Sauda Book, purchase
of these securities viz "RIV' & 1114% NCDs" on the relevant date on
which purchase was made has not figured
in Sauda Book and,
therefore, it has sought to argue that these transactions of purchase of

securities were fictitious and bogus transactions and the money, in
75
Further, it is argued that
fact, was siphoned off through brokers.
entries were made to show that there was a wrong remittance of that
particular amount, as reflected in the transaction
of each of the three
dates (because in respect of two transactions i.e of Rs 5 crores and Rs
7 crores, charges have not been pressed by the prosecution) and these
documents were later on altered to show that the wrong remittance
was
repaid .
It
is
argued that, initially, it was shown in these
documents that wrog remittance was made to CBMF and, later on,
word "CBMF"
was
scored off.
It is argued
that
this was done to
suppress transfer of funds from CBMF to
the brokers and when the
amo.unt was repaid, it was not shown that
it was repaid by CBMF to
Canfina.
Prosecution has laboriously brought on record all these
documents to establish the link of travelling of funds from

from Canfina to
Point-B
Le. CBMF to
Point-A i.e.
Point-C i.e. brokers and Point-D
i.e. again re-flow of money to Canfina.
It is argued, therefore, that
without ensuring receipt in physical form of securities when purchases

were made, huge
amounts in crores of rupees were diverted. It
is
argued by the prosecution that accused No.1 - S.Mohan and accused

No.8 - M.K. Ashok Kumar were not authorized to deal in purchase and
sale
of securities
beyond
the particular
limit
and yet, without
authority, they had allegedly entered into the said transaction and,
76
therefore,
they had committed an offence of criminal breach of
trust
punishable under section 409 of I.P .C. and had misappropriated the
arno.unt and committed an offence punishable under section 403 of
I.P.C. and section 13(1) (c) read with section 13 (2) of the Prevention
of Corruption Act and, for that purpose,
had created
fabricated
documents and, there.fore, had committed an offence punishable under

section 477-A of I.P.C.
44.
In the present case, submission made by the learned counsel for
the accused that there is no direct or indirect evidence to show that

there was conspiracy to divert funds from Canfina to the brokers,
cannot be accepted.
It is well settled law that it is difficult to get
direct evidence in respect of ,conspiracy to commit an offence and in

case of circumstantial evidence the chain of circumstances has to be
estabfuhed which
present
case,
the
points
out
prosecution,
to
the guilt of the accused.
Jn the
inter alia, has successfully brought on
record all the documentary evidence to establish that Canfina is a

Company registered under Copanies Act but
it
is 100% subsidiary
Company of a Canara Bank which is a nationalized bank.
Though
article 21 of the Articles of Association permits Canfina to buy and sell

securities and or to lend money with or without security, by virtue of
77
the provisions of section 21 of the Banking Regulations Act and the
guide-lines laid down by the RBI from time to time which have
statutory force, it did not have the authority to lend money since this
c."Ould be done only by the bank withln the meaning of the provisions
of section 21 of the Banking Regulations Act and, admittedly, Canfina
was not a bank within the meaning of the said section. It has come in
evidence that CBMF
of Canfina.
P.W. 9
was
not purchasing or selling securities on behalf
has stated in
his evidence that CBMF was not
purchasing or selling securities on behalf of Canfina.

has not been challenged by any of the accused.
position,
there
was
This evidence
That being the
no question of remitting the various amounts
which were remitted in. different transactions to CBMF. CBMF, on the

other hand,
after having received money
from
Canfina which,
according to the vouchers which were prepared by their officials viz.

accused No.3 and 11 clearly indicated that the amount was wrongly
remitted from Canfina to CBMF and, in such cases, where there were
wrong remittances received, the
Canfina.
money had to be sent back to
The accused No.3, on the contrary, remitted the amount to
the brokers viz. accused Nos.5, 6, 7, 9 and 10. It has been brought on
record that on the very same day when the payment was made
from
Canfina to CBMF, either on the same day or one day before that,
78
cheques were prepared for
the same amount for being remitted in
favour of brokers viz. accused Nos. 5, 6, 7, 9 and 10 and the brokers,

in tum, on the same day, had made remittances to various parties
though the balance in their account was not sufficient.
This clearly
indicates that there was complete chain and all the accused had
knowledge that the amount would be remitted from Canfina and on
the same day the amount would be remitted from CBMF to the
brokers. The chain, therefore, is established from the various entries
which are made in the account of the respective brokers and the
vouchers were prepared by CBMF.
On the other hand, fictitious
entries in the Deal Pad were made and though physical securities and
Bank Receipts were n.ot obtained, the amount was remitted. No entry
was made in the Sauda Book. The vouchers which were prepared viz
Exhibit-178 etc. indicate that the amount

wrongly
was
shown to have been
remitted to CBMF and i.rutead of immediately remitting the
amount back to Can.fina,
this amount was sent to the brokers who
utilized the money and, thereafter, remitted the. amount back after it
was used for their own purposes. The theory of the accused that there
were regular transactions in respect of purchase and sale of securities,
therefore, falls to the ground and the case of the prosecution that
fictitious entries were made for the purpose of remitting the amount
79
by showing that there were ostensible purchase and sale transactions
stands established from the evidence which
record.
has
been brought on
This evidence dearly establishes that accused Nos. 1 and 8
had no authority to enter into transactions beyond the particular limit

yet, without obtaining sanction from the higher officers, they created
record showing the Deal Pad entries and remitted the amount to
CBMF. At that end i.e. at CBMF's end, accused Nos. 3 and 11 received
money, created vouchers to show that the amount is wrongly received
fro
Canfina
and yet paid
that amount to the brokers.
establishes that th.ere was no actual transaction.
lt
has
This
been argued
on behalf of the accued that there is no basis for the prosecution cae
that
all
transactions of purchase and sale of securities were entered in
the Sauda Book. Even assuming for the sake of arguments that this is
true , yet the vouchers which were prepared by the officials of CBMF
show that there was no such transaction, otherwise they would have
created a record to indicate that the amount was received for the
purchase of RlL and NCD securities. On the contrary, the vouchers
indicate that the amount was wrongly remitted to CBMF.
Coupled
with this fact, there is evidence on record to show that CBMF was not
dealing in purchase or sale of securities on behalf of Canfina.
If
Canfina wanted to purchase and sale securities it could have done so
,.
80
m its own right by contacting the brokers directly.
This further
establishes that there was a conspiracy, therefore, to use the officials

of the CBMF
as
conduit to siphon off the money from Canfina. The
offence of conspiracy,
established.
therefore, in my view has been clearly
The ratio of the judgment of the Apex Court in Ram
Narayan Popli Vs. CBI reported in (2003) 3 SCC 641, therefore, is

clearly applicable to the facts of the present case.
45.
Considering the evidence which is brought on record, in my
view, the prosecution has established flow of funds in the aforesaid

transactions viz dated 10/10/1991, 22/10/1 991 and 16/0 1/1992 and
reversal of funds back
46.
to
Canfina.
First, however, l would like to discuss the evidence which is on
record in respect of three transactions and the reversal transaction. I

will do so transaction-wise.
47.
However, before that, very briefly, I would
like
to discuss the
I
I
81
evidence which is brought on record, regarding the purchase of shares
by Chief Dealer and dealer of Canfina at Bangalore.
48.
P.W.
followed
6 has in his evidence stated the . procedure which is
in respect of
purchase transaction and sale transaction.
P.W. 6 was promoted as Executive Vice President in 1991.
He has
stated in his evidence that accused No.8 - M.K. Ashok Kumar was
authorized to undertake sale and purchase transactions in shares on
behalf of
Canfina
and
that
accused No.1 - S. Mohan was working
under accused No. 8 - M.K. Ashok Kumar.
He has stated that the
Board had delegated powers to M.K. Ashok Kumar - accused No.8.

Accused No. 1 - S. Mohan, however, was given limited powers under
the Portfolio Management Scheme of buying and selling securities and,
therefore,
he
had
no powers
to
undertake
sale
and
transactions in shares and securities on behalf of Canfina.

brought on record Exhibit-17-
purchase
He has
sanction note No. 726, Exhibit-18
which is minutes of the Board Meeting and Exhibit-19 which is the

office note dated 23.9.1991. In the Board Note - Exhibit 17, the Board
was asked to authorize accused No.8 - M.K Ashok Kumar to accept the
funds for investments upto the limit of 100 crores per client and under
clause 2, he was empowered to buy and sell securities on outright
82
basis upto Rs 50 crores per transaction, the total not exceeding Rs 300
crores per day for sale and purchase separately.
Under Exhibit-18
which are minutes of the Board Meeting dated 30/11/1991, powers

were delegated as recommended under Exhibit-17.
which is a office
By Exhlbit-19
note dated 23.9.1991, the Managing Director
recommended delegation of powers to M. IL Ashok Kumar - accused

No.8.
The recommendations were made by accused No.2 - N.
Balasubramaniam and KB. Shenoy with further recommendations by
Mr. P.N. Narayanrao who was the Executive Vice President. The office
note was also signed by the Managing Director Mr. A.P. Rao.
49.
In his
evidence
referred to as "A.K. Kini"
P.W.6
Mr.K.Ashok Kumari Kini(hereinafter
in order to avoid confusion as accused No.8 is
M.K.Ashok Kumar) has given details regarding the manner
in which
the purchase and sale transactions were made. In the transactions, dt.
10.1.91, 22.10.91 & 16.1.92 since we
are concerned
with purchase of
shares, I shall give details regarding the manner of purchase of shares

as stated by P.W. 6-A.K. Kini. In para 13,14 and 15 of
P.W. 6-A.K. Kini
his evidence
has deposed to the effect that "In case of purchase of
shares, the transactions were concluded by the chief dealer of Canfina

at Bangalore on telephone with the brokers. On conclusion of the deal,
-------.Ml
83
he would note it down in Sauda Book and the payment for those
purchases as and when
it is to be made it is decided upon by the Chief
dealer and he would give instructions on telephone to the Canara Bank

Branch in Bombay to make the payment on behalf of Canfina. While
instructing, he would also convey on telephone the IBA number. The
Chief dealer himself would write down the IBA number which is given
to
the Canara Bank Bombay, in the IBA Issue Register.
prepared by the Back office as per instructions.
The IBA is
JBA register would
contain IBA number, date, and the Canara Bank Branch name and the
amount.
the
On the basis of these details the back office would prepare
eque
favouring the Canara Bank Branch in Bangalore.
On the
basis of that cheque, the Canara Bank Branch would prepare JBA
which is generally taken delivery of by Funds Dept. of Canfina,
Bangalore and sent over to the Canara Branch
in Bombay. The Canara
Bank at Bangalore would debit the account of Canfina by the amount

of the cheuqe.
Jn so far as Canfina's own transaction of sale and
purchase, the averments are that the vouchers are prepared for sale
and purchase on the basis of Sauda book.
These vouchers
are
prepared at intervals and not on daily basis. In case of purchases and

sales on behalf of Portfolio clients are concerned, similar vouchers are
prepared by the
Bank Department of the Funds Departmen4
The
84
Vouchers would contain the nature of the security, quantum, purchase
or sale rate, the brokers name and the aggregate amount receivable or
payable.
In so far
as
Canfina's own transactions are concerned, the
vouchers are prepared in the Investment Department which was under

me and the vouchers would be signed by me. In so far
as
the portfolio
transactions are concerned, the vouchern are prepared by the Back-up

Department and signed by one of the Officials working in the Back-up
Department. The Cheque Issue Register is maintained by the Back-up
Department in the course of business of Canfina."
SO.
P.W.2 - B.N. Srikantha was working in the Funds Department of
Canfina.
He was maintaining the registers and clients register and
used to attend to the other bank work like preparing cheques. He
has
stated that accused No.8 - M. K. Ashok Kumar and accused No.1 - S.

Mohan were working
dealers in
Funds
Department.
He has stated
th.at the dealers used to make entry in the Deal Pad.
He has stated
as
that accused No.1 and accused No.8 used to give him Deal Pad and,
thereafter, P.W.2 used to take xerox copy of the relevant Deal Pad for
-
the purpose of making entry in their record and after taking out xerox
copy, the original Deal Pad was returned back to accuseq No.1 or
accused No.8.
85
51.
P.W. 1 -
Mrs. Virakth.i Sudhakar Hegde
has
stated in her
evidence that the Bankers of Canfina, Bangalore were Canara bank,

Cunningham Road Branch.
The cheque drawn by Canfina
in
case of
purchase of securities were in favour of Canara Bank, Cunningham

Road Branch, Bangalore. This was done by P.W.2 - B.N. Srikantha as
per the instructions of accused No.2 - N. Balasubramaniam on the
basis of IBA.
52.
P.W. 9 - Mr. Ravi Tirumalai has further stated that Can Bank
Mutual fund (CBMF) was a trust created by the Canara Bank which
was
the
principal trustee
and,
at
the
relevant
ti.me,
it
had
approximately 13 funds and which were used to be called as product

and there were different schemes, like CAN Shares, CAN Growth,
CANCIGO, CANGlLT etc.
This evidence establishes that money was entrusted to accused
Nos . 1 & 8 and a particular procedure was set up in case of purchase of
securities.
en PURCHASE OF RIL FOR RS 17.29 CRORES

FROM CBMF ON 10.10.1991 .
53.
ln order to prove the movement of funds from Canfina to the
86
tune of Rs 1 7.29 crores and the ultimate destination of these funds to

the various accounts of the brokers, the prosecution has examined
P.W.Nos. 1, 2, 4, 6, 10, 18 and 19.
P.W. 2 and 6 are from Canfina.
P.W. 4 is from Canara Bank, Tamarind Lane Branch, Mumbai, P.W.1 is

Canbank employee, P.W. 9 is also Canbank employee. P.W. 10 is an
employee of Bank of India, P.W. 18 is the Accounts Assistant of Stock
Broker Mis Narbheram Harakchand, P.W. 1 9 is the Investigating
Officer.
54.
P.W.2 in para 21 of his deposition has stated that accused No.l -
S. Mohan and accused N o.8 - M.K. Ashok Kumar were dealers in Funds
Department and they concluded the deal. He has stated that they used
to fulfill particulars in the Deal Pad. Accused No.1 made entry in his
handwriting in respect of purchase on 10/10/1991 for RIL for the
aggregate amount of Rs 1 7,29,00,000/- from CBMF. RIL indicates
Reliance 1ndustries Limited. It is indicated in the column made for
ready forward. (Rf) that a sum of Rs 8.99 crores is on RF basis for a

period of 15 days at the rate of 24%.
The entry further indicates that
the amount was re.mitted by IBA No.32100 for Rs 8 crores and IBA
No.32107 for Rs. 9,29,00,000/- from Canara Bank, Tamarind Lane
Branch, Bombay. The Deal Pad has been exhibited at Exhibit-59 The
87
prosecution has then relied on the evidence of P.W. 6 Mr. A.K. Kini.
P.W. 6 has also stated the same thing as has been stated by P.W.2. In
para 18 he
has
stated that
in
the IBA Issue Register No.1 there is an
entry with regard to IBA No. 32100 regarding Rs 8 crores issued on

Tamarind Lane Branch, Bombay.
The said entry is at Exhibit-39.
page 63, there is an entry in regard to IBA No.32107.

regarding the amount of Rs 9.29 crores,
again
Lane Branch Bombay. It is at Exhibit-40.
He
At
That entry is
issued on Tamarind
has
stated that though
these IBA numbers are same as are mentioned in Exhibit-59, the total
of the amount of these two IBAs is Rs 17 .29 crores, which is the
amount mentioned in Exhibit-59. (Emphasis supplied).
55 .
P. W. 6 in his evidence in para 12 has stated that the Sauda Book
was maintained by Chief Dealer

transactions were mentioned.
in
which the sale and purchase
In para 19, he has stated th.at Sauda
Book contained 170 pages and it was for the period from 27/05/1990
to 29/05/1992 and it contained entry with regard to sale and purchase
of shares and also other securities. Upon being shown entries on page
54, he
has
stated that the entries on that page were for the period
between 13/09/1991 and 4/1 1/1991

there were five entries
fro
nd in
respect of October 1991,
$enal Nos, 3 l to.
l Nos.
35.
These-
.l
..
88
entries were brought on record as Exhibit-60 colly.
He has further
stated that there was no entorwith regard toDeal Pad - Exhibit-59. In

the evidence of P.W.6, he has stated that the payment for those
purchases as and when it was to be made was decided upon by the
Chief Dealer and he .would give instructions on telephone to Canara
Bank Branch in Bombay to make payment on behalf of Canfina. He
would also convey on telephone IBA number.
The Chief Dealer
himself would write down the IBA number in the IBA Issue Register
which would contain IBA number, date,
the name of canara Bank,
Bombay and the amount. P.W. 2 has stated that dealer accused No.l
s. Mohan and accused No.8 - M. I<. Ashok Kumar used to give Deal
Pad to him and he would take xerox copy of the relevant Deal Pad for
the pu.rpose of making entry in the IBA Register.. He has stated that in
respeci of this transaction, th entry was on page 62 with regard to
IBA NQ._3 2100 regarding Rs 8 crores issued on Canara Bank, Tamarind
Lane Branch, Bombay. The said entry is at Exhibit-39 and in respect of
the balance amount on page 63, the entry is in regard to IBA No.32107
regarding amount of Rs 9.29 crores issued on Canara Bank, Tamarind
Lane.B ranch Bombay. The entry is at Exhibit-40 and the IBA numbers
are same as were mentioned in Exhibit-59. The total amount of
twp
JBAs was Rs i7.29 crores which was the amount mentioned in Deal
89
Pad - Exhibit-59 and both the entries in Exhibits-39 and 40 were in the
handwriting of accused No.1 - S. Mohan.
P.W. 2 has further stated
that the Back-up Office would prepare a cheque on the basis of these
details and, accordingly, a cheque
was
drawn in favour of ''Yourselves
IBA on Tamarind Lane, Bombay for a sum of Rs 8 crores.
It was
written by P.W.2 and signed by P.N. Narayanrao. The rubber stamp

indicated that the amount had been transferred
Branch of Canara Bank, Bombay.
to
Tamarind Lane
The said cheque is at Exhibit-21.
P.W.2 has further stated that he has prepared another cheque in his
own handwriting dated 10/10/1991 of Canara Bank, Bangalore,
drawn in favour of "Yourselves IBA on Tamarind Lane, Bombay", for a
sum of Rs 9,29,00,000/- and was signed by A.K. Kini.
The said
cheques at Exhibits-21 and 23 were deposited with Canara Bank

Cunningham Road Branch and entry in respect of the said cheque was
made in the statement of Current Account No. 26645 maintained by
the Canfina with Canara Bank, Cunningham Road Branch, Bangalore,
which is at Exhibit-162.
P.W. 2 has further stated th.at on the basis of
the cheque, Credit Slips were prepared by the Back- up Department

which were at Exhibits-22 and 24 respectively in respect of two
amounts.
Accordingly, the said two amounts were remitted by
Canfina for the credit of CBMF. (Emphasis supplied)
90
56.
From the above evidence, the prosecution has established that
the amount of Rs 17.29 crores was remitted by Canfina and was

credited in the account of CBMF. The prosecution has established the
remittance of Rs 17.29 crores from Canfina to CBMF in respect of the
first transaction dated 10/10/1991.
57.
After the said amount was remitted to CBMF, it has been
brought on record that the Canbank Mutual Fund had an account with
Canara Bank, Tamarind Lane Branch and transfer was made from one
Branch to another Branch by a telegraphic transfer or by mail transfer.
The head office of Canara Bank is situated at Bangalore.
58.
The Canara Bank, Tamarind Lane Branch, Mumbai received a
message on phone from the Head Office and it prepared Dummy Debit
Slip, Head Office Account dated 10/10/1991 for a sum of Rs 8 crores
and another Slip for a sum of Rs 9.29 crores and both these amounts
were credited in Account No. 3980 of Canara Bnk and debit slip was
brou ght on record by P.W. 4
Mr. Ajay Kumar Nagendranath Kar. It is
at Exhibit-54(1).
59.
P.W.9 - Mr. Ravi Tirumalai has deposed in his evidence that the
91
remittances of funds to CBMF from Canfin.a, Bangalore, were in the
form of IBA and the Canara Bank, Tamarind Lane Branch was the
banker.
Initially, IBA numbers used to be conveyed on telephone by
any .official from Canfina, Bangalore and, thereafter, the physical IBA
of the same number used to be received from Canfina, Bangalore and
from that they would learn about the transfer from Canfina, Bangalore
to ara Bank, TaJJ?.arind Lane Branch.
The details would then be
forwarded
effecting
in the
prescribed
form
for
credit
in funds
(Schemes) account and if the physical was not received, IBA number
would be mentioned in the prescribed form. He has further stated that
th.ere was an extension counter of Canara Bank in CBMF itself.
60.
P.W. 9 has then stated
that, normally, if the amount was
wrongly received, it would be sent back to the sender.
He has stated
that in this transaction there was deviation from this normal practice.
He
has
stated that ac:cused No. 1 1 - B.V. Srinivasan who was working
as Fund Manager, CBMF, instructed his Secretary P.W. 1
Ms virakthi
Hegde to prepare voucher. Accordingly, she prepared a voucher in

handwriting.
The voucher was in two parts.
het
The upper part was in
respect of debit entry and the lower part was in respect of credit entry.
This voucher
has
been produced at Exhibit-178 by P.W.19.
In the
92
upper part of the document, there is a mention of "Can bonus" and the
debit entry amount is Rs 1 7.29 crores.
Sundry Creditors
This amount was
debited to
others account. This was so done as the amount was
wrongly remitted to Canbank Mutual Fund, Bombay. This debit entry

made by P.W.1 as per instructions of Fund Manager Mr. B .V.
was
Srinivasan - accused No.11. The lower part of the document - Exhibit178 i.e. the credit part refers to the amount of Rs
credit to Bankers Tamarind Lane.
Cheques No.488905/906.
wrongly
re.paid."
remitted
In
this
17.29 crores being
There is also reference to two
There is an endorsement
to CBMF.
"as amount
Bombay by Ganfina Bangalore. now
endorsement
the
words
"remitted
to
Canfina
Bangalore" were scored off and the word "repaid11 was written. P.W.1
has stated that she
has
done
this
as
per the instructions of Mr. B.V.
Srinivasan - accused No.1 1 . (Emphasis supplied)
61.
Accused No.11 - B.V. Srinivasan, after giving instructions and
after preparation of voucher at
Exhibit- 178, prepared two cheques in
his own handwriting which are signed
by himself and another accused
is
dated
10/10/1991 for a sum of Rs 8,99,00,000/- bearing No.488905
issued
No.3
B.R.
Acharya,
Officer
of CBMF.
One
cheque
in favour of Mis S.K. Jhaveri and signed by accused No.11 - B.V.
93
Srinivasan and accused No.3 - B.R.. Acharya and another cheque dated
10/10/1 991 for a sum of Rs 8,30,00,000/- bearing No.488906 issued
in favour of Mis Narbheram Harakchand and signed by accused No. 1 1
and accused No.3.
and 1 5 respectively.
Both these cheques are on -record at Exhibits 14

The prosecution's case therefore, is
that on the
one hand accused No.11 had created false record to show
that the
amount was wrongly received from Canfina and credited to the

account of CBMF and, on the other hand, instead of remitting the
amount back to Canfina, the amount was given in two cheques to
accused Nos.6 and accused Nos. 9 & 10.
62.
Accused No.11 - B.V. Srinivasan
in his argument has submitted
that he had written those ch.euqes on the instructions of accused No.3B.R.. Acharya who was
his superior officer .and he was merely
implementing the directions given by accused No.3. Accused No.3, on

the other hand,
has taken different defence, which
will be considered
at the appropriate st.age.
63.
The prosecution
has exhibited a common attendance register
which was kept by CBMF at Exhibit-105

attendance of accused No.3
and entries
regarding
B.R. Acharya on 10th, 1 1 th and 12th
----
94
October, 1991 were brought on record at Exhibit- 105 (2) collectively.
This was shown to establish that accused No.3 - B.EL Acharya was not
in Mumbai but he w at Bangalore for official duty.
has been brought on record by P.W.9.
This document
The entries in respect of
attendance of accused No.11 - B.V. Srinivasan would show that he was

present on 10th, 11th and 12th October, 1991 and these entries are
marked at Exhibit 105(3) collectively.
This was shown to establish
that accused No.11 was present on the said dates.
64.
In order to establish that this amount was, in fact, deposited in
the account of Mis Narbheram Harakchand, the prosecution examined

P.W. 18 Mr. Mukesh Joshi (Exhibit-144). P.W. 18 has stated that M/s
Narbheram Harakchand was having account with the Bank of India,
Stock Exchange Branch and, at that time, accused No.9 - Ketan Parekh
and accused No. 10 - Navinchandra Parekh were the partners. He has
stated that he used to prepare cheques as per instructions of accused
No. 9 - Ketan Parekh.
The details were also given by him for
preparation of the cheques and he also used to give narration of the

transactions.
In respect of cheques received from other parties, they
used to be deposited in the firm account in the Bank of India, Stock

Exchange Branch by P.W. 18 or other staff members. He has stated
-- -
95
that cheque No.488906 dated 10/10/1 991 for Rs 8,30,00,000/- issued
in favour of M/s Narbheram Harak.chand is signed by the accused
No.11
B.V. Srinivasan and accused No.3 - B.Il Acharya of CBMF and
this cheque which is at Exhibit- 15 was deposited in the account of the

firm being account No. 14010.
slip for a sum
of
Rs
This was deposited by way of credit
8,56,06,450/- and, on the reverse side of the
credit slip, it is mentioned that Canara Bank Cheuqe at
Exhibit-15 for
an amount of Rs 8,30,00,000/- and second cheque No.488911 for Rs.

26,06,450.
The
The credit slip has been exhibited at Exhibit-1 1 1.
prosecution has, therefore, established that the cheque which was to

be remitted back to Canfina was, in fact, remitted to accused Nos. 9
and 10, the partners of Mis Narbheram Harakchand by the cheque
which
is
at Exhibit- 15 which was signed by accused No.11 - B.V.
Srinivasan and accused No.3 - B.R. Acharya. This credit slip has been
brciu ht on record by P.W. 10 - Dilip Jagmohandas Ummergaonwaia.

P.W. 10
has
hlc.h
also brought on record Exhibit-113 and 113 ( 1 ) w
refled:ed the credit entry in. respect

10/10/1991 for
of Mis
sum of Rs 8,56,06,450/- in the statement of accolitit
Narbheram
03/10/1 991
Branch.
of credit slip of Bank of India dated
Harakchand
bearing account No.14010
to 31/10/1991 with Bank of India,
from
Stock Exchange
96
65.
After
the
Navinchandra
said
amount was
received,
accused
No.
10
Parekh issued cheque of Bank of India bearing
No.577597 dated 10/10/1 991 for Rs 8,25,00,000/- in favour of S.I<.

Jhaveri - accused No.6. This cheque was signed by accused No.10 Navinchandra Parekh. This cheque is at Exhibit-1 12. The prosecution,
therefore has established that on the same day, : after having received
Rs
8,30,00,000/-,
accused
No.10
remitted
an
amount
of
Rs
8,25,00,000/- to accused No.6 - S.K. Jhaveri. Again, the statement of
account at Exhibit 113 and 113 (2) shows that accordingly debit entry
was made after the payment of Rs 8,25,00,000/- in the account of M/s
Prosecution case, therefore, is that the
Narbheram Harakchand.
accused No.10 - Navinchandra Parekh utilized the amount of Rs

8,30,00,000/- which was illegally received from Canara Bank though
there was no deal or transaction in respect of any security, much less
purchase or sale of 14o/o NCO.
Harakchand
which
is
at
In the account of Mis Narbheram
Exhlbit-113,
opening
balance
as
on
10/10/1991 was Rs 45,46,482.86 and dosing balance on that date

was Rs 1,62,21,932.86. These entries are exhibited at Exhibits 113(3)
and 1 1 3 (4) respectively.
97
66.
Out of the other cheue for Rs 17.29 crores which was received by
CBMF, again accused No.3 - B.R. Acharya and accused No.11 - B.V.
Srinivasan issued cheque bearing No.488905 dated 10/10/1991 for a
sum of Rs 8,99,00,000/- in favour of Mis S.K. Jhaveri which
was
signed by both the accused and which is at Exhibit- 14. This cheque
was deposited by accused No.6 - S.K. Jhaveri in his account No.19186
with Bank of India, Stock Exchange Branch, Mumbai by pay-in-slip of
Bank of India on the _same date. The pay-in-slip has been brought on
record by P.W. 1 1 - Mr. Kishore Mahadeo Ajgaonkar and is at Exhibit1 17 and the name and date of the cheque at Exhibit-14 tally with the
pay-in-slip at Exhibit- 117.
Prosecution has brought on record the
statement of account of accused No.6 - S.K. Jhaveri bearing account

No.19186 with Bank of India, Stock Exchange Branch, Mumbai and
this statement is at Exhibit-115 and the relevat entry in respect of
sum. of Rs 8,99,00,000/- dated 10/10/1991 is marked at Exhibit115 (1).
Further, the prosecution has brought on record a cheque
bearing No.370306 issued by accused No.6 - S.K. Jhaveri dated

09/10/1991
for Rs 24,75,65,324/-
in favour of
Stock Exchange
Clearing House which is at Exhibit-1 16. Prosecution case is that the

opening balance of the said account was Rs 9,31,86,600.97 which is at
Exhibit- 1 15 and the cheque in favour of Stock Exchange Clearing
98
House could be issued by accused No. 6 - SJ(_ Jhaveri only because
these two amount.s viz Rs 8.25 crores and 8.99 crores were credited
into his account. The case of the prosecution is that, therefore, though
accused No.6 - S.I<. Jhaveri had no transaction with Canfina or with
CBMF, these amounts were deposited in his account without any deal
or security transaction and these amounts were utilized by
other purposes.
him
for
Accu sed No.6 - S.K. Jhaveri in his defence has
submitted that he had sufficient amount in the Bank and that he had
several transactions with CBMF and Canfina.
This argument will be
considered at length i'.'-t the later stage

The prosecution has, therefore, established the illegal movement
of funds in respect of the first transaction at the instance of accused
Nos. 1 and 8 from Canfina to the account of CBMF and, thereafter, to
the account of accused Nos. 6,7,9 and 10 by creting false & fictitious
record.
(ll) PbRCHASE OF 14% NCDs FOR RS 12 CRORES
fRoM CBMF ON 22/10/1991

67.
Prosecution case is that the accused No.8 - M.K. Ashok Kumar
and accused No.1 - S. Mohan were working as dealers in Funds
99
Department and they were the persons who were concluding the deal
on behalf of Canfina.
Accused No.2 - N. Balasubramaniam made an
entry dated 22/10/1 991 in the Dealers Pad of Canfina, Bangalore

regarding the purchase of 12 crores 14o/o NCD from Mutual Fund at Rs
100/- for Rs 12 crores and also mentioned IBA No.321 5 1 in the said
Deal Pad.
This was to indicate that an amount of Rs 12 crores was
remitted by IBA No.3215 1 on Canara Bank, Tamarind Lane Branch,

Mumbai. P.W. 6 - A.K. Kini proved the said document and it is marked
as Exhibit- 61. The Deal Pad is in the hand writing of accused No.2 - N.
Balasubramaniam.
Prosecution case
is that, after the deal was
concluded, entries would be made in the Sauda Book and in cases

where deals which were not concluded, no entries were made in the
Sauda Book.
colly.
P.W. 6 has stated that the Sauda Book at Exhibit 60
did not contain any entry in regard
to transaction dated
22/10/1 991 for Rs 12 crores.
68.
The payment for these
purchases would be made by giving
instructions on telephone to Canara Bank Branch, Mumbai who are

instructed to make payment on behalf of Canfina.
When such
instructions were given to Canara Bank Branch in Mumbai, the Chief

Dealer would give instructions on telephone and he used to convey on
100
telephone IBA number and, thereafter, mention IBA number in the IBA
Issue Register. P.W.2 in his evidence
has stated that accused No.1 -
S.
Mohan and accused No.8 - M.K. Ashok Kumar used to give him Deal
Pad and, thereafter, P.W.2 used to take out xerox copy of the relevant
Deal Pad for the purpose of making entries in IBA Register.
In this
particulart case in respect of transaction of 22/10/1991 the relevant

entry is at Exhibit-41 which
has been made
in IBA Issue Book with
regard to IBA No.32151. The entry is in the handwriting of accused

No.1 - S. Mohan.
69.
Though the money was transferred on instructions which were
conveyed on telephone by informing the IBA number, it was necessary

to issue a cheque which would be sent to Canara Bank, Tamarind Lane
Branch, Bombay.
prepared
P.W. 2 in his evidence has stated that he had
a cheque dated 22/10/1991 of Canara Bank, Bangalore
drawn in favour of ''Yourselves IBA on Tamarind Lane, Bombay" for a

sum of Rs 12,00,00,000/- .
Kini.
The
rubber stamp
This cheque was signed by P.W. 6 - A.K.

indicated that
the
amount
has been
transferred to Canara Bank, Tamarind Lane Branch, Bombay.
This
cheque is brought on record by the prosecution and it is at Exhibit-25.

P. W. 19
has brought on record the statement of Current Account
101
No.26645 maintained by Canfina with Canara Bank, Cunningham
Road Branch, Bangalore and it is at Exhibit-162, which indicated that
the cheque
was
deposited with Canara Bank, Cunningham Road
Branch in Bangalore.
70.
P.W.2 in his evidence has stated th.at the credit slip would. be
prepared in the Back-up Department of Canfina Bangalore on the basis

of the cheque at Exhibit-25 and this was submitted to Canara Bank
Branch at Bangalore with IBA No.32151. The amount, therefore, of Rs
12 crores
was
officially remitted by Canfina to the credit of CBMF.
This credit slip filled-up by P.W.2 has been exhibited
as
Exhibit- 26.
Prosecution case is th.at, in fact, there was no deal by Canfina with

CBMF for transfer of Rs 12 crores.
71 .
P.W.4 in his evidence has stated that the transfer of money from
one Branch to another Branch was made by a telegraphic transfer or

by mail transfer.
He has stated that
on receiving the message on
telephone from the Head Office, Canara Bank Tamarind Lane Branch,
Mumbai prepared credit advise dated 22/10/1991 of Canara Bank
authorizing credit of Rs 12 crores to account No.3914 CBMF Cancigo .
On this credit advise Mr. Mani had put his initials. This credit advise is
102
at Exhibit 55(1). This Exhibit shows that an amount of Rs 12 crores

was credited to the account No.3 914 of CMF Cancigo. The statement
of
this account was marked for identification by the Investigating
Officer P.W.19 and was shown as X-18(1) to X-18(5).
72.
So. it has been established by the prosecution that the money
travelled from Canfina to Canbank Mutual Fund (CBMF). After the

amount
was
received by CBMF, in order to establish what happened
thereafter, the prosecution has examined P.W. 9

the CBMF, Mumbai.
Ravi Tirumalai of
He has stated in his evidence that the funds
which were remitted to CBMF were in the form of IBA and it was used
to be conveyed on telephone by any official from Canfina, Bangalore.
He
has further stated th.at the physical IBA of the same number used to
come from Canfina, Bangalore. He has stated that, after perusing IBA,
they used to leam about transfer of funds from Canfina, Bangalore
Canara Bank Tamarind Lane Branch. Depending upon
to
the scheme to
which it was addressed, it would be forwarded to the said funds for

effecting credit in funds (Schemes) account. He has further stated that
there was extension counter of Canara Bank in CBMF itself. (Emphasis
supplied).
103
73.
P.W. 9 has brought on record Exhibit- 104 which is the office
copy of the letter dated
22/10/1991 of Canbank Mutual Fund
addressed to the Mger Canara Bank, Tamarind Lane, Bombay.

Similarly, Canbank Mutual Fund also has addressed a letter to the
Manager, Canara Bank, Fort Market dated 25/10/1991 enclosing IBA
No.32151 dated 22/10/1991 for a sum or Rs 12,00,00,000/-.
said letter is at Exhibit- 103.
that the amount of Rs
The
Prosecution has. therefore. established
12.00.00.00Q/- which was remitted from
Canfina was received by CBMF. He has further stated that the voucher
dated 22/10/1991
was
prepared in the handwriting of one Mr. Rajesh
Pawar and it contained
two
portions; the upper portion
was
debit
portion and the lower portion was credit portion and below the
signature of Mr. Rajesh Pawar, P.W. 9 had signed since he had
checked it. He has stated that accused No.4 - P.J. Subbarao also had
signed the voucher for
Exhibit-102. P.W.9
giving his approval. This debit voucher
is at
has further stated that in the debit portion of the
voucher, it is mentioned that the amount of Rs 12 crores

received from Canfina's Account.
was wrongly
He has further stated that credit
portion of the document, however, showed that an amount of Rs 12

crores was paid to S.K. Jhaveri vide cheque No.587347
instructions of Canfina, Bangalore.
as
per the
He has further stated that, in
104
normal course if the amount was
wrongly
received by CBMF on
account of Cancigo's Current Account, it would have been remitted

back to Canfina. However, in the present case, instead of remitting the
amount to Canfina, the amount was paid to S.K. Jhaveri by cheque
No.587347.
He further stated that he did not personally know S.K.
Jhaveri though, he was one of the brokers dealing with CBMF. The
evidence of this witness establishes that though in the record of CBMF,
the amount was wrongly received by CBMF, instead of remitting back
the said amount, the money was paid
to
Exhibit 102 was signed by accused No.4
74.
S.K. Jhaveri. This voucher at

P.J. Subbarao.
P.W. 9 - Mr Ravi Tirumali has further stated that one day before
the transaction i.e. on 21/10/1991 Mr. B.R. Acharya - accused No.3
had asked him to prepare a cheque for Rs

Jhaveri.
12 crores favouring S.K.
He has stated that before the cheque was prepared, he has
asked B.R. Acharya the reason why the cheque was to be prepared in
favour of Jhaveri.
He has stated that B.R. Acharya told him that he
should prepare the cheque and bring it to him and, thereafter, he

would inform him about the nature of transaction. He has stated that
the cheque was prepared by him and he signed it and since the cheque
had
to
be signed by one more signatory, he took the cheque to Anil
105
Narichania and when he did so he was asked by
him about the nature
of transaction involved. P.W. 9 has then stated that he informed

what
was
told to
him by Mr. Acharya and, thereafter,
him
Anil Narichania
also signed the cheque. He then took the cheque to B.R. Acharya. The
cheque
was
in the handwriting of Rajesh Pawar.
stated that though the cheque
was
P.W. 9 has further
prepared on 21st, the date on the
cheque was put as 22/10/1991. The cheque is at Exhibit- 78. P.W.9

has, therefore, established that the cheque
prepared at the
was
instance of accused No.3 - B.R. Acharya.
75.
P.W.9 has further stated that on 22/10/1991 accused No.4 - PJ.
Subbarao informed P.W.9 that an amount of Rs 12
crores
had been
received from Canfina, Bangalore through IBA and it was meant for
Cancigo Scheme.
P.W. 9
has further stated that the common
attendance Register was kept for officers and staff by CBMF.
The
Register for the month of October, 1991 is brought on record at

Exhibit-105 and in which it is mentioned that on 22/10/1991 all the
officers
viz Mr. B'.R. Acharya - Accused No.3, Mr. PJ. Subbarao -
accused No.4 and Mr. Anil Narichania were present.
It has been
established by the prosecution that the accused No.6 - S.K. Jhaveri and
accused
No.7
Pallav
Seth
had
Joint
Account
bearing
106
No.047860111 with Bank of America, Mumbai.
76.
P.W. 8 - Mr. Pronab Ray has stated in his evidence that he was
working in the Accounts Department of Bank of America and that the

cheuqe dated 22/10/1991 of Canara Bank bearing No.587347 for a
sum of Rs 12 crores was issued in favour of S.K. Jhaveri at Exhibit-78
was deposited in the Joint Account No.047860111 of accused No. 6 S.K. Jhaveri and accused No.7 - Pallav Seth which account
was
maintained in the Bank of America, Mumbai. P.W.8 has stated that

the said cheque was deposited by way of pay-in-slip of Bank of
America dated 22/10/1991 for a sum of Rs 12 crores in respect of
cheque bearing No.58734 7 to the credit of the Joint Account of M/s.
S.K. Jhaveri and Pallav Seth. The pay-in-slip had been exhibited at his
instance and it is at Exhibit-79 and the cheque which was deposited
has been marked at Exhibit-78.
77.
P.W.8 has further stated in his evidence that the opening balance
in the said Account as on 22.10.1991
was Rs 1,57,89,472.23 and
after the cheque was credited in the account, the amount was utilized
for making payment to Mr. R.R. Bohra vide cheque dated 22/10/1991
for Rs 59,37,000/-. The said cheque is also on record at Exh.J.oit-80.
107
He has stated that the another cheque of the same date for Rs
1,11,78,600/- was issued by accused No.6 - S.I{. Jhaveri in favour of
Bank of India A/c. BOI Mutual Fund.
Exhibit-81.
The said cheque is also at
Another cheque dated 22/10/1991 for Rs 2,42,95,000/
was issued by accused No.6 - S.K. Jh.averi in favour of Bank of India
A/c. BOI Mutual Fund drawn on Bank of America. Th.is cheque is also
brought on record at Exhibit-82. Another cheque at Exhibit-83 of the
same date for Rs 40,63,000/- issued by Shrenik Jhaveri - accused No.6
in favour of Vikram Kedia is also brought on record. P.W. 8 has also

brought on record two more cheques at Exhibit-84 and Exhibit-85
issued by accused No. 6
- Shrenik Jhaveri of the same date i.e.
22/10/1991 for Rs S crores which was issued
in favour of FFSL drawn
on Bank of America and another cheque for Rs 50,40,000/- issued in

favour of G.N. Hegde drawn on BOA.
78.
From this evidence, in my view, prosecution has established that
the amount of Rs 12 crores was deposited in the Joint Account of

accused No. 6 - Shrenik Jhaveri and accused No.7 - Pallav Seth and
this cheque was issued on the instructions of accused No.3 - B.R.
Ach.arya. It has been urged by Mr. Pradhan, the learned Special Public
Prosecutor on behalf of CBI that, because this amount was deposited in
----------
108
the Joint Account, the accused No.6 and accused No.7 were m a
position to make several payments to various parties.
From the
evidence of P.W.8 and P.W. 9, the prosecution has tried to establish

that B. Acharya - accused No.3 got the cheque of IU 12 c:rores issued
in the name of accused No.6 - S.K. Jhaveri, though the debit voucher
dearly indicated that an amount of Rs 12 crores was wrongly remitted
from Canfina, Bangalore to CBMF and though B.R. Achacya - accused
No.3 was aware of it, yet, he directed that the amount should be paid
in the account of S.K. Jhav
eri. . The
accused No.6 and accused No.7
had misutilised the funds which were not meant for them and have
thereby misappropriated the said amount for their own use and
accused Nos.1, 8,
3,
6, 7 have committed the offences punishable
under sections 120-B read with sections 403, 409, 109 of the Indian
Penal Code read with
13(1)(c)
& 1 3 (2) of the Prevention of
Corruption Act with which they are charged.
PURCHASE
(IIO
OF 14%NCDS FORRS5CRQRF.S
FROM CBME ON 16/01/1992
79.
In this transaction,
accused
Nos. 2, 4, 5, 1 and 8 are alleged to
109
have been involved.
The beneficiary of the transaction is Hiten P.
Dalal. The relevant charges in respect of this transaction are 9, 10, 1 1,

To establish the charges pertaining to
22 and 23.
this
transaction,
prosecution has examined P.W.1, P.W.2, P.W.6, P.W.4, P.W. 19, P.W.9
and P.W. 12.
The documents which are brought on record by the
prosecution to establish these charges against the said accused are at

Exhibits 62,
63 colly., 64 colly., 42, 27, 162, 28,
107,
.106,
51,
X-18(2) , 52, 121, 120(1), 120(5) colly. and Exhibit 122.
80.
ln
this
case also, the prosecution
has
alleged that the accused
Nos. 1 and 8 created the record to show th.at there was purchase of
14% NCDs at Rs 100/- from CBMF of Rs 5 crores on 16/01/1 992. A
debit voucher was prepared, showing the said amount being debited in
the account of Canfina and the CBMF, instead of remitting this amount
to Canfina, paid the said amount to Hiten P. Dalal - accused No.5 who
utilised the said amount for his own purposes.
remitted by informing CBMF lBA number.
A deal pad entry was
prepared by accused No.2 - N. Balasubramaniam.

cheque was issued in favour of CBMF.
The amount was
Thereafter, the
Though the amount was
remitted, no entry was made in the Sauda Book. The IBA Issue Book
shown the entry with regard to IBA which, in
this case,
was No.32686
110
issued on
Canara Bank, Tamarind Lane Branch, Bombay for Rs 5
crores. P.W.l, P.W.2 and P.W.6 have deposed about the manner in
which the amount was remitted from Canfina to CBMF, how the
entries were made in the Deal Pad and how the amount which was
received by CBMF was transmitted to accused No.5 - Hiten P. Dalal.
This amount was deposited in the account of accused No.5 - Hiten P.
Dalal who issued a cheque in favour of Corporation Bank.
The
opening balance of the Bank Account of accused No.5 with Andhra

Bank showed that after this amount was deposited
in his Account, he
returned it for issuing RBI cheue dated 16/01/1992 in favour of CBMF

and, therefore, on account of receipt of said cheque of Rs 5 crores from
CBMF, sufficient balance was made available to him to enable him to
issue
cheque dated 15/01/1992 in favour of Corporation Bank. The
deal pad entry is at Exhibit-62.
The IBA No.32686 is in the
handwriting of accused No.2 - N. Balasubramaniam and it is at

Exhibit-42. The Sauda Book which is at Exhibit 63 colly. and 64 colly.
discloses that no entry
this transaction.
has been made in the Sauda Book in respect of
The cheque bearing No. 999551 dated 16/1/1992
which was issued in favour of CBMF is at Exhibit-27. The Statement of

Account of Current Account No. 26645 maintained by Canfina with.
Canara Bank, Cunningham Road Branch, Bangalore is at Exhibit-162.
i- - -
111
The telegraphic transfer application is at Exhibit-28 which mentioned
IBA No.32686. The Canbank Mutual Fund rubber stamp indicates that
the
amount was transferred to CBMF.
receipt of
this
The telex confirmation about
amount is at Exhibit-50(1) wherein IBA No.32656 is
mentioned. Exhibit- 107 is a letter which shows that the remittance of

Rs 5
crores
had come from Canara Bank, Cunningham Road Branch,
Bangalore to CBMF.
The Statement of Account is at
X-18(2). The
debit voucher which was prepared is at Exhibit-106 and which is

signed by P.W.9.
The cheque bearing No.587664 dated 16/01/1992
of Canara Bank for a sum of Rs 5
crore.s
is at Exhibit-51.
On
16/01/1992, requisition form of Canara Bank for issuing bankers

cheque along
with cheque
dated 16/01/1992 bearing No.587664 for a
sum of Rs S crores was received by P.W. 4 - Ajay Kumar N. Kar, Officer

working
in Tamarind
Lane Branch. The requisition form is at Exhibit-
52.
81.
P.W.4 has stated that on the basis of cheque at Exhibit-5 1 and
requisition form at Exhibit-52, he issued banker cheque under his

signature dated 16/01/1992 for Rs 5 crores in favour of Andhra Bank
credit to H.P. Dalal for Rs 5 crores.
He also made an entry in the
Cheque Issue Register at serial No. 11/92 and made an endorsement
-----
- - -
112
"BC/11/9211 on the requisition form at Exluoit-52. P.W. 12 - Vasanth
Kumar Damaraju has stated that during the course of investigation,
Andhra
Bank, vide
its
letter No. 755/I/238 dated 26/08/1994
informed th.at they received Pay Order No.992040 dated 16/01/1992

from Canara bank with covering letter to credit the amount to H.P.
Dalal's Account. The letter dated 26/08/1994 is at Exhibit- 119.
82.
After the Pay Order No.992040 dated 16/01/1992
was
received
by Andhra Bank, the credit voucher was prepared for a sum of Rs

6,52,25,290/- covering two cheque,s; one for & 5 crores for pay Order
No.992040 and another for Rs 1,52,25,290/-. This voucher showed
that an amount of Rs 6,52,25,290/-
was
to be credited to the Account
of H.P. Dalal. P.W. 12 has brought on record the said voucher and it is
exhibited at Exhibit-121.
83.
In my view, from the evidence which is brought on record it has
been established by the prosecution that accused Nos. 1 and 8

remitted an amount of Rs 5 crores by creating false and fictitious
documents in respect of purchase of 14o/o NCDs for Rs 5 crores from
CBMF on 16/01/1 992 and it is further established that CBMF in its
own record prepared a voucher showing that the amount was wrongly
113
from Canfina and instead of remitting the amount back, this
received
amount was remitted by accused

instructions to accused
No. 11.
No.3 by giving directions and
The accused
No.11, being a junior
Officer, was duty bound to follow the instructions and the amount was
remitted from CBMF to the account of Hiten
Further, the evidence of P.W.
utilized by Hiten
P. Dalal in Andhra Bank.
12 clearly indicates that this amount was
P. Dalal for making payment to
the Corporation
Bank.
84.
P.W. 12 - Vasanth Kumar Damara.ju was working with Andhra
Bank between May
1994 and July 1998. He has brought on record
entries in the Statement of Account of H.P. Dalal and they are marked
as Exhibit
120(5) colly. He has further stated that before credit of the
said cheque of Rs
5 crores as of 16/01/1992 in H.P. Dalal's Account
No.4819 with Andhra Bank, the balance was Rs 48,50,510.15. He has

stated that, thereafter, there was a credit of Rs
25,96,95,205.48 in his
on receipt of cheque from CBMF and the account was
account
simultaneously debited for issue of R.BJ cheque dated

favouring CBMF for Rs
entries
25,42,70,230.48 and after the credit and debit
the balance of Rs
Account.
16/01/1992
54,24,755/ remained m H.P. Dalal's
The Statement of Account is exhibited at Exhibit- 120.
_J
114
Prosecution case is that on receipt of the said cheque for Rs 5 crores,

sufficient balance
was
made available to H.P. Dalal, as a result of
which he could issue cheque No.985279 dated 15/01/1992 in favour

of Corporation Bank and the rubber stamp on the reverse of the
cheque indicates that the cheque was sent to Corporation Bank. This
cheque is brought on record at Exhibit-122. The entry showing the
amount which was debited in the account of H.P. Dalal is marked as
Exhibit-120(2).
In this evidence it has been established that the
accused No. 5 - H.P. Dalal paid an amount of Rs 5 crores to

Corporation Bank by sending cheque dated 15/01/1992.
85.
The prosecution has, therefore, established that
the amount of
Rs 5 crores was siphoned off from Canfina via CBMF and it was paid to
Hiten P. Dalal when there was no actual transaction of purchase of

14% NCD securities and bogus vouchers were prepared to create the
impression that there
was
actual purchase of these securities and, as
result of the money which was made available, H.P. Dalal could pay Rs
5 crores to Corporation Bank and, therefore, he utilized the money
which did not belong to him and misappropriated the said amount.
H.P. Dalal - accused No.5, on the other hand, has submitted that the
amount of Rs 5 crores was paid by him by cheque dated 15/01/1992
115
which is one day before the said amount was deposited in his Account.
It is his case that
this
amount was paid as and by way of adjustment as
was directed by citiban.k.
This defence would be considered at a
subsequent stage.
86.
In respect of remaining two transactions, out of five transactions
dated 07/02/1992 and 11/02/1992 in respect of Rs 5 crores and Rs 7

crores respectively, Mr. V.G. Pradhan, the learned
Prosecutor appearing on behalf of
statement across the bar
that
the
Special Public
prosecution has made
since the concerned broker had died
during the pendency of the case, the prosecution did not wish to press
these
two
transactions
and,
therefore,
he
did
not
make
any
submissions regarding these two transactions. It will, therefore, be not

necessary to refer to the evidence which is brought on record by the
prosecution and in defence by the accused in respect of these two
transactions.
FURTHER DIVERSION AND REVERSAL:

8 7.
Prosecution case is that the amount which was siphoned off in
an illegal
manner from
Canfina
to
the
tune
of Rs
47 crores
approximately was again brought back, illegally, to the tune of Rs
--
--- -
--
--------
116
53,77,82,500/- and, therefore, there is a difference between what was
remitted from Canfina and what was brought back which difference
works out to Rs 6,07,14,300/-. Out of this amount, further amounts
were paid to the brokers and balance of about rupees one crore and
odd .remained with Canfina. Prosecution case is that, therefore, there
was a temporary misappropriation and, later on, these funds which
were ostensibly paid for purchase transactions were again brought
back ostensibly for sale transactions. It would be relevant to see what
is the evidence regarding sale transactions.
88.
P.W.6 in his evidence has mentioned how the sale transaction by
Canfina used to normally take place.
He has stated in his evidence
th.at the sale transaction normally originates because of two reasons
(1) to generate funds and (2) to take advantage of the price movement
in the market and as and when the situation arises in this manner,
brokers were contacted over telephone by the Chief Dealer Mr. M.K.
Ashok Kumar - accused No.8 and sometimes by S. Mohan - accused
No.1 and, thereafter, the transactions were concluded With the broker.
The sale transaction involved quantity of the shares and the price and,
thereafter, contract notes would come from the broker and would be
monitored by the Backup Department or by the dealers themselves.
_
_
....
._
117
Thereafter, the deliveries and realisation of the sale proceeds also were
monitored by the dealers. He has further stated that in case of shares.
delivery always used to be
in physicals. In respect of other securities.
however. sometimes delivery used to be

SGL.
in physical or by BR or by
In case of sale transaction, payment used to be received at the
point where the brokers were situated and the payments were received
at the Canara Bank, Bombay and transmitted to Canfina's account in
Bangalore by way of telephonic instructions followed by IBAs. In case
of sale transactions the broker would deposit the cheque with Canara
bank with instructions to make onward remittances to Canfina,
Bangalore.
Accordingly, the Canara Bank, on realisation of the
cheque, would send onward remittance
to
Canfina Bank Bangalore by
telephonic instructions to Canfina first then followed by IBA in favour

of Canara Bank Branch, Bangalore.
These instructions would be
received in the Funds Department, Canfina Bank, Bangalore and the

information would come to the Chief Dealer or the dealer and
sometimes in the Back-up Department. The IBAs would be received in
the Funds Department of Canfina at Bangalore and, thereafter, the
IBAs would be forwarded to the Canara Bank Branch
in
Bangalore.
Actual receipt of IBAs would take two to three days. However, the
credit would be given by the Bank in Canfina's account on the basis of
,----
118
telephonic instructions received by the Funds Department. On receipt
of telephonic instructions, the concerned Officer would transmit those
instructions to the Bank in writing on the basis of which the credit
would be given by the Bank. On getting the written instructions by the
Bank, it would prepare dummy IBA and give credit to the Canfina's
account.
On receipt of the original IBA in the Funds Department of
Canfina, the same would be sent to the Bank and the Bank would
replace the dummy IBA by the original IBA. He has stated further that
in this manner, nothing would remain in the Funds Department of
Canfina and the said Funds Department would not keep any record
with regard
to the receipt of telephonic
instructions.
After the
conclusion of the sale transaction, it would be entered in the Sauda

Book maintained by the Chief Dealer.
In case of sale of other
securities, the Chief Dealer would first note the fact of conclusion of
the deal on a rough sheet and at the end of working hours, the rough
sheet would be handed over to the Back-up Department. The Back-up
Department would note all these deals in the Deal Pad. (Emphasis
supplied)
89.
Prosecution case is that the Canara Bank's Funds Management
Department was managing the funds on behalf of Canfi.na and on
119
3 1/03/1 992, total sum of Rs 70,77,82,500/-
was
received on behalf of
Canfina through different remittances.
One of the remittances
included cheque dated 31/03/1992 for Rs 30 crores from Standard

Chartered Bank. In the records of Canfina, the cheque was treated as
consolidated receipt for
Can!ma's two sale deals viz (i) for sale of
securities of Rs 15 crores to Mis. Growmore Research and Assets

Management Ltd. and (ii) sale of securities for Rs 13 crores to M/s.
V.B. Desai. In view of this, an amount of Rs 2 crores
was
found "an
excess" receipt of Rs 2 crores and, therefore, this amount of Rs 2 crores

was paid by banker's cheque No.822329 dated 31/03/1992 favouring
Harshad S. Mehta and it was credited to his account in the State Bank
of Saurashtra.
This cheque
was
issued by R. Venugopal and it was
col!-ntersigned by K.D. Prabhu.
90.
P.W.13 has stated
in his evidence that after the amount was
appropriated on account of transaction with Harshad S. Mehta, the

balance of Rs 53,77,82,500/- was treated as receipt from Mis V.B.
Desai and entries were accordingly made into Canfina books.
M/s.
V.B. Desai had remitted the said amount to Canfina as per unwritten
instructions of Pallav
Seth -
accused No.7.
Against the said
remittances dated 31/03/1992, Mis V.B. Desai had received shares of
--------
120
equal value from Pallav Seth - accused No.7. P.W. 13 in his evidence
has stated that the entry in respect of amount of Rs 53,77,82,500/- is
in his handwriting and there is mention of IBA No.F/214/92 dated
31/03/1992.
He has stated that, in this entry, there is no mention
regarding either any purchase or sale
transaction.
The particulars of
the transaction also are not mentioned. The said entry is marked at
Exhibit 124. Prosecution case is that, therefore, though there was no
transaction, the said entry has been made and, therefore, the amounts
were received by Canfina, Bangalore by IBA dated 31/03/1992 being
No.F/214. The said IBA is at Exhibit-70.
91.
It is alleged by the prosecution that, therefore, there was no
transaction of purchase or sale and after the amount was received, it

was appropriated
towards
(i) sale of 17.29 crores RJL @ 100,
(ii)
12 crores 14o/o NCO @ 108.04 and (iii) 1 7 crores 14% NCD @ 102.66
and it was shown that against the transaction of purchase of securities
which were at Rs 47,70,68,200/- an amount of Rs 53,77,82,500/- was
received and, as such, there was an excess amount received by Canfina
to the tune of Rs 6,07,14,300/-
92.
Again P.W.2 in his deposition has stated that there was a deal
121
pad
dated
31/3/1992
in
which
the
above
mentioned
three
transactions have been mentioned and the said excess amount was
shown to be paid on 02/04/1992.
Similarly P.W. 6 - A.K. Kini has
stated that in the aforesaid three transactions of sale of securities there

was
a mention of "RFR" in Deal Pad at Exhibit-48 which means ready
forward reversal transaction. He
has stated that this showed that the
sale was by way of reversal of earlier ready forward transaction. P.W.

6 has referred to Exhibits 48, 59 and 61.
93.
P.W. 2 has again stated in
his evidence that on 02/04/1992,
accused No.2 - N. Balasubramaniam made an entry in the dealers pad

of Canfina regarding transfer of Rs 20,92,14,300/- to accused No. 7 Pallav
Seth by IBA
No.33242
and
the
following
details
were
mentioned in Canfina's deal pad viz (i) Amount excess received on

31/03/1 992 payable Rs 6,07,14,300/- ,
(ii) Payment towards 85,000
shares of Nahar Spinning @ 1500 i.e. Rs 12,75,00,000/- and
(iii)
15,000 shares of Castrol @ 1400 which comes to Rs 12,10,00,000/-,

thus total Rs 20,92,14,300/-. The said entries were brought on record
at Exhibits 46 and 47. He
has further stated that accused No.8 caused
to be issued IBA No.33262 dated 02/04/1992 for consolidated amount

of Rs 20,92,1 4,300/- which was inclusive of Rs 6,07,14,300/- plus an
122
amount of Rs 12,75,00,000/- being payment towards purchase shares
of Nahar Spinning and also an amount of Rs 2,10,00,000/- being
payment towards purchase of shares of Castrol without receipt of any
cost memo, contract note or security in physical or in the form of Bank
Receipt. He has stated that, accordingly, deal pad entry was made and
it was used to prepare cheque for a sum of Rs 20,92,14,300/- which
was signed
by
accused No.2 - N. Balasubramaniam and, accordingly,
rubber stamp of Canara bank indicated that the amount had been
transferred to Tamarind Lane Branch of Canara Bank, Bombay vide
cheque at Exhibit-33.
This cheque at Exhibit-33 was deposited with
Canara Bank, Cunningham Road Branch, Bangalore which is reflected

in the Statement of Account No.26645 maintained by Canfina, which
is at Exhibit-162. Accordingly, a credit slip was prepared in the Back
up Department of Canfina, Bangalore and the credit was given for the
said sum in respect of cheque at Exhibit-33 and the credit slip is
.
brought
on
record
at Exhibit-34.
Accordingly,
cheque
bearing
No.082331 dated 02/04/1992 for Rs 20,92,14,300/- came to be issued

at CBMF end.
P.W. 8
has
brought it on record at Exhibit-76.
This
cheque was given to Pallav Seth, who deposited the cheque bearing
No.82331 in Bank of America by pay-in-slip dated 02/04/1992 in to
account No.4941-011 of Pallav Seth - accused No.7. The pay-in-slip is
123
at Exhibit- 77.
94.
Accused No.7 - Pallav Seth and accused No.6 - S.K. Jhaveri had
joint account in their name in the Bank of America. The cheque and
pay-in-slip at Exhibits-76 and 77 were deposited in the said account
and the credit entry is reflected in the Statement of Account Exhibit-38
and the entry is at Exhibit-38(1).
95.
Now in respect of purchase of 85000 shares of M/s Nahar
Spinning Mill, it is the case of prosecution that shares were purchased

@ 1500/- per share though the rate of share at the relevant point of
time
was
Rs 800/- to Rs 900/- per share and, therefore, accused No.8 -
M.K. Ashok Kumar caused Canfina to pay Rs 600/- per share and, as
such, total loss of Rs 5.10 crores was caused to Canfina and
corresponding gain to said accused No. 7 - Pallav Seth. To prove this
fact, prosecution has examined P.W.17 - Yogesh Bhambardekar
working with Bombay Stock Exchange, who has stated about the
original quotation sheets for that particular period which were brought
on record at Exhibits-137
to
143 and relevant entries were brought on
record at Exhibits 137A(l) to 143A(l).
Prosecution has examined
P.W.7 who has stated that Mis Nahar Spinning Mills had informed
124
Bombay Stock Exchange vide their letter dated 12/02/1992 about
record date for their right issue as 25/03/1992 and, therefore, under
BSE rules, transactions upto 20/02/1992 were on cum rights basis and
from 21/02/1992 onwards were on ex-rights basis .
He has stated
that accused No.8 - M.K. Ashok Kumar did not take any contract note
from Pallav Seth - accused No.7 in connection with the said purchase
of
85000 shares of M/s. Nahar Spinning Mills
and thereby caused
payment of Rs 12,75,00,000/- to be made to Pallav Seth - accused

No. 7 without adequate safeguards and that the Canfina was able to
receive shares only after gap of one year. P.W. 7 has further stated in
his
cross-examination that he was aware of the terms "cum rights" and
11ex-righ.ts11
He has explained that the meaning of
the
term "cum
rights" was share purchased before the record date I no delivery

period fixed for issue of the right shares and the meaning of the term
"ex-rights11 was that
the
transposition was concluded after the record
date or no delivery period.
He
has
further stated that he does not
remember whether in 1992 any right shares were issued by Nahar

Spinning Mills Ltd.
The case of the prosecution is that, against the
payment of Rs 12,75,00,000/- made to Pallav Seth - accused No.7 for

purchase of 85000 shares of Mis Nahar Spinning Mills, no steps were
taken by Canfina for effecting delivery from Pallav Seth - accused No. 7
125
till mid July 1992 and after the scam was known to the public at large,
fax message from
Canfina bearing No.725/92 dated 18/07/1992 was
addressed to accused No.4 - P.J. Subbarao which read as under:-
"As of 25.03.1992, we bought Rs 85,000
shares of Mls. Nahar Spinning
Mills through
Pallav Sheth - accused No.7, we understand

that Pallav Sheth Accused No.7 inadvertently
delivered the shares to you and you had
lodged the shares for transfer in your name
and
also
applied
for
the
rights
issue
thereunder0
The shares "inadvertent1i' delivered to CBMF could be restored to

Canfina sometimes in April 1993. P.W. 7 - Mr. M. Pappa Rao, Officer
of CBMF has stated about the procedure with respect to registration of
Nahar Spinning Ltd. He
has explained the procedure in his evidence
through documents which are at Exhibits 73/1 to 73/26.
96.
The details of another transaction have been given by P.W. 8
Mr. Pronab Ray wherein he has mentioned that accused No.2 - N.

Balasubramaniam
made
an
entry
in
the
dealers
pad
dated
08/04/1992 regarding purchase of 40000 shares of Ace @ Rs 6,250/-
126
per share from Pallav Seth - accused No.7. The deal was finalised by
accused No. 8 - M.K. Ashok Kumar and on the basis of the said entry,
the amount of Rs 25 crores was
transferred
on 08/04/1992 to Canfina
Mumbai for credit of the same in the account of Pallav Seth - accused
A cheque bearing No.082334 dated 08/04/1992 for Rs 25
No.7.
crores was issued and the same was deposited in the joint account of
accused Nos. 6 - Shrenik Jhaveri and accused No.7
the Bank of America.
- Pallav Seth in
The said cheque for Rs 25 crores dated
08/04/1 992 is brought on record at Exhibit-99.
The pay-in-slip
through which the cheque was deposited is at Exhibit-100 and the

Statement of Account is at Exhibit-38. The relevant entry is at Exhibit38(2).
97.
P.W. 8 has further stated that after receipt of Rs 25 crores on
08/04/1 992 from Canfina, Pallav Seth
P.W.7 utilized the said
amount by issuing cheques to various parties
The said cheques are
on record at Exhibit- 87 to Exhibit-98.
98.
Thus, the prosecution has established that various amounts were
deposited in the joint account of accused No. 6 - S.K. Jhaveri and

accused No.7 - Pallav Seth and that after the said amounts were
127
deposited, various cheques were issued by accused No. 7 - Pallav Seth

to various parties. The counsel appearing on behalf of accused No.7,
inter alia, has argued that price of Rs 1500/- per share included in
share of right issue and, therefore, no loss was caused
to
Canfina and,
therefore, no offence is committed by accused Nos 6 to 8.
99.
Having seen the evidence which is brought on record by the
prosecution in respect of three transactions regarding purchase of

NCD securities and the reversal of the transactions by alleged sale of
securities, it will have
to
be seen what is the defence of the accused in
the context of each of those transactions and cross-examination of the

relevant witnesses examined by the prosecution in support of each
transaction. I have already stated in brief the defence of each of the
accused.
However, now submissions in detail with reference to
defence for each of the transactions will have to be examined.
100. In respect of the first transaction, the following accused have.

been alleged to be directly involved viz. accused Nos. 1, 3, 4, 6, 8, 9,
10 and 11. In respect of the second transaction the accused who have
been alleged to be involved directly
are
viz. accused Nos. 1, 2, 4, 6, 7
and 8 and in respect of third transaction accused Nos.2, 4, 5, 1 and 8
128
have been alleged to be directly involved.
101. In respect of the first transaction, prosecution
has examined
P.W.2, P.W. 6, P.W. 19, P.W. 4, P.W. 9, P.W.1, P.W. 10, P.W. 18 and
P.W. 1 1 .
In respect of the second transaction prosecution has
examined P.W.2, P.W.6, P.W.19, P.W.8, P.W.9 and P.W.4. In respect

of the third transaction the prosecution has examined P.W. 1, P.W.6,
P.W.2, P.W. 19, P.W.4 & P.W.12. In respect of reversal &
further
transaction prosecution has examined P.W.13, P.W.6, P.W.2, P.W.19,

P.W.8, P.W.6, P.W. 1 7 & P.W.7
102. P.W.2
Nos. 3, 4,
has not been cross-examined by the Counsel for accused

6, 9, 10 and 1 1 .
P.W.2, in
his cross examination by
Counsel for accused No.1 has admitted that the entries in the Deal Pad
are
made on the basis of rough sheets and they are made by the dealer
or by any one to whom the work is assigned by the dealer. He has

further admitted that during the relevant period, continuous audit of
funds department was going on and that a note was to be put up to
the Managing Director through Mr. Narayan Rao, who was the
Executive Vice President at the relevant time and that the deals
finalized in the Funds Department were executed at different places at
129
Bombay, Delhi and Calcutta. He has further stated that he
was
not
aware whether in a purchase transaction, the delivery of the purchase

was
taken by the executing branch. It was further suggested to him
that the entire amount

was denied by him
was
recovered by Canfina which suggestion
He has further admitted that the physicals
register I ledger was meant for showing the actual delivery.
103. In his cross examination by the Counsel for accused No.2, P.W.2
has stated that he did not get rough sheet but only Deal Pad was given
to him and the IBA number was given by the dealer on the Deal Pad
and, accordingly, entty was made in the IBA Register and that entry at
Exhibit-43 in IBA No.2 was in the handwriting of Balasubramaniam.
He further admitted that physical register was for showing the holding
of security and not for the movement of security. He was shown office
note at Exhibit-20. He, however, denied having knowledge about the
contents of office note.
104. The counsel for accused No.5 cross-examined the P.W.2 and in
the cross-examination, he has stated that it
was
his duty to prepare
cheques on the basis of Deal Pad and he has stated that IBA used to be
issued only in respect of Canara Banlc. The Counsel for accused No.7
130
adopted the cross-examination made on behalf of accused No.S. In the

cross-examination taken by the Counsel for accused No.8, P.W.2 has
stated that whenever he used to take the cheques to P. Narayan Rao
and Ashok Kini, they used to check and sign the cheque.
further admitted
He
has
that the amount of Rs 47,70,68,200/- as shown in
the document at Exhibit-48 was received by Canfina and that in this

document there is mention of words
the earlier transaction
"rft' in the margin, meaning that
was reversed. He has stated that the word "(p) 11
refers to purchase and the word "(m)11 refers to mutual fund. He
has
also admitted that by the Deal Pad Exhibit-48, the earlier five
transactions of purchase as per Exhibits 21, 23, 25, 27, 29, and 31
were reversed by receiving the amount of Rs 47,70,68,2001- and that
a profit of Rs
1,41,68,200/-
examination of P.W.2
was
earned
by
Canfina.
Cross
was declined by the Counsel appearing on
behalf of accused Nos. 9, 10 and 1 1 .
105. From the cross examination of P.W.2, it can be seen that none of
his testimony has been challenged by the accused and, therefore,

whatever has been stated by him in
his evidence has practically been
accepted by the accused. From the cross-examination of P.W.2 it
can
be seen that accused No.1 has tried to put a suggestion that emphasis
131
could not be led on deal pad entry in the absence of rough sheets
being brought on record.
In my view, merely because rough sheets
are not brought on record that does not establish that deal pad entry
which was made by accused Nos. 1 & 8 was genuine. The fact that
the deal pad entry is fictitious has been established from the vouchers
which are prepared by accused Nos. 3 and 1 1 at the CBMF end. These
vouchers clearly establish that, according to CBMF, the amount
amount remitted from Canfina was wrongly received and had to be
repaid back to Canfina. The amount was credited to the account of
sundry creditors in CBMF.
If the deal pad entries were genuine, such
an entry would not have been made in the voucher which was
prepared by the employees of CBMF. Similarly, cross-examination by
learned Counsel for accused No.5 and 8 does not help the accused in
any manner. Even admission of P.W.2 that whenever he used to take
the cheques to P. Narayan Rao and Ashok Kini, they used to check and
sign the cheques also does not establish the innocence of accused
No.8.
Reference to the word "rfr" which is found in Exhibit-48 also
does not make the transaction genuine.
As stated hereinabove, the
vouchers which are prepared by CBMF Officials clearly falsify the

suggestions made by the Counsel for the accused.
P.W.2 has not been shaken in the cross-examination.
The evidence of
132
106.
P.W.6 has been cross-examined by accused Nos. 1, 2, 3, 4, 5
and 8. Rest of the accused declined
to
cross-examine him
He has
been extensively cross-examined by the Counsel for accused No.1. He

has admitted that there were number of Officers higher in rank than
accused No.1 - S. Mohan in Cafina at the relevant time. He, however,
denied the suggestion that these Officers were responsible for day-to
day affairs and management of Canfina. He has stated that each one
had their own role to play. He has further admitted that office note
with regard to each and every transaction was used to be put before
the Managing Director. He has further admitted that there used to be
concurrent audit in Canfina. He has further admitted that he was not
shown rough sheets which were written by the dealer when his
statement was recorded by CBI. fie has denied the suggestion that the
rough sheets and deal pads used to be put up before him before he
,
signed the cheque. In his cross-examination, he has stated that the

Sauda Book pertains only to share transactions and other listed NCDs
purchased through the broker and that he had not stated in his
statement before CBI that the NCD transactions were also
recorded in the Sanda Book.
being
He has further admitted that NCD
transactions were never written in the Sauda Book and, therefore, did
133
not state that before the CBI.
He has further admitted that he
was
aware th.at there was arbitration between Canfina and CBMF. It was
suggested to him that separate register for ready forward transaction
was maintained in the Dealing Department. He, however, stated that
he was not aware about it.
He
has further stated that he
was not
aware whether separate diary was maintained for ready forward

transactions.
No suggestion has been made in respect of statement
made by him in his examination-in-chief regarding the funds which

were transferred from
Canfma to CBMF. It was only suggested that
rough sheets were initially prepared and then Deal Pad has been
prepared and that there were higher officers than accused No.1 who
were responsible for maintaining day-to-day affairs of
suggestion was also denied by him.
Can.fina. This
Further, it was suggested that
other securities were not mentioned in the Sauda Book and he has
accepted
this suggestion that NCO securities were not mentioned in
the Sauda Book and, therefore, he did not inform the CBI about it.
107. In the cross examination by the Counsel for accused No.2, P.W.6
has stated that he was the co-signatory alongwith accused No.2 of
cheques at Exhibits 27, 29, 31, and 33. He has further admitted that
for every transaction, there used to be rough sheet and that the
134
endorsement "P.E.P" indicated only the entry in the physical register.

It did not indicate actual receipt of the physicals. No other suggestion
has been put by the Counsel for accused No.2 to this witness.
108. P.W.6 in his cross-examination by the Counsel for accused No.3

was asked questions in respect of Exhibit-41 which was an entry made
in the IBA issue register. He has stated that this entry was made in
the JBA Register by accused No.1 - S. Mohan and that he used to
receive this register alongwith the cheque for his second signature on
the cheque.
He has stated that Bxhibit-41 was in respect of
transaction on account of port folio clients and that he was making
this statement on the basis of Deal Pad at Exhibit- 61 and that the
dealers working in Funds Department of Canfina used to take
decisions with regard to investments even on be.half of the clients.
This witness was asked regarding Port Folio Management Scheme and
he has stated that there were two types of Schemes viz (1) where the
clients issue instructions in respect of each transaction and (2) where
the discretion is given to Funds Manager to deal with the funds of the
clients as the dealer th.inks fit. He has stated that the entry at Exhibit41 was in respect of the transaction of the second category. He has
also admitted that, normally, IBA should contain the details as to
_J
135
whom the payment
109. P.W.6 in
is to be made.
his cross-examination by Counsel for accused No.4 has
admitted that there
was arbitration proceedings between Canfina and
CBMF. He has, however, stated in his cross-examination that he could

not recall the point of reference to the Arbitration with regard to these
transactions
and whether
in respect of the five transactions Canfina
received back money and whether that

before the Arbitrator.
falsely and
was the admitted position.
He denied the suggestion that he was deposing
he could not recollect that Canfina had admitted before
the Arbitrators that they had received the funds in all the five
transactions.
1 10. P.W.6 in
his cross-examination by the Counsel for accused No.5
has admitted that
he did not sign any other cheque of Rs 5 crores on
16/01/1992 and that he was saying so on the basis of IBA Issue

Register No.II of 16/01/1992. He
has further stated that the letter at
Exhibit-69 dated 15/04/1993 could not relate to any of the five

transactions involved in the case.
He, however, admitted that the
Deal Pad at Exhibit- 48 covers the transaction indicated at Exhibit-62.
136
1 1 1 . P.W.6 in his cross examination by Counsel for accused No.8 has
admitted that entries in IBA Issue Register No. I & II were not in the
handwriting of accused No.8 - M.K. Ashok Kumar.
He has further
stated that there were three Executive Vice Presidents. He
was one of
th.em and the other was P.N. Narayanrao. and above them were
Executive Director and Managing Director and above them was the
Board of Directors of Canfina and th.at the Chief Dealer had no power
to sign the cheques after 1991 and that the notes in respect of all the
transactions used to be put up to the Managing Director th.rough the
Back-up Department.
He has further admitted that there used to be
three audits of Canfina viz (1) continuous audit, (2) statutory audit
This
and (3) the audit by inspection branch of the Canara Bank.
witness was further shown office note dated 08/01/1992 addressed

by the Chief Dealer to Funds Department.
signed
that of
A-8(1).
He admitted that he
had
this document on the right hand side and other signature was
P.N.
After
Narayanrao
which
is on the left hand side at Exhibit
this witness was cross-examined, he was re-examined
by the prosecution for seeking clarification of the statement wherein

he
has stated that NCO securities were not mentioned in the Sauda
Book and in his re-examination he has stated that it was not possible
to co-relate by mere reference
to
NCD in the documents as
to
which
137
company they belong.
He has funher stated that NCD means non-
convertible debentures and listed NCO means those which
are
listed
on the Stock Exchange. After he was shown Deal Pad at Exhibits 62,
65 and 67, he has stated that there is reference to NCDs but the name
of the company was not mentioned and, thereafter, he has stated that
he was not in a position to explain why the NCO tran5actions were not
entered in Sauda Book.
112. In my view, considering the cross-examination of P.W.6, the

statement made by him in
his examination-in-chief has not been
shaken by the defence. In the cross-examination by learned Counsel

for accused No.1, number of suggestions have been put to P.W.6. The
first suggestion being th.ere were number of Officers higher in rank
than accused No.1 . The suggestion, therefore,
was
that the decisions
were taken by higher-ups and accused No.1 was merely following

instructions.
This suggestion has been denied by the wimess by
saying that they were not responsible for day-to-day affairs and
management of canfina. A further suggestion was put that the office
note regarding these transactions was put up before the Managing
Director and that the rough sheets which were written by the dealer
were not shown
to
him.
In
his cross-examination by the learned
__J
138
Counsel for accused No.1, initially he stated that NCO transactions
were never written in the Sauda Book. He was, however, re-examined
by the prosecution and, in the re-examination, he clarified that it
was
not possible to co-relate by mere reference to NCO in the documents

as to
which company they belonged to.
He further clarified that in
deal pad at Exhibits 62, 65, and 67 there

name of the Company, though there
was
was no reference
reference
to
to the
NCDs.
The
emphasis by the learned Counsel for the accused was that the theory
of prosecution that the transactions of purchase and sale of securities
were entered in Sauda Book was not established.
solitary
admission
made
by
this
witness
that
In my view, the
NCDs
were
not
mentioned in the Sauda Book does not falsify his earlier evidence that
all transactions of purchase and sale were entered
in. the Sauda Book.
This stray admission given by
him in the cross examination stands
nullified by clarification which
has been obtained by the prosecution.
in his re-examination.
This suggestion also does not help the case of
the accused No.1 in any manner.

No.3 had made a suggestion to
The learned Counsel for accused
this witness which was admitted by
him stating that normally IBA should contain the detajls
as
to whbm
the payment is to be made and that the dealers working in the Funds
Department
of Canfina
used
to take
decisions with regard to
__J
139
investments even on behalf of the clients.

does not help the case of accused No.3.
This cross-examination
It is neither the case of
prosecution nor it has been suggested by the accused that the alleged
purchase or sale of securities was pertaining to any particular client
becuse, normally,
transactions
can
in the case of Portfolio Management Scheme
be entered into by dealers on behalf of such clients.
It is. nobody's case that in respect of these transactions, purchase or

sale was made on behalf of any of the clients. Similarly, a suggestion
was
put by the learned O>unsel for accused No.4 that there were
arbitration proceedings between Canfina and CBMF and that Canfina

had not made any claim against CB:MF in respect of five transactions.
This suggestion does not help the case of any of the accused. The
witness, however,
has denied this suggestion. The learned Counsel for
accused No.5 has made a suggestion that this witness had not signed
any other cheque of Rs S crores on 1 6/01/1992 but that does not
establish the case of accused No.5.
the amount
Prosecution
has established th.at
was remitted from Canfina to CB:MF by creating false and
fictitious deal pad entries which is further established by the voucher

which
was signed by accused No.4 wherein he has stated that the
amount
was wrongly remitted by Canfina
to
CBMF and from CBMF it
was credited in the account of Hiten P. Dalal in Andhra Bank.
_J
140
Similarly, crossexamination by the learned Counsel for accused No.8

also does
not establish the innocence of accused No.8, as the
admission that the entries in IBA Issue Register 1 and 2 were not in
the handwriting of accused No.8 does not absolve the said accused
since he was the Chief Dealer and he had been entrusted with certain
funds by the Board of Directors and he, alongwith accused No.1, had
remitted these amounts to CBMF.
113. P.W. 1
Virakthi Hegde has been cross-examined by the Counsel
for accused Nos. 9 and 10, 4
and 11 only. The other accused have
declined to cross examine this witness.
114. In her cross examination by Counsel for accused Nos. 9 and 10,
P.W. 1
has stated about the vouchers being kept in th.e file serially and
that it was a box file without any specific name and whatever was
written
in the document was under instructions and she had no
personal
knowledge
handwritten
about
the
contents
and
that
documents, entries in these documents
apart
from
were keyed in
the computer.
P.W.1 in her cross-examination by the Counsel for
accused No.4
has further stated that scoring part on the voucher
LS?er' is also done by her as per the insttUctions of accused
141
No.11 and that the amount which was not pertaining to the scheme,
would be shown in the account of Sundry Creditors - others and
if the
amount was wrongly remitted then the amount would be paid back.
She has stated that the cheques at Exhibits- 14 and 15 were not signed
by accused No.4.
She has further stated in her cross-examination by
the Counsel for accused No.11 that she did not remember if she had
attended the office on 09/10/1991 and she never came to know that
cheques at Exhibits-14 and 15 were
written on 09/10/1991.
The
Counsel for accused No.4 further cross-examined this witness and she
stated that, in the normal course, in the case of wrong remittances
when a corrective action is taken, signature of Subbarao is not
necessary but in that particular case
his
initials were taken on the
vouchers for approval of the corrective measure.
This witness has
been cross-examined by the Counsel for accused Nos.9, 10, 4 and 11

only.
Most of her testimony has not been challenged in cross
examination.
In my view, the cross-examination by these accused
does not in any manner shake her testimony which has been given by
her in her examination-in-chief.
1 15. So far as P.W. 5 - Jarugumilli R. Nath
is concerned, accused
Nos. 1 and 2 and 4 to 1 1 declined to cross-examine him and only one
142
question was asked by the Counsel for accused No.3 to
this
witness to
which this witness has replied that as far as he knows, prior to his
joining Canfina, the Managing Director of Canfina was sitting in
Bombay.
116.
So far as P.W. 9
Ravi Tirumalai is concerned, his cross
examination on behalf of accused Nos. 1, 2, 7, 8, 9, 10 and 11 was

declined. Counsel for accused No.3 asked this witness about hierarchy
of CBMF and the accounts maintained by each Fund.
P.W. 9
has
further srated that CBMF did not have Articles of Association since it
was not independently registered Company.
He has also stated that
he was not aware as to what were the powers delegated to the

General Manager.
He has further stated that except his bare words,
there was no evidence to show that the cheque of Rs 12 crores was

issued on the instructions of accused No. 3
..
Mr. Acharya, the General
Manager and he has stated that there were no guidelines regarding

the manner in which wrong credits were to be dealt with.
117. Jn his cross examination by the Counsel for accused No.4, P.W.9
has
stated that accused No.4 was also over seeing the accounts and
looking after the administrative work of CBMF and he was not
143
concerned with any deals I transactions with the brokers. He has also
admitted that the accused No.4 was not concerned with call money
transactions of purchase and sale of securities and equities.
He was
asked a specific question in respect of voucher dated 22/10/1991 at

Exhibit-102 and whether he had any discussion with regard to th.is
voucher with
accused No.4 to which he has replied
that the cheque
came into their bankers in High Value Clearing and, at that time, their
account
did not have sufficient amount to honour the cheque.
However, accused No. 3 - B.R. Acharya was not in Office and,

therefore,
he discussed with accused No.4
Subbarao as to what
should be done and he has stated that accused No.4 was not aware
the transaction and, therefore, accused No.4 told
inquire about it and let
accused No.4 gave
of
him that he should
him know and after a lapse of one hour,
him IBA number and that he told him that this IBA
number was given to
him by
Mr. Acharya - accused No.3.
This
witness was cross-examined by the Counsel for accused No.S and in

his cross-examination he was shown voucher at Exhibit- 106 and
he
has admitted that in the credit portion of this voucher, earlier, Canfina
Bangalore
was written. However, it was scored and Bankers Account
Tl.. was written.
"IBA No."
was
also written and scored.
writing, however, was not visible and it
was
Earlier
also scored out. He was
144
also shown the cheque at Exhibit-51 for Rs 5 crores. He has admitted
that it was signed by Mr. Anil Narach.inia and Mr. Satish and it was in
favour of Canara Bank and not in favour of Hiten
Dalal as indicated in
credit portion of voucher at Exhibit-106. He also admitted that while

signing the voucher, he did not ask any details regarding
this
transaction.
118. P.W. 18 - Mukesh K. Joshi has not been cross-examined by

accused No.1, 2,
3, 4, 5, 7, 8 and 11.
P.W. 18 in his cross
examination by the Counsel for accused No.6 has stated that their
Firm had transaction with S. K. Jhaveri - accused No.6. and they were
maintaining his account in their Firm. When he was shown cheque at
Exhibit-112, he was unable to say with which transaction it was
concerned.
No other suggestion
for accused No.6.
has
been put to
him
by the Counsel
P.W. 18 in his cross examination by Counsel for
accused Nos. 9 and 10 has stated that he used to maintain the carbon
copy of cheque issued on behalf of the Firm. His attention was drawn
to the carbon copy No. 577597.
He has stated that the handwriting
on the carbon copy was of Nitin Patel and that there
was
narration as
115,00,000 REL 2,00,000 NH and 3,00,000 AS.KNP" and, after
this
endorsement, there are initials of Navinchandra Parekh - accused
145
No.10.
He has stated that this endorsement means that the cheque
was issued for purchase of 5,00,000 shares of Reliance and the letters
''NH" means Narbehram Harakchand. He
form of "KNP".
However, he
was unable to state the long
was aware of one person by name
Kirti.kumar Narbheram Parekh. On being shown Exhibit-111 - pay-in

slip, he has stated that he used to write the narration of transaction on
the reverse of the counter-foil.
th.is was in his handwriting
The writing on front and reverse of
and on the reverse of the counter-foil
there was narration of '1500000 Reliance" besides the figures of two

cheques and also there was writing as "CB-4211 He has stated that it
was a ledger folio numher and 11CB" stands for Canara Bank. The cross
examination of this witness does not in any manner affect the
testimony
which he has given in his examination-in-chief. Though in
his crossexami.nation he
maintained
has stated that accused Nos. 9 and 10
carbon copy of the cheque issued on behalf of
and that there
the firm
was a narration of "500,000 REL, 2,00,000 NH and
3,00,000 AS.KNP" this statement of P.W.18 m his cross-examination

does not establish or even create a doubt that the transaction dated
10/10/1 991
119.
was a genuine transaction.
So far as P.W. 10
is concerned, the learned Counsel appearing
146
on behalf of accused Nos. 1 to 8 and 11 have not cross-examined
The only cross-examination
was
him.
by the learned Counsel appearing on
behalf of accused Nos. 9 and 10.
In the cross-examination, he
has
stated that before 1990, he was not aware whether the account of
Narbheram Harakchand
part of
was
in existence.
He
has stated that it was
his duty to verify the signatures appearing on the cheque
received by their bank for clearance and he could identify the

signature of accused No.10 on Cheque
that he
when
was
not aware whether
his statement
was
Exhibit 112.
He
has stated
he was shown statement of account
recorded by CBI.
The cross examination,
therefore, does not in, any way, further the case of the accused Nos. 9
and 10.
120. P.W. 1 1 - Kishore Ajgaonkar

Branch of Bank of India.
was
working in Stock Exchange
The cross-examination of
this witness is
declined by accused Nos.1, 2, 3, 4, 5, 7, 8, 9 & 10 and 1 1 . He was

cross-examined only by the Counsel for accused No.6.
In
his cross
examination, he has stated after perusing the Statement of Account at

Exhlbit-115 of S.K. Jhaverl th.at the entry dated 10/10/1991 for
3,30,000,00/credited to
was
Rs,
the credit entry showing that the amount was.
his account on that day. He has admitted that on the sam
..
147
day the amount of Rs 4.19 crores was credited to S.I<. Jhaveri's
account.
He has also admitted that on 11/10/1991, th.ere were two
entries; one for Rs 30,35,00,900/- and another for Rs 5 crores.
121. P.W. 19 has been cross-examined by the Counsel for all the
accused.
122. Apart from this evidence the accused No.6 has examined one
witness Nishit
Rasiklal
Joshi - DW A-6(1).
He was working as an
Accountant with Shrenikbhai Jhaveri - accused No. 6.
Accused No.7
has examined one witness Surendran Nair - DW A- 7(1) who was

working
in the Administrative Department of Nahar Group
Companies.
Accused No. 9 also has examined one witness
of
Manish
Mahendra Thakkar - DW A-9(1).
123. Thus, this is the entire evidence which is brought on record in

respect of the
accused.
first
transaction, both, by the prosecution and by the
Perusal of this evidence discloses that the prosecution has
established beyond the reasonable doubt by producing necessary

documents that the amount of Rs 17.29 crores was remitted from
Canfina to CBMF and from CBMF to the Account of accused Nos. 9 -
------
148
Ketan V. Parekh and accused No.10 - Navinchandra N. Parekh and in
respect of amounts of Rs 8.30 crores and Rs 8.99 crores in favour of
accused No.6 - S.K. Jhaveri and accused No. 7 - Pallav Seth in their
Joint Account in the Bank of America. There is no cross-examination
on the point of documents which show the remittance of the said
amount from
Canfina
to CBMF and from CBMF to the brokers viz
accused No.6, accused No.7 and accused Nos. 9 and 10.
has
Prosecution
also established that Canfina did not receive physical securities at
the time when the said amount of Rs 17.29 crores was remitted to
CBMF and false entries were created in order to show that the
transaction was entered into with Canfina for purchase of securities,
though, in fact, no transaction was taken place.
has
Though an attempt
been made on behalf of the accused to show that, in fact, the said
transaction had taken place, there is no evidence to show that on the

date on which the amount was remitted, security in physical form or
Bank Receipt was obtained as security by the Officers of Canfina.
Merely
because
the
amount
which
was
remitted
in
the
five
transactions was received back at subsequent stage, does not absolve

the accused who have taken part in the remittance of the amount. A
refund of this amount, therefore, does not absolve the Officials of the
Canfina or brokers who received the said amount and utilized the
149
same for their own purpose.
It has been established from the
Statement of Account of accused Nos.
and
and accused Nos. 9 &
10 that the amount which was received by them was utilized for their
own purposes, which has been established by number of cheques
which have been issued by them from their Account.
The
documentary evidence which is brought on record clearly establishes

the commission of the said offence by the accused. There is virtually
no cross-examination in respect of the actual remittance of the
amount and in respect of correctness of the entries which have been
made
as
Statements
also documents in respect of cheques, pay-in-slips,

of Account of Canfina
of accused Nos.
6 and 7
and CBMF
and individual Accounts
and accused Nos. 9 and 10. This evidence
establishes involvement of accused Nos. 1 and

accused No.3 from CBMF, accused Nos.
and 10 who were stock brokers.
and
from Canfina,
and accused Nos. 9
In my view, prosecution
has
established charge of criminal misappropriation under section 403,

criminal breach of trust under section 409 and criminal conspiracy
under section 120-B against the accused Nos. 1 and
accused Nos.
6, 7,
8,
3 and 1 1 and
9 and 10. Though an attempt has been made to
show that, in fact, there
was
actual
transaction of purchase
150
and sale of securities by showing certain endorsements, the defence of
accused Nos. 6 and 7 and 9 and 10 cannot be accepted. It is no doubt

true that witness of
Canfina has stated that Canfina earned profit of
about Rs 1 crores but the fact remains that a huge amount of Rs 17.29
crores
was debited without there being any physical security or
collateral security and thus the offence of temporary misappropriation

has been committed by accused Nos. 1 and 8, 3 and accused Nos. 6,
7, 9 and 10.
prosecution
So far as accused No.2 is concerned, in my view, the
has not been in a position to establish that he was a part
of the criminal conspiracy or that he had committed an
overt
act in
respect of the actual remittance of the said amount from Canfina.

Accused No.2 was working in the Back-up Department and;
as
such,
accused Nos. 1 and 8 were dealers who were authorized to enter into
deals in respect of purchase and sale of securities and on the basis of
instructions given by these two accused, the accused No.2 was asked
to make entries.
DEFENCE OF INDIVIDUAL ACCUSED
AND THEIR SUBMISSONS:
124. Now the defence of individual accused and their submissions
will be taken into consideration.
151
First transaction dated 10.10.1991 in respect

of purchase of RD.. for Rs. 17.29 crores
fromCBMF:
125.
The learned Counsel for accused No.1
S. Mohan
has
submitted that there was no conclusive proof to show that accused

No.1 had entered into such transaction.
In my view, evidence of
P.W.2, P.W.6, P.W.1, P.W. 9 and P.W.10 clearly establishes the role
played
by accused No.1.
The allegation of prosecution against
accused No.1 is that he did not have any authority, yet, he and
accused No.8 were responsible for remitting the amount of Rs 17 .29
crores in this transaction. The submission of the learned Counsel for
accused No.1 that the entries made in the Deal Pad and IBA Register
are
to be treated as ministerial acts, cannot be accepted. It was the
duty of accused No.1 to have ascertained whether the amount which

was being remitted
was
authorized by higher Officials of Canfina and
or there was proper security obtained before remitting the said

amount and, therefore, merely stating that he had done the ministerial
act will not absolve him from the commission of this offence, though
there may not be any evidence to show that, in fact, accused No.1 had
entered into any of the subject transactions of this case. Prosecution,
having established the overt act committed by accused No. l, has
proved that there was enough material to show that accused No.1 is a
-----
--------
152
part of the consprracy of siphoning of the funds from Canfina by

creating fictitious record. The accused No.1 was
creating this record.
responsible
for
The involvement of accused No.1 is more
serious, particularly because he, admittedly, had no power to enter

into these transactions.
That being the position, it
was
always open
for the accused No.1 to have asked for the proper security before
entering into transaction or he should have obtained sanction from
the higher authorities for the said transaction. This, admittedly, was
not done by accused No.1. Merely because accused No.1 was working
under accused No.8, does not absolve him from the commission of
offence. The evidence which is brought on record by the prosecution
clearly discloses that this amount of Rs. 1 7.29 crores could not have
been remitted by accused No.8 alone without the actual help and
connivance of accused No.1.
The first submission, therefore, of the
learned Counsel appearing on behalf of accused no.1 cannot be

accepted.
There is virtually no cross-examination of this witness by
the Counsel appearing on behalf of accused No. 1 .
The only attempt
has been made to establish that higher-ups were aware of the

transaction
as the notes were being put up before the Board of
Directors and Vice President. An
attempt has been made by the
accused No.1 to show that higher-up were not made accused and that
153
the accused No.1 was comparatively a lower ranking Officer. Merely
because the prosecution
has not filed any charges against the other
high ranking officers, that by itself does not take the acts committed
by accused No.1 out of the purview of the offence punishable under
the provisions of the Indian Penal Code. The second submission made
by the learned Counsel for accused No.1 is that the rough sheet is the
foremost and primary record of deals and that this evidence not
having. been brought on record, the prosecution has not established
the case in respect of remittance of Rs 17.29 crores. This submission
also cannot be accepted.
Though P.W. 2
in his evidence has stated
that entries in the Deal Pad were made on the basis of rough sheets
and
that the
rough sheets
are not brought
on record by the
prosecution does not further the case of accused No.1. The Deal Pad
entries have been proved by the prosecution.
The remittance of Rs
17.29 crores also has been proved by the prosecution and, therefore,
merely because rough sheets are not brought on record, it
said that the
case
ot be
cann
of the prosecution has not been established.
The
third submission of the learned Counsel for accused No.1 is that the
entries
in the Deal Pad and IBA Register are not relevant for deciding
the person who concluded the deal.

submitted that no witness
The learned Counsel
has
has stated that the person who made entries
154
in the
records/registers is the person who concluded the deal. He has
submitted that the witnesses have only identified the person who
made entries in the Deal Pad/IBA Register and nothing beyond that.
He submitted th.at P.W.2 has merely identified the handwriting of
accused No.1 in the Deal Pad dated 10/10/1991 at Exhibit- 59 and
also IBA Register at Exhlbit-39 and Exhibit-40 and that P.W. 6 also has
identified the handwriting of accused No.1 at Exhlbit-59 and in the
IBA register, at Exhibit-41. He submitted that P.W.2 had also some
times prepared the Deal Pad based on rough sheet.
P.W. 6 has also
stated that the Back-up Department would note all these deals in the
Deal Pad.
He further submitted that P.W. 2 has stated that he was
maintaining the IBA Register and the stock of the security register and
he was also making entry in the IBA Register on the bas of Deal Pad.
These submissions made by the learned Counsel for accused No.1
cannot
be accepted.
The fact remains that the relevant entry in the
Deal Pad concerned with the remittance of Rs 17.29 crores was made
by accused No.1 and
his
handwriting has been recognized by P.W.2
and P.W.6.
This fact has not been denied by accused No.1 either by
putting
suggestion
in
the
cross-examination
or
otherwise
establishing that the entry was not made by accused N o.1.
It is
further submitted by the learned Counse l appearing on behalf of
155
accused No.1 that the deals in question were reversed with profit and
that Canfina had earned profit of Rs 1,41,68,200/- . This also, by itself,
as stated hereinabove, does not make the transaction dear.
is
Canfina
100% subsidiary of Canara Bank which is a nationalized bank and,
as such, money which was remitted from Canfina was public money
and, therefore, the amount could not have been paid without there
being proper security in the form of physical security or atleast in the
form of Bank Receipt (BR). There
is
nothing on record to show that
any such security was obtained before remitting the said amount. The
fact th.at the amount
factors
which
will
was
returned back may be one of the mitigating
have
to
be
taken
into
consideration
while
considering the seriousness of the offence and while awarding the

sentence.
126.
also submitted that the investigation carried out by the Officer of CBI
i.e. P.W. 19 was perfunctory and not proper. He submitted that rough
sheets were not seized.
He further submitted that P.W.
19
has
admitted that he did not recollect whether he had seized the office
note put. up to the Managing Director or whether he had seized RF
diary from the Back- up Department, the ready forward note book
156
from dealing department, the vouchers in respect of these transactions

from
the Back-up
Department of Canfina
and
that though the
prosecution own witnesses have stated about these documents, the

Investigating Officer did not recollect having seized these documents.
He
submitted that the Investigating Officer did not record
statement of Mr. K.B. Shenoi and Mr. Sati.sh Shetty of Canfina.

support of
this
the
In
submission, he invited my attention to the evidence of
P.W.19 in para 18. He further submitted that the prosecution did not
examine
the
relevant witnesses
whose
statements
were
already
recorded by CBI viz. Mr. Praveen Bhat, Mr. P.N. Narayan Rao and Mr.
A.P. Rao.
He submitted that, therefore, adverse inference was liable
to be drawn against the prosecution.
It is submitted that the
prosecution has produced the evidence which
has
suited to it and has
not taken charge of I produced best evidence available so that the true
picture about the transactions in question could have been brought
before this Court.
It is lastly submitted that there was no direct or
circumstantial evidence
to establish the criminal conspiracy.
In
support of this submission, he relied upon number of judgments of the

High Courts and Apex Court.
None of these submissions can be
accepted. Merely because rough sheets have not been produced, does
not establish that the entries made in the Deal Pad were not correct.
157
Prosecution has established the
chain of circumstances right from the
Deal Pad entry till the remittance of the amount through IBA, which
was conveyed on telephone and the remittance of the amount on the
same day to CBMF and from CBMF to brokers viz. accused Nos. 6, 7, 9
and
10.
Prosecution has
established
this pattern which clearly
establishes that accused Nos. 1 and 8, 3 and accused Nos. 6, 7, 9 and

10 were aware that the said amount was likely to be received on the
same day i.e. 10/10/1991 and, therefore, though there
was
no
amount in the CBMF, remittances were made in favour of accused

Nos. 6, 7, 9 and 10. The
chain of circumstances, therefore, has been
completely established by the prosecution,
clearly pointing out
towards the guilt of the accused viz. accused Nos. 1 and 8, 3 and
and 7 and 9 and 10 so far as
127.
this particular transaction is concerned.
So far as accused No.2 - N. Balasubramaniam is concerned,
submissions made by his Counsel will have to be accepted and, in my

view, it cannot be held that the accused No.2 is involved in any of the
offences with which he is charged in the instant case.
The admitted
position is that he was working in the Back-up Department to record

the transactions put through by the dealers. He was reporting to the
Vice President Mr. K.B. Shenoi who is not made an accused in this case
158
by the prosecution.
The prosecution witness has stated that his job
was to write down the transaction put through by the Dealing

Department in the Deal Pad based on the instructions given by the
dealers in the rough sheets. He did not have any power to buy or sell
or deal in shares or securities. It has come on record in evidence that
he has not concluded or entered into any deal at any time.
The
evidence which has come on record indicates that the accused No.2
merely was given a job of recording the transactions, procedure of
purchase and sale transaction which is undertaken and it has come on
record through evidence of P.W.2 and P.W.6 which indicates that the
decision is taken by the dealers and the instructions are given to the
execution centers which are noted down by the dealers in rough
sheets.
Funds are transferred by conveying IBAs.
Then, the IBAs are
mentioned in JBA Register. Thereafter, cheques are issued to the Bank

for debiting the account and actual IBAs. The rough sheets are then
given to Back-up Department for noting the transactions in the Deal
Pad, copy of the Deal Pad is take n by the Back-up Department for
further accounting and Deal Pad is given back to the dealers. Thus, in
no
way,
the
Department
accused
was
No.2
concerned
purchase or sale of shares.
who
with
was
the
working
actual
in the
decisions
Back-up
regarding
159
128.
So far as the cheques are concerned, initially, the cheques
were signed by one official. Latter on, the cheques were signed jointly
by any two officials viz. Ashok Kumar Kini, K.B. Shenoi, P.N. Narayan
Rao and accused N o.2. It has to be noted here that the cheques in this
transaction appear to have been signed as a mere formality since the
transactions
had
already been carried
out and
the
funds
were
transferred by the dealers by conveying IBA numbers. In view of this

evidence which is on record, accused No.2 cannot be said to be a
member of the criminal conspiracy as he was acting under the Vice
President Mr. K.B. Shenoi who also has not been made as an accused.
Similarly, other persons, who have signed the cheques also are not
made as accused.
On the same analogy, therefore, it cannot be said
that accused No.2 was a co-conspirator who had taken part m

remitting the money illegally from Canfina.
The accused No.2 is,
therefore acquitted of all the allegations and charges which are

levelled against him.
129.
It is submitted that accused No.3 - B.R. Acharya was not
having mens rea and was not involved in conspiracy with any of the
accused as alleged by the CBI.
Secondly, it is submitted th.at the
160
ingredient "dishonestly misappropriates" as is found in section 403

and 405, has not been established by the prosecution particularly in
view of the definitions under section 23, 24 and 25 of the Indian Penal
Code.
He has submitted that the amount which was allegedly
remitted from CBMF to th.e brokers was returned to Canfina with a

profit of more than Rs 1 crore. It is submitted that the contents of the
vouchers and other documents have not been proved and, therefore,
no case was made out by CBI since only signatures have been proved
and not the contents.
It is submitted that the offence under section
403 has not been proved since the evidence on record shows that
there was no dishonest intention and the alleged property had not
been used for his own wrongful gain or his institution i.e. CBMF and,
therefore, it is submitted that the ingredient of section 403 regarding
"dishonestly misappropriates or converts to
property" is not satisfied.
his own use any movable
It is submitted that after the amount WB.$
received by CBMF, it was immediately
transferred
to Mr. S.I{. Jhaveri
and M/s Narbheram Harakhchand and it was not retained by th
accused No.3 in the account of CBMF and, therefore, there was no

intention or Mens rea in respect of offence under section 403 and,
therefore, there was no question of abetment as contemplated under
section 109.
It is then submitted that the money was transferred to
161
another person and, thus> the nature of transaction was between two
persons and, therefore, CBI had no locus standi to file a complaint. It
is then submitted that the offence under section 405 also is not made
out.
It is also submitted that the offence under the
sections 409, 467, 463, 471, 477-A
provisions of
have also not been established.
All these submissions cannot be accepted. The accused No.3 was the
co-conspirator and without his connivance and assistance, money

could not have been siphoned off to the brokers.
accused No.1 1 to transfer the money
He instructed
in favour of the brokers which
was done by accused No.11 at his instance.
Merely because the said
amount was returned back to Canfin.a, does not absolve the accused
No.3 of his responsibility and liability on account of temporary
misappropriation.
In my view, it is very much established by the
prosecution that the accused No.3 was a co-conspirator and, therefore,

once that is established for the actions of his other co-conspirators he
is also equally liable. The offence with which he is charged, therefore,
has been dearly established beyond the reasonable doubt.
130.
So far as accused No.4 - P.J. Subbarao is concerned, the
submissions made by the learned Counsel appearing on his behalf will

have to be accepted.
From the evidence of P.W.16 and P.W.9 it is
162
evident that accused No.4 was handling administration as well as
accounts and, therefore, he had powers to pass the accounting
vouchers, credit & debit vouchers and the accused No.4, as can be
seen from the evidence of P.W.9, was overseeing the accounts and
looking after administrative work of CBMF and he was not concerned
with the deals/transactions with. the brokers and he was also not
concerned with call money transactions or transactions of sale and
purchase of securities and equities.
P.W.l also, it can be seen that
Further, from the evidence of
his initials were taken on the vouchers
for approval of corrective measures.
In respect of transaction dated
16/1/1992, voucher at Exhibit- 106 has not been signed by accused

No.4. Then, the cheque at E:xhibit-51
No.4.
is also not signed by accused
Thus, from the entire evidence, the prosecution has not been
able to establish that the accused No.4 was connected in any way with
the criminal conspiracy of siphoning off funds from Canfina to CBMF
and from CBMF to the brokers - accused. It
has been established from
the statements of witnesses that he was not concerned with the actual
deals/transactions and he was only looking after the administrative
work.
Prosecution, therefore, has not established the case against
accused No.4 in respect of any other transactions.
163
131 .
So far as accused No. 6 - S.K. Jhaveri is concerned, the
learned Counsel appearing on his behalf has submitted that there is no

evidence regarding conspiracy and that the statements of witnesses
prove innocence of accused No.6.
P.W.9 -
Ravi
He has relied on the statement of
Tirumalai, who has stated that he personally did not
know the accused No.6 and the said witness had prepared a cheque
for Rs 12 crores in favour of accused No.6.
lt is submitted that the
offence of conspiracy and criminal breach of trust cannot be sustained

against accused No.6.
He has further submitted that the said witness
had stated that CBMF was dealing with Pallav Seth, the representative
of accuse d No.6 and that this supported the case of accused No.6 that
all dealings with Canara Bank and its Associates like CBMF, Canfina
etc were done only by Pallav Seth - accused No. 7 and th.at the accused
No.6 has no personal knowledge and is not involved in the same. The
learned Counsel further relied on the statements of the witness
wherein he has stated that he has never informed the accused No.6
that the cheque for a sum of Rs 12 crores was issued as per the
instructions
of Canfina,
statements of P.W. 1 9
Bangalore.
Further,
he
relied
on
the
Investigating Officer, who confirmed that the
cheque dated 10/10/1991 for Rs 8.99 crores was handed over to

Pall.av Seth - accused No. 7 being the representative of S.K. Jhaveri
164
accused No.6. It is then submitted th.at the accused No.6 had already
informed the Investigating Officer by reply dated 18/07/1994 that the
accused No.6 had regular transactions with Canara bank and the
cheque in question was part of such regular transactions in normal
He further invited my attention to the cross
course of business.
examination of P.W.19 wherein he
has
admitted that he did not make
any inquiry with Canara Bank as to whether accused No.6 had any
transaction other than the transaction which was the subject matter
of the special case. He invited my attention to the further evidence of
P.W.19, which, according to the learned Counsel, est.ablished that
none of the documents relied upon by the prosecution showed that
the accused No.6 was involved either in criminal conspiracy or in
diversion.
It is then submitted that the motive attributed by the
prosecution to accused No.6 was that the amount was siphoned off in
order to utilize the
learned
said
money. In support of the said submission, the
Counsel appearing on behalf of accused No.6 relied on the
statement of account of Bank of India of accused No.6 for the relevant

period.
He submitted
on the basis of the said opening and closing
balance of the said account th.at though pay-in-day of Stock Exchange

was
10th October,
1991, Stock Exchange never used to deposit
cheques of brokers on the same day and they would be deposited
165
after about two days of pay-in-day to enable the brokers to get
sufficient balance in their account by depositing the cheques collected
from clients in respect of settlement cheques. It is, therefore, argued
th.at, in the present case, the Stock Exchange deposited accused No.61s
cheque only on 11/10/1991.
Further, the learned Counsel pointed
out that the amount allegedly received by accused No.6
was not
utilized for the purpose of making payment to the creditors of accused

No.6. It is further submitted that there was no evidence to show that
the
cheque
which
was
issued
by
accused
No.6
was
without
consideration. It was therefore submitted in short that there was no

oral and documentary evidence adduced by the prosecution to prove
th.at
(a)
conspiracy;
the accused No.6 had any role to play in the alleged
(b) the accused No.6 had any knowledge that the moneys
received from Canara Ban.k/CBMF were not against any consideration;
(c) the accused No.6 induced Canara Bank/Canfina to issue the said
cheques;
(d) the cheques were without consideration; (e) there was
any deficiency in accused No.61s account on 1 1/10/1991 when the

cheque
was
deposited by Stock Exchange
(f) the accused No.6 was in
any way involved in diversion of moneys from Canfina to CBMF, {g)

the accused No.6 had misappropriated the amount.
IL_
166
132. The said submissions made by the learned Counsel appearing on
behalf of accused No.6 cannot be accepted.
It
has
already been held
that the charge of criminal conspiracy has been proved against

accused Nos. 1, 3, 6, 7, 8, 9 and 10.
conspiracy having been proved,
The alleged charge of criminal
the accused No.6 not having any
.knowledge in respect of other transactions is immaterial. Prosecution

having established that the accused No.6 was a part of the general
conspiracy and the prosecution having established the flow of money
from Canfina to CBMF and from CBMF to Bank Account of accused
No.6 and utilization of the said amount by accused No.6, it is clear
that the accused No.6 had misappropriated the amount and this was
done by virtue of the fictitious entries which were made by accused
Nos. 1, B &
3.
Though accused No.6 may have other transactions
with Canfina or Canara Bank or CBMF, yet, the fact remains that these
transactions were fictitious transactions and, therefore, charge of
temporary misappropriation has been clearly established.
Cross-examination of DW A-6(1) - Nishit Rasiklal Joshi:

133. The accused No.6 has examined his witness DW A-6(1) - Nishit
Rasiklal Doshi.
He
has
stated that in 1991 he was working as an
Accountant with Shrenikbhai Jhaveri - accused No.6. He has stated in
167
his evidence that he used to look after the accounts and make entries
from Bank counter-foils and cheque book and cheque counter foils to
the bank book and from the bank book to the ledger account of the
respective clients. He
of accused No.6.
has
stated th.at Pallav Sheth was the sub-broker
He has further stated that Pallav Sheth used to
collect orders from his own clients, execute them and receive cheques
from and issue cheques to respective clients and that Shrenik Jhaveri
had six sub-brokers besides Pallave Sheth. He has further stated that
Canara Bank and Canbank Mutual Fund were the clients of Pallav
He has stated that all transactions in respect of CBMF were
Sheth.
maintained in the account of Canara Bank and that there were

hundreds of transactions with Canara Bank and/or Canbank Mutual
Fund
in
the year 1991- 92.
1991-92 around
He further stated that during the period
170 cheques were
received
from
Canara Bank
aggregating to Rs 200 to 210 crores and around 120 cheques were

issued during this year aggregating to Rs. 110 to 115 crores. He has
further st.ated that the ledger book was maintained
transaction of Pallav Sheth with his clients.
No.1,
and
were
brought
on
record
in
respect of the
Various entries in Book

through
this
witness.
Essentially, the defence of accused No.6, apart from denial, is that

accused No. 7 was his sub-broker and he was directly dealing
with
the
168
Canara Bank and CBMF and he (accused No.6) had no connection of
whatsoever with the transaction is question and the amount which
was received was, in fact, deposited in the Joint Account and,
therefore, he had not received any amount from CBMF or Canfina and
it was accused No.7 who could be held responsible for the transaction
and not accused No.6.
134.
In
my view,
the
said
defence
accountant does not help accused No.6. It

be
number
of transactions
and
of his
evidence
is possible
that there may
during the relevant period
between
Canfina, Canara Bank and S.K. Jhaveri accused No.6. However, the
fact remaip..s that, that does not by itself make the aforesaid two
transactions legal.
It is possible that accused No.6 might have
received hundreds of crores from Canara Bank, CBMF in respect of

other transactions during the course of the year and that the said
transactions may be valid transactions.
present case, the prosecution
siphoned off and
transactions
has
particularly
The fact remains that,
in
the
established that huge amounts were

those
mentioned
in
the
aforesaid
dated 10/10/1991 etc. which were fictitious transactions
and the deal pad entries were created only
to
give an impression that
those securities were purchased, when, in fact, the record indicates
169
that no such transactions had ever taken place.
Secondly, once it is
held that there was a conspiracy to siphon off the funds, it is

immaterial whether accused No.7 was sub-broker of accused No.6 or
that accused No.6 did not have any direct dealings with Bank Officers
or
that the amount was deposited in the Joint Account of accused Nos.
6 and 7.
The fact remains that the amount was deposited in his
it
was utilized by him, though the said amount did not
belong to him.
Therefore, this witness does not take the case of
account and
accused No.6 any further and does not establish his innocence.
135.
So far
as
accused No.7 - Pallav Seth. is concerned, he was
the representative of accused No.6 and, therefore charge against

accused
No.7
also
has
been
established
from
the
oral
documentary evidence which has been brought on record.
Cross-examination of DW A-7(1)
136.
Surendran Nair :
Accused No.7 - Pallav Seth has examined
DW A-7(1)
and
170
Surendran Nair.
This witness was working in the Administrative
Department of Nahar Group of Companies. He has stated that he was

working in Mumbai Office
and that the Share
Department was
situated at Ludhiana. He has produced Share Transfer Register for the

month of March, 1992.
He has stated that as per this Register, the
folio number of Canara Bank was C00674 and the entries at serial
Nos.27273 to 28170 were concerning the transfer of shares to Canara
Bank and that, as per the said entries, various shares have been
t:ran.sferred from various transferors to Canara Bank
on
25/03/1992
and the total number of shares transferred to Canara Bank on

25/03/1992 were 85000. In the cross-examination, he has stated that
he was seeing the register for the first time and that he had no
personal knowledge about this register.
Hence, it appears that this
witness is of no assistance to accused No.7.
137.
So far as accused No.8 - M.K.. Ashok Kumar is concerned,
he was the Chief Dealer of Canfina and he had instructed accused

No.1 to make deal pad entries.
Therefore, merely because accused
No.8 may not have put his signatures on certain documents could not
171
absolve
him
from
the
comm1ss10n
of
the
said
offence.
The
submissions made by the learned Counsel appearing on behalf of

accused No.8, therefore, cannot be accepted.
138.
It
has
been established by the prosecution that the part of
the money, initially, had gone to accused No. 9

accused No. 10
Ketan V. Parekh
&
Navinchandra N. Parekh who had, in turn, retained
the amount of Rs 5 la.khs and remitted the amount of Rs 8.25 crores to

accused No.6.
Prosecution has established that the amount was
deposited in their account and , on the very same day, that amount
was remitted to accused No.6.
The submission made by the learned
Counsel for accused Nos. 9 and 10 that they had already given reply
regarding the transaction to the Investigating Officer and that shows
the genuineness of the transaction, cannot be accepted.
Once it has
been established that the prosecution has proved the charge of general
criminal conspiracy and has established the flow of the amount on the
basis of creation of fictitious record, merely because reply has been
given by accused Nos. 9 and 10 to the Investigating Officer does not
establish that it was a genuine transaction.
adverse
inference
The question of drawing
for not examining D'souza
and
also
relevant
172
witnesses also does not arise since it is a well settled position in law
that the prosecution can examine some witnesses and
if the
sufficient
evidence is brought on record it may drop examination of certain

witnesses and, in the present case, rnerely
because
some witnesses
whose statements have been recorded, have not been examined

cannot be held against the prosecution.
Cross-examination of D.W.A-9( 1)
139.
Accused No.9 has
Manish Mahendra
exam
ined DW A-9(1)
Thakkar :
Mr. Manish
Manendra Thakkar. This witness has stated that he was working with
Mis Nerbheram Harakchand and he was handling the institutions
business and his work was to deliver contracts and shares.
He was
shown two contract notes dated 27/09/1991 issued in favour of

Canara Bank.
He
has
stated that original contract notes were with
Canara Bank and that he had delivered those originals to Mr. B.R.
Acharya - accused No.3. He has further stated that accused No.3 had
put his initials by way of
acknowledgment on both these contract
notes and they were signed by accused No.9 - Ketan V. Parekh.
He
has also stated that from the delivery book of the firm K.N. Parekh, it
could be
seen
that
there
was
delivery
of
2,79 ,800
shares of
173
Reliance Jndustries to Canbank and delivery of those shares was made

on 13/10/1991.
He
has
stated
that the delivery was made to Mr.
D'Souza, the Custodial Manager of Canbank Mutual Fund and he

asked
him
these
shares.
to meet Mr. B.R. Acharya since he did not know about

He has stated that Mr. B.R. Acharya accepted the
delivery of the shares as also the first and second copy of the delivery
challan. He has stated that the
the
acknowledgment.
firm
Further,
did not receive the second copy of
he has stated
that the register
indicated that there was delivery of 2,00,000 shares of Reliance

Industries to Nerbheram Harakchand and delivery of shares was made
by
him
to Mr. D'Souza of Canbank Mutual Fund on 13/10/1991.
the cross-examination, he
has
In
stated that Mr. D'Souza was working as
Custodial Manager and he had met him many times regarding delivery
of shares to him and also had obtained
his initials as
acknowledgment.
He has stated that the contract note was issued to a party who
has
instructed the firm to buy or sell shares in their name.
has
admitted that
in the documents at Exhibits-A-9
and
He
10 the name of
I
I
I
174
Canban.k Mutual Fund was
not mentioned.
However,
he
has
volunteered to say th.at whenever they had transactions with CBMF,

they used to
be shown in their record in the name of Canara Bank.
Much emphasis was laid on the suggestion made by the prosecution to
this
witness to the effect that the person by name Mr. D'Souza was
never working with Canbank Mutual Fund.
140.
It is vehemently submitted that it was the duty of the
prosecution to bring out the correct facts before the Court.
It is
submitted that it was brought on record by the prosecution witnesses

themselves that Mr. D'Souza was a Custodial Manager and he was the
head of their Department.
suggestion
which was put
suggests that the prosecution
It is submitted that, therefore, the

to
has
this witness
in cross-examination
tried to suppress the material facts
from the Court and has purposely not examined Mr. D'Souza and,
therefore, adverse inference was liable to be drawn against the
prosecution.
141.
In my view, the evidence of
this
witness does not assist
either accused No.9 or 10. As stated by me earlier that it is possible

that there might be number of genuine transactions which were
_J
175
entered into by CBMF with these brokers and from time to time
delivery of the shares was made to Canara Bank which
was
accepted
by Mr. D'Souza or any other officials. This, however, does not make
the aforesaid
three
transactions
legal and valid.
It
has been
established by the prosecution that these transactions were fictitious

transactions
after it
was
and that the money was utilized illegally by the brokers

siphoned off from Canfina to CBMF. This defence witness
[DW-A-9(1)] therefore does not help the accused No.9.
142.
So far as accused No.11 - B.V. Srinivasan is concerned, he
was
merely a junior ranking officer who was acting on the instructions
of accused No.3 - B.R. Acharya.
From the evidence which has come
on record, it is clear that he had no other alternative but to accept the

directions which were given
by accused No.3. In my view, therefore,
the charge against accused No.11 has not been established.
Second transaction dated 22/10/1991

in re
spectofpptthasof14%NCDsfor
Rs 12gores {romcsMF:
143.
So far as
this
transaction is concerned, already the
evidence which has come on record

oral and
the
has been discussed at length. The
documentary evidence on record has
also been
176
considered. The evidence of P.W.2, P.W.6, P.W.4, P.W.9, P.W. 19,
P.W.8 conclusively establishes flow of funds from Canfina at the
behest of accused Nos. 1 and 8, false entries being made in the Deal
Pad at Exhibit- 61 in respect of IBA No. 32151. At Exhibit- 60,
Sauda
Book discloses that no entry has been made in respect of Deal Pad at
Exhibit- 61 whereas entry is made in IBA Issue Register at Exhibit-41.
The entry is in the handwriting of accused No.1.
Bangalore
has
The Canfina,
an account with Canbank in Bangalore. The cheque at
Exhibit-25 vide
cheque No.013453
was
issued
in the
name
of
"Yourselves IBA on Tamarind Lane, Bombay" and the amount was

transferred to Bombay. The Statement of Current Account at Exhibit162 discloses that the amount was passed from Canfina to CBMF.
Exhibit-26 is a credit slip of Canban.k, Bangalore Branch.
done by IBA from Bangalore. The actual IBA
days.
was
This was
received after 3 to 4
Since the amount was deposited in Canbank, Tamarind Lane,
the cheque at Exhibit-78 was issued in favour of accused No.6 - S.K.

Jhaveri and the cheque number was mentioned in voucher at Exhibit102.
The amount was deposited in joint account of accused No.6 -
S.K. Jhaveri and accused No. 7 - Pallav Seth with the Bank of America.
Pay-in-slip at Exhibit 79 shows that the amount
was
credited and
Exhibits-SO, 81, 82, 83, 84, 85 disclose that the amount is utilized by
177
accused No.6 on 22/10/1991. Prosecution, therefore, in my view,
has
dearly established the conspiracy as against accused Nos. 1, 8, 3, 6, 7,

9 and 10. I have already discussed at length the reason why I feel that
there is sufficient material to disclose the criminal conspiracy for
siphoning off funds.
For the same reasons,
in
my view, considering
the oral and documentary evidence on record, the case against the
said accused Nos. 1, 8, 3, 6, 7, 9 and 10 has been established so far as
this transaction is concerned.
144. In respect of the second transaction dated 22/10/1991, the

prosecution has examined P.W.2, 6, 19, 4, 9 and 8
In respect of
P.W.2, P.W.6 and P.W. 1 9 and P.W.9, I have already discussed the
cross-examination while dealing with the first transaction.
Since the
cross-examination of these witness has already been discussed, it is no

longer necessary again to separately deal with the cross examination
of these witnesses.
So far as remaining witnesses viz. P.W.4 & P.W.8
are concerned, P.W.4 has not been cross-examined by any of the

accused and P.W. 8 also has not been cross-examined by accused Nos.
1 to 6 & 8 to 1 1 . P.W. 8 has been cross-examined only by the learned
Counsel for accused No.7.
In cross examination, P.W. 8 was shown
Exhibit-76 which was a cheque issued
in
favour of BOA.
He
has
178
further stated in cross-exmination that whenever a cheque was issued

in favour of a person, it is credited to the account of that person only.
He has further stated that the statement of account entry at Exhibit38/1 does not indicate the cheque number.
witness
is
The evidence of
this
not shattered, in any way, by the learned Counsel for
accused No. 7
Third transaction dated 16/01/1992

in resoect of 14
%NCDs(romCBMF
for Rs 5 crores:
145.
In respect of this transaction also the amount involved is
Rs S crores. The Deal Pad is at Exhibit-62. The Sauda Book is at

Exhibits-63 and 64. Exhibit-42 is the IBA Issue Register. Exhibit-2 7 is
a cheque for Rs 5 crores.
Exhibit- 162 is the Statement of Current
Account. Exlubit-28 is the Telegraphic Transfer Form. Exhibit- 107 is

the letter disclosing IBA number. Exhibit- 106 is the voucher. Exhibit51 is the cheque. Exhibit 52 is the requisition letter of a Canara Bank
to issue banker's cheque in favour of Hiten P. Dalal. Exhibit- 121 is the
credit voucher of Andhra Bank. Exhibit 120(1) is the credit entry in
respect of cheque at Exhibit-51.
Exhibit 120(5) is the balance of
credit entries in respect of opening and closing balance.
Exhibit-122
.....-----
179
is the cheque issued by Andhra Bank in favour of Corporation Bank

which is signed by Hiten P. Dalal The accused who were involved in
this are accused Nos. 2, 4 and 5.
In
this case also, in my view, the
prosecution has established the actual siphoning off funds from

Canfina to CBMF and from CBMF to Hiten P. Dalal - accused No.S.
The Statement of Account of Hiten P. Dalal discloses that the amount
has been utilized by him . The oral and documentary evidence on

record clearly establishes the siphoning off of funds by preparing false
entries in the Deal Pad.
The submission of Mr. Kale, the learned
Counsel appearing on behalf of accused No.5 that the amount of Rs 5

crores which was paid by Hiten P. Dalal to Corporation Bank, was in
respect of adjustment of the account cannot be accepted. What is to
be seen is whether the amount was siphoned off from Canfina to
CBMF and from CBMF to the account of Hiten P. Dalal This
has been
established by the documentary and oral evidence which is adduced

by the prosecution. Once that is established, it clearly indicates that
the funds were diverted ostensibly for purchase of securities, when, in
fact, no such securities were purchased.
It is possible that accused
No.5 - Hiten P. Dalal might have given an explanation to the

Investigation
Officer
but
that
by
itself does
not
absolve
the
involvement of accused No.5 in the commission of the said offence
180
and the mere fact that the amount was returned back also does not
reduce the liability of accused No.5. Therefore, at the Canfina's end,
accused Nos. 1 & 8 were responsible for siphoning off of the amount
to CBMF from which end the accused No.3 siphoned off the money to
Hiten P. Dalal who utilized it and, thereafter, returned it illegally back
to Canfina.
Thus, therefore, the case of conspiracy has been
established. Charge No.1 has been established against accused No.5.

Similarly, the charge of temporary misappropriation also has been
established as also the charge of abetment of criminal breach of trust
by accused No.5 has been established.
146. In respect of the third transaction dated 16/01/1992, the

prosecution has examined P.W.1, 6, 2, 19, 4 and 12. I have discussed
the cross-examination of P.W.1, P.W.2, P.W.6, P.W.19 and P.W.4 while
considering the first transaction and, therefore, it is not necessary to
again restate their cross-examination while considering the third

transaction.
So far
as
P.W.12 is concerned, he has been cross-
examined by the learned Counsel for accused No.5. This witness was
shown
cheque
dated
16/01/1992
Exhibit-51
being
cheque
No.58/664. He was also shown a Credit Voucher - Exhibit-121. He
has stated that in this voucher although there
is a mention of Rs
--
IL
181
crores and Rs 1,52,55,290/- the cheque Numbers are different i.e.

992040 and 202837 which do not tally with cheque at Exhibit-51. He
has stated as under:-
"This means that the voucher Ex. 121
does not relate to the cheuqe Ex. 51."
He has further stated that the closing balance of the previous day was
the opening balance of the next day. His attention was drawn to the
statement of account Exhibit-120.
balance
was
He has stated that the closing
Rs 2,24,70,386.12. He was also shown
memo from
Canara Bank dated 16/01/1992. He has stated that this refers to the
said cheque of Rs 5 crores as mentioned in the credit voucher at
Exhibit-121. The memo was t.aken on record as Exhibit A-5 (1).
this cross-examination, what is suggested and argued by
By
Mr. Kale, the
learned Counsel appearing on behalf of accused No.5 that the cheque

at Exhibit-51
was
issued in favour of yourself and that the cheque
number of Exhibit-51 and cheque number in the Credit Voucher at

Exh.ibit-121 are different and, therefore, there was no evidence to
show that the amount which was remitted by Canfina to CBMF was
further remitted to accused No.5.
It is no doubt true th.at the cheque
number which is shown at Credit Voucher - Exhibit-121 is 992040
..
182
dated 16/01/1992 and the cheque number at Exh.ibit-5 1 is 587664
and that there is a difference in the cheque number as shown in
Exhibit-121 and Exhibit-51. Even if it is assumed that the cheque at
Exhibit 51
was,
in fact, issued in the
name
of yourself, the fact remains
that the amount of Rs 5 crores was remitted from CBMF to the account
of accused No. 5 - Hiten P. Dalal.
In my view, variation of cheque
number of Canara Bank at Exhibit-51 and Pay Order by which the

amount was credited to the Andhra Bank in Hiten P. Dalal's account
does not assist the accused.
The relevant voucher at Exhibit-121
clearly shows that CBMF deposited the money through their cheque
with Canara Bank, who, in tum, issued a cheque of different number
as
per instructions of CBMF favouring accused No.S's account in
Andhra Bank which is at Exhibit-119 and Exhibit-52. Exhibit- 119 is a

letter written by the Chief Officer, Andhra Bank to the Superintendent
of Police. In the said letter it is mentioned that the cheque No. 587664
which is a cheque at Exhibit-51 for Rs 5 crores was issued by Canbank
Mutual Fund on their CD a/c.3914 with Canara Bank and this was not
a bankers' pay order.
He has further stated that Andhra Bank has
received pay order No.992040 dated 16/01/1992 from Canara Bank

with a covering letter to credit the amount to H.P. Dalal's account and
the xerox copy of the relevant letter
was
also enclosed. The emphasis
__J
183
laid by Mr. Kale, the learned Counsel appearing on behalf of accused
No.5 on the variation in the cheque number at Exhibit-5 1 and at

Exhibit-121, therefore, does not change the complexion of the case.
The fact remains that it has been established by the prosecution that
the amount of Rs 5 crores was deposited in the account of Hiten P.
Dalal.
What accused No.5 has done in this case is immaterial.
An
attempt has been made to show that the said amount of Rs S crores
was paid by him to the Corporation Bank for the purpose of
adjustment.
In my view, once it is established that all the accused
were part of the same conspiracy for siphoning off the funds and it is
established that the funds were deposited in the account of accused
No.5, it cannot be said that accused No.5 was not involved either in
conspiracy or in misappropriation of the amount for his own use.
Fourth
transaction dated 07/02/1992 in

resped:.of 17% NCDslrom CBMF for Rs.5 crores:
beneficiary
of
this
147.
The
transaction
was
Manubhai
Maniklal.
Prosecution has not pressed the charges in respect of this
transaction since the beneficiary in this transaction has expired and

the case against him has abated. Hence, it is not necessary to discuss
the evidence in respect of this transaction.
184
Fifth transaction dated 11/02/1992 in
resoect of 14% NCDs from C8MF for

Rs. 7 crores;
148.
Though the prosecution has led oral and documentary
evidence in respect of this transaction, at the time of oral arguments

Mr. V.G. Pradhan, the learned Special Public Prosecutor appearing on
behalf of CBI did not press the charges in respect of this transaction
since the beneficiary of this transaction viz. Manubhai Maniklal has
expired. Hence, it is not necessary to discuss the evidence in respect
of this transaction.
Further
149.
Diversion & Reversal:
I have already discussed at length the evidence which has
been led by the prosecution.
I have already noted that the
prosecution has established that the amount which
was
siphoned off
from Canfina was reverted back to it in an illegal manner.
This
evidence clearly discloses that there was no regular transaction in

respect of purchase of so-called NCO securities nor sale of these
securities and that the money had been illegally siphoned off and it
was temporary misappropriation by the brokers who utilized the
money for their own purposes and latter on remitted the money back
185
through accused Nos. 6 and 7.
Prosecution has established the
rversal of the transaction by bringing on record documentary

evidence in the form of Deal Pad Entry at Exhibit-48, IBA at Exhibit70, the relevant entry at Exhibit-45, Deal Pad at Exhibits-46 & 47, the
cheque at Exhibit-33, Statement of Current Account at Exhibit-162,
credit slip at Exhibit-34, the cheque at Exh.toit-76 issued favoring Bank
of America, Pay-in-slip at Exhibit-77, Statement of Account at Exhibit38, Sauda Book at Exhibit-60. The amount which was brought back
through V.B. Desai - broker on behalf of accused No.7 is at Exhibit124.
Exhibit-70 discloses that sale of securities was false and there
was, in fact, no transaction. It is no doubt true that the prosecution

witness has admitted in the cross-examination that Canfina earned
profit of more than Rs 1 crore in respect of the said transaction.
However, merely because the amount
was
returned back, does not
establish the innocence of the accused. That may be a factor which

may be taken into consideration at the time of awarding sentence.
150.
was
It is strenuously urged on behalf of the accused that there

no dishonest intention and that the refund of the amount clearly
discloses that the accused never wanted to misappropriate the said

amount and that the said transaction was a regular transaction in
I
_J
186
respect of purchase and sale of securities. This has been the consistent
theme of the Counsel appearing on behalf of the accused. It has also
been argued that the accused had already given explanation in respect
of the transaction when notice was issued to them by the Investigating
Officer under section 91 of the Criminal Procedure Code and that it
was a duty of the Investigating Officer to have verified the said
explanation by making inquiry with the Canara Bank and CBMF and
the 1.0. failing to do so, the case against the accused had not been
established beyond the reasonable doubt. It is also argued that it is
the duty of the prosecution to place relevant material before the Court
so that the Court can give its finding whether the accused are guilty or
not of the alleged charges which are levelled against the accused. It is
also strenuously urged that adverse inference was liable to be drawn
against the
prosecution for non-examination of the important
witnesses. It is also urged that some of the persons who were named
as accused were later on dropped and no explanation has been given
by the prosecution as
to
why these accused were not being
prosecuted.
All these submissions have already been considered in
respect of
other transactions and for the same reasons, the said
submissions cannot be accepted. The important factor which has to

be considered is that in respect of these transactions the material on
__
187
record dearly discloses that (a) there was no real or genuine

transaction
of either purchase or sale of securities,
(b) entries were
made in the Deal Pad and other vouchers to create an impression th.at,
in fact, there
was
a purchase of sale of securities, when, in fact, there
was no such transaction, (c) CBMF was used as a conduit to siphon off
the amount.
On the one hand it
was
shown as if the amount was
wrongly received from Canfina to CBl'AF and that amount which
was
wrongly received was to be repaid back & at the same time,
this
amount was siphoned off to

purposes.
the brokers who utilized it for their own
The accused Nos. 6 and 7 received almost about Rs 24
crores and these
two
accused received the maximum benefit.
accused Nos. 9 and 10 also were used as conduit to
transfer
The
the funds
from CBMF to accused Nos. 6 & 7 and they retained the amount of Rs
5 lakhs and remitted Rs 8.25 crores to the account of accused Nos. 6

& 7.
The accused No.S received Rs S crores.
remitted back by accused No.7.
This amount was
Though an attempt was made to
show that, in fact, the amount was received
from purchase of
securities such as 11RJL'1 by showing the counter-foil and the notings on

the counter-foil, that does not establish that, in fact, these securities
were either purchased or sold. Canfina itself is a Company which was
authorized to buy and sale securities and, therefore, there was no
__
188
reason to buy or sell these securities through CBMF. It is brought on
record that CBMF was not dealing either
in purchase or sale of
securities on behalf of Canfi.na. If at all Canfina wanted to buy or sell

securities, it could have done so directly through brokers.
For
all
these reasons, therefore, the submissions made on behalf of the

accused cannot be accepted.
151. In respect of the reversal of the transaction, prosecution has

examined P.W.13, P.W.6, P.W.2, P.W. 19, P.W.8, P.W.6, P.W.17 and
P.W.7.
1 have already considered the cross-examination of P.W.6,
P.W.2,
P.W.1 9,
transaction.
P.W.8
and
P.W.6
while
considering
the
first
So far as the remaining three witnesses viz. P.W. 13,
P.W.17 and P.W.7 are concerned, none of the Counsel for accused has
cross-examined
P.W.13
Omprakash
Kuckian.
This
witness
was
examined for the purpose of proving reversal of the transaction and he

has stated that he used to maintain Register No.VJ and that the entries
were made in the Register on the basis of the documents like purchase
or sale memo and that he had made an entry of Rs 53,77,82,500/
which was in his handwriting and this was in respect of the cheque
received from V.B. Desai.
was
He has also stated that in this entry there
no reference to the nature of transaction i.e. whether it was a
189
purchase or sale transaction. The entry
124.
has
been exhibited at Exhibit-
He has stated that the amount mentioned in the entry was
transferred to
Bangalore under the IBA No.F/214/92.
Thus th.is
evidence has not been challenged which indicates that the reversal
has
been made though there was no purchase or sale transaction entered

into by any of the brokers or by the dealers of Canfina. P.W. 1 7 also
has been cross-examined by the learned Counsel for accused No. 7.
P.W.1 7 - Yogesh Bhambardekar was working with Bombay Stock
Exchange and he has stated that he maintained the quotation for the
month of March, 1992 & April 1992. The learned Counsel for accused
No. 7 has cross-examined this witness and in cross-examination he has
stated that
if the
and
if the
quotation
quotation
is
is received ''X
Right" then it is so recorded
with "X Right" then
the quotation is inclusive of
right.
"XR" is
written, otherwise
He has denied the suggestion that
the quotations recorded on 25/03/1992 are X Right.
He was shown
quotation dated 21/02/1992. He has stated that the quotation was
in
respect of Nahar Spinning and on that day the quotations were 800850.
The quotation has been exhibited at Exhibit A- 7(1).
He has
further stated that on the earlier day i.e. on 20/02/1992 the quotation
of
on
Nahar Spinning was 1400-1600.

record at
----- - - -
The said page was also brought
Exhibit A-7(2) and the relevant
entry
is at Exhibit-
_J
- --
--------
190
A-7(2) (A)(l). In my view, the cross-examination of this witness does
not change his original testimony
as
given by him
in his
examination-
inchief.
Now, I would like to consider whether accused Nos.I, 2, 3,
152.
4, 8 and 11 are public servants within the meaning of section 21 of

the Indian Penal code and whether the provisions of Prevention of
Corruption Act are attracted in their case and, secondly, whether the
sanction
to prosecute
was properly granted
by the
sanctioning
authority in respect of the accused who were in service at the time

when the charge- sheet was filed.
Whetberthe sanctionaccordedtoprosecute accused Nos. 2 & 4 is

os.I.2.3.4.s&11 are
PIO.P
eran
d validandwhetheraccusedN
the provisions of the
of
public seryants within the meaning
Prevention ofCorryptionAct. 1988?
153.
Jn the present case, Canfina is a Company incorporated
under the Companies Act
and
is lOOo/o subsidiary of the Canara Bank
which is, admittedly, a Nationalized Bank. CBMF is a trust registered

under the Indian Trusts Act and the Ca nara Bank is the settler of the
Trust.
Accused No.l - S. Mohan and Accused No. 8 - M.K. Ashok
Kumar who were working with Canfina were removed from service
----I-'
191
during investigation.
accused No.1 1
of investigation.
Similarly, accused No. 3 - B. Acharya and
B.V. Srinivasan also had left service during the course

So far as accused No.2
- N. Balasubramaniam is
concerned, Mr. K. N. Karnath, Chairman and Managing Director,

Canbank Financial Services Ltd, has accorded sanction under section
19(1 ) (c) of the Prevention of Corruption Act, 1988 dated 23/2/1996
for prosecution of the said accused. Similarly, Mr. G.A. Shenai, Chief
Executive Officer of Canbanl< Mutual Fund also has accorded sanction
under section 19(1) (c) of the Prevention of Corruption Act, 1988 by
letter dated 04/03/1996 for prosecution of
accused No. 4 - P.J.
Subbararo.
154.
It has been urged by the learned Counsel appearing on
behalf of accused No. 4 - PJ. Subbarao that he

the CBMF which is a registered Trust.
was
an employee of
He is not a public servant
within the meaning of section 2(c) of the Prevention of Corruption

Act, 1988.
He submitted that, therefore, the charges under section
13(l)(c) reatl with section 13(2) are not attracted. In respect of the
said submission he relied upon the judgment of the Apex Court in the
case of
Canara Bank and Others Vs. National Thermal Power
Corporation and another reported in (2001) 1 sec 43. The learned
I
I
_J
l-
192
Counsel appearing on behalf of accused No.4 has also submitted th.at
the sanction was not properly given and there was non-application of
mind.
Similar submissions have been made by the learned Counsel
appearing on behalf of accused No.2 in respect of the sanction

accorded by Mr. K. N. Karnath
155.
P.W.14.
On the other hand, Mr. V.G. Pradhan, the learned Special
Public Prosecutor appearing on be.half of CBI relied on the provisions

of section 2(c)(viii) of the Prevention of Corruption Act.
He also
invited my attention to dictionary meaning of the term community at

large in Prem's Judicial Dictionary as also in P. Ramanatha Aiyar's the
Law Lexicon.
156.
In the present case, it is an admitted position that the
Canara Bank is a Nationalized Bank and, therefore, the employees of

Canara Bank and Canfina who is the 1 OOo/o subsidiary of the Canara
bank are, therefore, public servants falling withih the definition of
section 2 (c) of the Prevention of Corruption Act, 1988.
So far as
employees of CBMF are concerned, in my view, it will have to be held

that they are public servants within the meaning of provisions of
section 2(b)(c) of the Prevention of Corruption Act, 1988.
It will be
193
relevant to refer to the provisions of section 2(c) (viii) of the said Act
which reads as under:-
112. Definitions.- In this Act, unless the

context other wise requires:(a) ............ .
(b) ............
(c) ..public servant" means , (i) ............ .
.
(ii)
(ill) ............ .
.........
(iv) ............ .
(v)
.......
(vi) ............
(vii)
(viii) any person who holds an office
.
by virtue of which he is authorized

or required to perform any public
duty;"
The requirement, therefore, under sub-clause (viii) of clause (c) of

section 2 is that the person who is authorized or required to perform
any public duty by virtue of his office is, therefore, deemed to be a
public servant. In this context, therefore, the definition of public duty
is important. In the present case, CBMF undertook purchase and sale
of public securities on behalf of small and large investors in ordet to
ensure that they receive handsome profit in respect of the funds which
are invested by the community at large. The word "community", as
_J
194
has been defined in the Law Lexicon, reads as under:-
"Community. Joint ownership or common

position in regard
to something (as)
community
of goods
or
of interests;
society or body of people living in the same

place, under the same law and regulations,
and
who have
common
rights
and
privileges; a corporation or body politic.
11The community11 means the public generally.

A body of people organised into a political,
municipal or social unity [S.12, I.P.C.]
COMMUNITY ; MUTUALITY ; UNITY. A
species of partnership interest arising upon

marriage
in
property
acquired
during
coverture,- legal when it arises by operation

of
law,
conventional
when
created
by
express contract; a society having common

political interests.
Community,
Society.
Community
anything
constitutes a community ; a
common interest, a common language, a
common government, is the basis of that
community which is formed by any number

of individuals ; the coming together of my
and keeping together under given law aftd
fot given purposes constitutes a society ;
satieties are either public or priv::lte
accbrding
to the purpose : friends form
'
I
societies for pleasure, persons form societies
for business.
The
term
community is
appropriately applied to indefinite numbers,

and society in cases where the number is
restricted by the nature of the union."
Similarly, the word "community" has been defined in the World Book
195
Dictionary, which reads as under:-
"community (ke myu1na te), n. pl. -ties, adj.

-n. 1. all the people living in the same place
and subject to the same laws; the people of
any district or town:
This lake provides
water for six communities. Before civilization

the size of communities was very smal.1; large
numbers of great cities are phenomena of the
last hundred years (Ogburn and Nim.koff).
2 a group of people living together or
sharing something in common, such as
interests or vocations: a community of
the scientific community. SYN :

fellowship, society, association. 3 ownership
together; a sharing together : community of
food supplies, community of ideas. SYN:
partnership. 4 Figurative. a group of animals
monks,
or plants living together; any group of

related
mutually
organisms.
SYN:
colony. 5 like-ness, similarity; identity:
community of interests causes people to work

together. SYN: affinity adj. 1 of or having
to do with a community: community
development. 2 for or shared by a
community:
a
community house,
a
community playground.. 3 owned jointly or
-
in common, especially by a husband and

..:.&
wue.
-
The
conjoint
community,
II
reading
therefore,
of
section
clearly
implies
registered by the Nationalized Bank

undertakes
activities
2(b)(c) (viii)
as
that
with
the Trust
the
word
which
is
its principal settler, therefore,
on behalf of the Nationalized
therefore, employees of such a Trust perform public duty.
Bank
and,
Similarly,
196
the term "public duty" which is defined m section 2(b) and more
particularly the explanation which is given beneath the said definition
discloses that the word "State" includes a corporation established by or
under
Central, Provincial, or State Act, or an authority or a body
owned or controlled
or aided by the Government or a Government
company as defined in section 617 of the Companies Act, 1956 (1 of
1956). CBMF, therefore, controlled or aided by the Nationalized Bank

would squarely fall within the definition of "State" as defined in the
said explanation and, therefore, the employees of such a Trust would
be
public
servants
within the definition of section 2 (c) of the
Prevention of Corruption Act, 1988.
15 7.
has relied on the judgment in the case of Canara Bank & Others
(supra).
Jn my view,
ratio of the said judgment would not apply to the
facts of the present case. Jn the first place, the issue which was before
the Apex Court in the said case was
not
under the Prevention of
(:orruption Act and, therefore, the question before the Apex Court in
the said case was not whether employees of such a Trust are public
servants within the meaning of section 2(c) (viii) of the said Act.
the said case the appellants were Canara Bank and others,
In
were
_J
197
aggrieved by the judgment of the High Court in Company Appeals
Nos. 23 and 22 of 1996 by which the orders passed by the Company
Law Board had been set aside and the disputes allegedly existing
between the parties were referred to the high-powered Committee. It
was contended before the Apex Court in the said case that the dictum
of the Apex Court in ONGC's case [1995 Supp (4) SCC 541] was not
applicable to the facts of the cases under appeals since there did not
exist a genuine dispute between the parties which could be referred to
the high-powered Committee. Jn the ONGC's case the Apex Court has
observed that the disputes between two public undertakings and
particularly frivolous litigation between government departments and
public sector undertakings of the Union of India should not be dragged
in courts and be amicably resolved by the Committee.
In the context
of the said case, the Apex Court observed th.at the rafio of the
-
judgment of the Apex Court in ONGC's case was not applicable in the
facts of the said case and while ooming to the conclusion has made
general observations which reads as under:-
"The Trustees of the Trust constituted by

Canara Bank as Settlor for the benefit of
numerous unit holders cannot be termed
and
styled
as
government company or
198
public sector undertak ing.
This observation
has
11
to be read in the context in which it was made.
The Apex Court was considering the dispute between the two public
sector undertakings and whether the dispute was frivolous and
imaginary and, in the light of the ratio in ONGC's case, it observed

that the trustees of the Trust constituted by the Canara Bank as settlor
could not be
termed
as government company
or public sector
undertaking. In my view ratio of the said judgment will not apply to

the
facts
of the
present
case.
The
question
which
falls
for
consideration before this Court is whether the employees of such. a

Trust are public servants within the meaning of section 2(c)(viii) oI
the Prevention of Corruption Act. The said observations of the Apex
Court in the said case, therefore, will not apply to the facts of the
present case. It is a settled position in law that the judgment of the
Apex Court should not be read as statute and the ratio of the
judgments
has
to be interpreted in the facts and circumstances of the
said case. It has also been held that
if the
facts
said ratio will not apply to any other case.
are
different then the
The apex Court in Zee
Telefilnis Ltd. and another vs. Union of India and others reported in
(2005) 4 sec 649
has
observed in paras 254, 255 & 256 as under:-
199
"Precedent
254.
Are we bound hands and feet by
Pradeep Kumar Biswas (2002) 5 SCC 111? The

answer to the question must be found in the
law of precedent. A decision, it is trite, should
not be read as a statute.
A decision is an
authority for the questions of law determined

by it. Such a question is determined having
regard to the fact situation obtaining therein.
While applying the ratio, the court may not pick
out a word or a sentence from the judgment
divorced from the context in which the said
question arose for consideration.
A judgment,
as is well known, must be read in its entirety

and
the
receive
observations
consideration
made
in
the
therein
light
should
of
the
questions raised before it. (See Punjab National
Bank v. R.L. Vaid (2004) 7 sec 698).
255.
Although decisions are galore on
this point, we may refer to a recent one in State
of Gujarat v. Akh.il Gujarat Pravasi V.S.

Mahamandal (2004) 5 SCC 155 wherein this
Court held : (SCC p. 172, para 19)
"It is trite that any observation made
during the course of reasoning in a judgment
should not be read divorced from the context in
which it was used."
256.
It is further well settled that a
decision is not an authority for a proposition

which did not fall for its consideration.
It is
also a trite law th.at a point not raised before a

court would not be an authority on the said
question.
In A-One Granites v. State of U.P.
(2001) 3 SCC 537 it is stated as follows : (SCC

p. 543, para 11)
_J
200
1111. This question was considered by the

Court of Appeal in Lancaster Motor Co.
(London) Ltd. v. Bremith Ltd. (1941) 1 KB 675
and it was laid down that when non
consideration was given to the question, the
decision cannot be said to be binding and
precedents sub silentio and without arguments
are of no moment"
[See also State of U.P. v. Synthetics and
Chemicals Ltd. (1991) 4 SCC 139, Amit Das v.
State of Bihar (2000) 5 SCC 488 (SCC para 20),
Bhavnagar University v. Palitana Sugar Mills (P)

Ltd. (2003) 2 SCC 111, Cement Corpn. of India
Ltd. v. Purya (2004) 8 SCC 270, Bharat Forge
Co. Ltd. v. Uttam Manohar Naknte (2005) 2 SCC
489 and Kalyan Chandra Sarkar v. Rajesh
Ranjan (2005) 2 SCC 42, See para 42.]"
In my view, the ratio of the said judgment squarely applies to the facts
of the present case. For the said reasons the judgment of the Apex
Court in Canara Bank & Others (supra) will not apply to the facts of
the present case.
158.
I am, therefore, of the opinion that the employees of CBMF
would squarely fall within the meaning of definition of "public

servant" as defined in section (2) (c)(viii) of the Prevention of
Corrupti.on Act.
159.
So far as submission of the learned Counsel appearing on
_J
201
behalf of accused No.2 regarding sanction is concerned, in my view.
Mr. K.N. Karnath - P.W.14 has, in his evidence, stated that whenever
reference
was
made by CBI seeking sanction, he used to go through
the records concerning the person working in the Department of

Canfina and get clarifications whenever he had doubt and, after
getting convinced that prima facie case of commission and omission
had been made out, he would accord sanction. He further stated that
with regard to the particulars mentioned in sanction order at Exhibit127,
he
has
documents
verified
the
original books
of
Canfina
and
other
and that he had followed the same procedure
for
according sanction against accused No.2 - N. Balasubramaniam.

has further stated that after having gone through the record
was placed before
he
accorded
him,
he decided that prosecution
sanction to prosecute
was
accused No.2.
He
which
required and
In the cross
examination of this witness, much emphasis was led on the draft

sanction and this witness has stated in
his
cross-examination that he
did not recollect how many volumes were there. Nothing much turns
on the cross-examination. A suggestion was put to him that there was
arbitration proceedings between Canfina and Canbank Mutual Fund
and that the case was presented by him before the arbitrator and that
all the funds
which were
given under the transactions involved in this
_J
202
case were received back on 31/03/1992. Further, suggestion was put
that the sanction
was
given by
him to take revenge against accused
No.2 since he had filed Writ Petition in the High Court when he was
the Managing Director of Canfina.
suggestion which has been put to
Nothing turns on the said
this witness. The fact remains that
P.W.14 had applied his mind to the papers which were produced
before
him and he has arrived at a conclusion that it was necessary to
grant sanction to prosecute.
I, therefore, hold that there is no
infirmity in the sanction which is granted by P.W.14 to prosecute

accused No.2
160.
So far as submission of accused No.4 is concerned on the
point of grant of sanction by P.W. 15 - G.A. Shenai, in my view,

submission that there was non-application of mind on the part of
sanctioning authority and therefore the sanction order was improper,
cannot be accepted.
P.W. 15 in
his evidence has stated that the
particulars mentioned in the sanction order were provided to
him by
the Legal Department and he had gone through the details of the
transaction and found that there is prima facie case against accused
No. 4 - P. J. Subbarao and, therefore, he issued sanction order. In the
cross-examination by the Counsel for accused No.4, a suggestion was
_J
203
put to him that the letters were addressed by accused No.4 to him.
However, the witness has stated that he did not remember whether
there was any correspondence between him and accused No.4.
He,
therefore, did not admit or deny the suggestion that he was not
conversant with the signature or handwriting of accused No.4.
He
also did not remember having received any draft sanction order from
CBI.
He was shown letter dated 15/4/1993 - Exhibit-A-1 (1) and he
has stated that he did not remember that this letter was placed before
him by the Legal Department and that the letter was not connected to
CBMF but was connected to Canfina. He was also shown two cheques
dated 19/01/1992 for Rs 5 crores at E:xhibit-108 and cheque dated
11/02/1992 for Rs 7 crores at Exhibit- 109 and he has stated that,
according to him, these cheques may not have been placed before him
by the Legal Department.
He
also
admitted that he was not in the
Canbank Mutual Fund during the relevant period. He has also stated
that the entire charge-sheet of the case was not placed before him by
the CBI. A question was asked, apart from the material mentioned in
the sanction order, no other material was placed before him by CBI
and to
this question
this witness has answered that whatever material
that was relevant for sanction was placed before him.

therefore, from the evidence of
this
In my view,
witness, it cannot be said that
204
there was non-application of mind on the part of P.W.15 for granting
sanction to prosecute accused No.4.
The submi ssion of the learned
Counsel appearing on behalf of accused No.4 in respect of sanction

being
invalid.
cannot be
accepted.
For
the
same reasons
the
submissions made by the learned Counsel appearing on behalf of

accused No. 3 - B.R. Acharya
that
the employees of CB'MF are not
public servants cannot be accepted.
161.
It is necessary to consider the
relevant sections
in order
to examine whether the prosecution has proved the charges vis-a-vis

the aforesaid sections against the accused. The accused have been
charged in the following manner:-
Accused Nos.1, 2, 3, 4, 8 and 1 1 are employees of

Canfina & CBMF and they have been charged under
sections, 120-B, 403, 405, 409, 467, 471, and
477A
of the IPC and section 13(1)(c) read with section 13(2) of

the Prevention of Corruption Act, 1988
Accused Nos. 5, 6, 7, 9 and 10 are the brokers who

are charged under sections 120-B, 403, 409 of the IPC
and for abetment under section 109 read with sections
403, 405, 409, 471, 477A, 467, and section 13(1)(c) read
205
with section 13 (2) of the Prevention of Corruption Act,
1 988.
162.
For proving the offence under IPC with which the accused
have been charged and more particularly sections 403, 405, 409, the
burden is on the prosecution to establish the dishonest intention on
the part of
the
accused
and,
therefore, definition of the word
"dishonestly" becomes relevant.
This is defined under sections 24 of
the Indian Penal Code. It is, therefore, necessary to examine the

individual section and see whether the prosecution
has proved, beyond
reasonable doubt, that the accused have committed the said offences
with which they are charged.
Section 24
of the Indian Penal Code,
reads as under:-
024.
"Dishonestly".-
Whoever
does
anything with the intention of causing

wrongful gain to one person or WTongful
loss to another person, is said to do th.at
thing "dishonestly".
206
The definition of the said provision becomes relevant in view of the

fact that this word is used in section 403 and section 405. Section
403 reads
as
under:-
"403.
Dishonest misappropriation
property.-
Whoever
of
dishonestly
misappropriates or converts to his own use

any movable property, shall be punished with
imprisonment of either description for a term
which may extend to two years, or with fine,
or with both.
Explanation-I - A dishonest misappropriation

for a time only is a misappropriation with the
meaning of this section.
Explanation- 2 - A person who finds property

not iii the possession of any other person, and
takes such property for
the purpose of
protecting it for, or of restoring it to, the

owner does not take or misappropriate it
dishonestly, and is not guilty of an offence;
but he is guilty of the offence above defined,
if he appropriates it to his own use, when he
knows or has the means of discovering the
207
owner, or before
he has used reasonable
means to discover and give notice to the

owner and has kept the property a reasonable
time to enable the owner to
claim it.
What are reasonable means or what is a

reasonable time in such a case, i.s a question
of fact.
It is not necessary that the finder should

know who is the owner of the property, or
that any particular person is the owner of it;

it is sufficient if, at the time of appropriating
it, he does not believe it to be
his own
property, or in good faith believe that the real

owner cannot be found."
Section 405, on the other hand, defines what i.s criminal breach of
trust. In both these sections, it has to be established that the accused
has dishonestly misappropriated the property. Section 403 talks about

movable property, whereas section 405
merely talks
about
t.lie
property. From the perusal of section 403 including the explanation,
it
can be seen that the misappropriation even for temporary period

constitutes an offence under the said provision, whereas under section
405, it has to be established that the accused

property.
was
entrusted with the
The section, however, qualifies the entrustment by stating
_J
L__
208
that it should be entrusted in any manner with the property or with
the dominion over the property.
Section 409 is an aggravated form of
offence which is committed by a public servant or by banker, merchant

or agent.
In the present case, it has been urged on behalf of the
163.
accused
Nos.
to
4,
B and
11
that
there
was
no
dishonest
misappropriation and, at the highest, it is an irregularity as submitted

by
the
learned
Counsel
appearing on
behalf of accused No.3.
Secondly, it is urged that these accused were not benefited in any

manner and, therefore, it was not a conversion for their own use. It is
then argued that since the element of mens rea was not proved,
offence of criminal breach of trust
has
not been established. It is also
urged by the learned Counsel appearing on behalf of accused No.l, 3
& 8 that they had acted on the instructions of their superior officers
who were very well aware of the transactions and, therefore, it we.is
one of the many regular transactions.
It is also urged that since
money had been returned back with profit, it is established that

was
th
there
no dishonest intention and, therefore, offence under sections 403,
409 was not established.
In support of the
said
submissions, the
learned Counsel appearing on behalf of the accused
has
relied on
209
number of judgments.
164.
The learned Counsel appearing on behalf of brokers, on the
other hand, have submitted that
this was a transaction of purchase and
sale of securities and that the money was returned back and, in the
process, Ca.nfina had earned profit of more that Rs 1 crore. It is also
urged that no claim
was
arbitration proceedings.
made by Canfina against CBMF in the
Complaint was also not filed by Canfina or
CBMF and, therefore, CBI did not have any locus to file complaint
under sections 403, 405 of the IPC. It is also urged that section 403
and 405
are
mutually exclusive and the person cannot be charged
simultaneously under sections 403, 405 of the IPC.
It is urged that,
therefore, the charge of abetment to commit offence under section

13(l)(c) read with section 13(2) and the offence of forgery and
falsification of accounts also are not established.
165. I am afraid that submissions made by the learned Counsel

appearing on behalf of the accused cannot be accepted.
If the
provisions of sections 403 and 405 are examined, it can be seen th.at
the movable property in section 403 comes in possession of the
accused in some neutral manner and, thereafter, it is misappropriated
_J
210
with the dishonest intention, whereas,
so
far as section 405
is
concerned, the provision indicates that the property comes into

possession of the accused either by express entrustment or by some
process, placing the accused in the position of trust. I am of the view
that all the ingredients of sections 403 and 405 have been established
by the prosecution against accused Nos. 1, 3, 8. The prosecution has
brought
on
record
Exhibits-17
and
18
which
Resolutions, which dearly establish entrustment.
are
the
Board
Exhibit- 57 is an
Articles of Association which also authorizes the entrustment in favour

of Board of Directors who have, in tum, entrusted the property to
accused Nos. 1 and 8. The entrustment is an indisputable fact which
has not been questioned by accused Nos. 1 & 8. They have not put
any suggestion, denying the said entrustment. For the offences under
section 403, 405 and 409, dishonest intention of the accused has
to
be
established. It is quite well settled position in law that intention being

a state of mind, there cannot be direct evidence to show that the state
of mind existed. However, the conduct and overt act of the accused
can establish the dishonest intention and it is a strong circumstance
which establishes that there existed dishonest intention on the part of
the accused on the basis of conduct and over act of the accused. In the
present case, as I have already discussed, it has been established that
211
though the accused did not have power to enter into any transaction
beyond Rs 50
lakhs,
accused Nos. 1 and 8 transferred huge amounts of
Rs 17.29 crores, 12 crores and 5 crores, even if the remaining

transactions of Rs 5 crores and Rs 7 crores are excluded, by creating
false documents and making false entries showing as
if
they had
entered into a regular transaction. After having prepared the Deal Pad
entry or after having instructed accused No.2 and other Officers to
prepare Deal Pad entry, no entry was made in the Sauda Book. This is
the first act which shows dishonesty on the part of accused Nos. 1 & 8
from Canfina. Further, they did not have any authority beyond Rs 50
lakhs without obtaining sanction from the higher executive viz Board
of Directors either by way of written permission or in the form of a
Resolution by the Board. This is the second circumstance which
establishes dishonesty on the part of the said accused. The
third
circumstance which shows dishonesty on their part is that the accused

Nos. 1 & 8, without waiting to get collateral security either in the form
of physical share certificates or B.R., on the very same day transferred
the said amount of Rs 1 7.29 crores on 10/10/1991, Rs 12 crores on
22/10/1991 and Rs S crores on 16/01/1992 on the basis of telephonic
instructions and conveying IBA number which was later on put in the
register of IBAs. After having remitted the said amount, there was no
212
correspondence on their part to check whether a contract note
received from the broker or whether physical securities
are
is
received or
to see whether the said amount has reached the person to whom it
was sent. This is another circumstance which shows dishonesty on the
part of the accused. This dishonest intention is further fortified when
a
false record is prepared by accused Nos. 3 at the end of CBMF. The
vouchers at Exhibits-178 and 106 further indicates their dishonest

intention and collusion and connivance between accused Nos. 1 and 8
on the one hand and accused Nos. 3 on the other hand of the CBMF.
Accused Nos. 3 & 8 have made entries to show that as if this amount
was
wrongly remitted by Canfina to CBMF.
The honest intention
could have been seen if the amount was promptly remitted back to
Canfina. Instead of doing so, this amount is transmitted in favour of
the brokers viz accused Nos. 5, 6, 7, 9 and 10. Accused No.3 on the
one hand directs accused No.4 and 11 to prepare a cheque on
09/10/1991, though the Deal Pad entry is made by accused Nos. 1 & 8
on 10/10/1991.
The attendance register which is produced by the
prosecution shows that the accused No.3 was not present in office on
10/10/1 991 and that he had got this cheque prepared on 9/10/1991
itself. This is a clear indication of collusion between accused Nos. 1 &
8 and accused Nos. 3 and these accused, simultaneously, on the same
_J
213
day, remitted this amount to the accounts of accused Nos. 6,7,9 and
10 in respect of transaction dated 10/10/1991 and 22/10/1991 and in
favour of accused No.5 in respect of. transaction dated 16/01/199 2.
Accused Nos. 5, 6, 7, 9 and 10 were aware that the said amount was
going to be received by them, which is evident from the fact that on
the very same day, they utilized the said amount for their own
purposes. It is, therefore, clearly established that there was a
conspiracy on the part of the accused to siphon off the money in order
to enable the brokers to use that money for their own purposes. The
offence of criminal breach of trust & misappropriation has been
established against accused Nos. 1 and 8 and accused Nos. 3
brokers
therefore
have
abetted
the
said
act
of
and
criminal
misappropriation and criminal breach of trust by accused Nos. 1 and 8

and accused Nos. 3 also have abetted offence under section 13(1) (c)
read with section 13(2) of the Prevention of Corruption Act, 1988.
Merely because the said amount was remitted does not absolve the
accused from the offence of temporary misappropriation which is an
offence under section 403 of the Indian Penal Code.
Another aspect
which also proves the dishonest intention on the part of the accused is
the fact which has come on record that CBMF
was
not regularly
dealing with the purchase and sale securities on behalf of Canfina

v-
_..
_
....
..__
214
which evidence has not been challenged by any of the accused.
If
that was the admitted position, there was no occasion for accused Nos.
1 and 8 to remit
the
amount to CBMF for ma.king payment to the
brokers. Since Canfina itself was dealing in the purchase and sale of
securities, it could have directly sent the money to the brokers after
having received physical security or collateral security in the form of
B.R.
That being the position, the accused Nos. 1 and 8 who were
aware of this fact, remitted the amount to accused Nos. 3 who, in turn,
were aware that they were not dealing in purchase and sale of
securities on behalf of Canfina, yet, they remitted
accused Nos. 6,7,8, 9 & 10 and accused No.5
this
amount to
The prosecution,
therefore, has clearly established defalcation of money by

accused.
Though an attempt
has
all
the
been made to raise a defence that
these were the regular transactions and that the brokers
had
numerous
transactions with Canfina, CBMF and Canara Bank and that the
transactions in question were few of such transactions, this theory
cannot be accepted since the the prosecution has established that these
were fictitious transactions and, for that purpose, fictitious accounts
were prepared and manufactured by the accused.
the view that the defence
has
Therefore, I am of
not been in a position to establish that
there was no dishonest intention
and, on the
other hand, the
v--
_J
215
prosecution by bringing on record circumstantial evidence in the form

of documents and oral evidence established dishonest and fraudulent
intention on the part of the accused who have acted in conspiracy and
there was collusion and connivance on their part and, therefore, they
acted in furtherance of the said conspiracy which fact is established
from the chronology of events and the false documents which are
prepared. The conduct of accused No.l, 3, 5, 6, 7, 8, 9 & 10 clearly
established th.at there was a consensus and common knowledge
amongst them about the transfer of money from Canfina to CBMF and
from CBMF to brokers i.e. accused Nos.5, 6, 7, 9 & 10 and all this had
happened in clock work precision manner which could not have taken
place unless there was a collusion and connivance of the accused. An
attempt has been made by the learned Counsel appearing on behalf of
brokers viz. accused No.5, 6, 8, 9 & 10 to show that when a notice was
issued under section 91 of the Cr.P.C., they had, in advance, given this
information about the transaction to the Investigating Officer and th.at
the Investigating Officer had not verified this fact from the Canara
Bank.
An attempt also has been made to show
as
if CBMF had
wrongly received 5 lakhs shares of RJL and that they were, thereafter,
remitted to Canfina. In my view, the very fact that they had given
explanation to the Investigating Officer in their reply to the showp
_J
216
cause notice which was issued under section 91 of the Cr.P.C., in fact,
fortifies the fact of alleged conspiracy.
It indicates that
they had
already decided to create an impression that there was regular

transaction, when, in fact, such transaction did not exist which is
evident from the evidence which is discussed by me hereinabove. This
submission made by the learned Counsel appearing on behalf of the
accused, therefore, also cannot be accepted.
166.
It would be relevant also to consider the provisions of
section 13(1)(c) and 13(2) of the Prevention of Corruption Act, 1988

which reads
as
under:-
13. Criminal misconduct by

servant.-(1)
commit
public
a public servant is said to
the
offence
of
criminal
misconduct,(a) ...............
(b)
(c)
.............
if
he
dishonestly
or
fraudulently
misappropriates or otherwise converts for

his own use any property entrusted to him
or under his control as a public servant or
allows any other person so to do; or"
(d) ..... . . . . . . . . . . . .
217
(i) ........... . .............
..
(ii) ...................... .
(m) ..................... .
(e) ............................ .
lClF1.Cll.itJ11.(2)
...
Any public servant who commits
criminal misconduct shall be punishable
with imprisonment for a term which shall

be not less than one year but which may
extend to seven years and shall also be
liable to fine.''
In the present case, I have already held that accused Nos.1, 3, 8
are
public servants within the meaning of section 2(c) of the Prevention of

Corruption Act, 1988.
I have given detailed reasons to indicate that
accused Nos.1 and 8 did not have requisite authority and they had
dishonestly misappropriated the property which was under their
control and siphoned off the funds so as to enable accused Nos. 5,6,7,9
and 10 to utilize the funds for their own purposes.
who was
an
Accused Nos. 3
employee of CBMF has dishonestly and fraudulently
misappropriated the amount which was remitted to CBMF and the said
amount was diverted to brokers Le. accused Nos. 5, 6, 7, 9 and 10. He
has, therefore, committed an offence punishable under section

13(1)(c) read with section 13(2) of the Prevention of Corruption Act
and the accused Nos. 5, 6, 7, 8, 9 & 10 have abetted these public
servants in the commission of the said offence and, therefore, they are
also liable for abetment for the offence punishable under section
13(1) (c) read with section 13(2) of the Prevention of Corruption Act.
_J
218
167. I have already discussed at great length how Deal Pad entries
were fabricated and false vouchers were prepared by accused Nos.1, 8
and 3.
They have, therefore, committed an offence punishable under
section 477A of the Indian Penal Code.
168.
The learned Counsel appearing on behalf of the accused have
relied upon number of judgments on various points.
Perusal of the
said judgment indicates that ratio of the said judgments does not apply
to the facts of the present case.
169.
Accordingly,
I record
the
findings
against the points
for
determination framed in para 1 7 above as under:-
POINTS
Point Nos. (1) & (2)
Point Nos.(3) to (6), (8),
(11), (22), (23), (24), (25),
FINDINGS
Yes, except accused
Nos.2, 4 and 11.
Yes
(2 7), (28), (29),

(31) to
(34), (3 7), (39), (41), (42),
(43)' & (46), (47)
Point Nos.(7), (9), (10), (1 2)
to
(21), (26), (30), (35),
No
(36), (44), (45)

Point No. (38) & (40)
Yes, except
No.11
Point No.(48)
As per final order.
accused
___J
iJ. ,.
219
I, therefore, hold that ;
1 70.
(i)
The prosecution has established beyond the
reasonable doubt that accused Nos. 1 and 8 and

accused No.3 and accused Nos. 5, 6, 7, 9 and 10
entered into criminal conspiracy to dishonestly
siphon off the funds of Canfina and executed
three
bogus,
fictitious
and
non-existent
transactions dated 10/10/1991, 22/10/1991 and

16/01/1992
involving
funds
the
said
transactions and diverted funds from Canfina to

CB:MF and, thereafter, criminally misappropriated
the proceeds to the respective accounts of accused
Nos. 5, 6, 7, 9 and
manipulated
and
10 and for that purpose
created
false
and
fictitious
documents and, thereby committed an offence

punishable under section 120-B read with section
403, 409, 477A of the Indian Penal Code read
with section 13(1) (c) and 1 3 (2) of the Prevention

of Corruption Act, 1988 and they are accordingly
convicted
for having
committed
the
aforesaid
offences.
(ii)
The prosecution has established beyond the
reasonable doubt
the charges against accused
Nos. 5, 6, 7, 9 and 10 and they are convicted

under section 120-B read with section 403, 409
and for abetment under section 109 of the Indian
220
Penal Code, of the offences committed by accused

Nos.1, 3 & 8 punishable under section 477A of the
Indian Penal Code and
section 13(1)(c) and
13 (2) of the Prevention of Corruption Act, 1 988.

Their bail bonds to continue till 28th March,
2008.
(iii) The prosecution has established its case

beyond reasonable doubt against accused Nos. 1,
3 and 8 and they are convicted for the offences
punishable under section 120-B, 403, 409, 477A
read with section 13(1)(c) and 13(2) of the
Prevention of Corruption Act, 1988 and also for
abetment under section 109 of the Indian Penal
Code, of the offences committed by accused Nos.
5, 6, 7, 9 and 10 under section 403 of the Indian
Penal Code. Their bail bonds
to
continue till 28th
March, 2008.
(iv) The prosecution has not established the

charges as framed again.st accused Nos. 2, 4 and
1 1 and they
are,
therefore, acquitted of the
offences with which they are charged. Their bail

bonds stand cancelled.
(v)
The prosecution has not established the
charge as framed against all the accused for the

offences punishable under sections 467 and 471
_J
221
of the Indian Penal Code and, therefore, they are
acquitted of the said offences punishable under
section 467 and 471 of the Indian Penal Code.
(vi)
has
Prosecution
reasonable
doubt
that
committed an offence
established
Accused
beyond
has
No .1
punishable under sections
409, 477A read with section 13(1)(c) and 1 3 (2)

of the Prevention of Corruption Act and he is
accordingly convicted for having committed the
aforesaid offences.
(vii)
Prosecution
has
established
beyond
reasonable doubt that the accused No.3 has

committed an offence punishable under section
1 3 (1)(c)
read
with
section
1 3 (2)
of
the
Prevention of Corruption Act, 1988 and section

109 read with section 403 of the Indian Penal
Code and he is accordingly convicted for having
committed the aforesaid offences.
(viii)
Prosecution
has
established
beyond
reasonable doubt that the accused No.S has

403 and also under section 109 read with section
403
of the
Indian
Penal
Code
and
he
is

aforesaid offences.
222
Prosecution
(ix)
reasonable
doubt
has
established
that the
accused
beyond
No. 6
has

403
of
the
Indian
Penal
Code
and
he
is
accordingly convicted for . having committed the

aforesaid offence.
(x)
Prosecution
reasonable
doubt
established
has
that the
beyond
No. 7 has
accused

403
of
the
Indian
Penal
Code
and
he
is

aforesaid offence.
(xi)
Prosecution has
established beyond
reasonable doubt that the accused Nos.6 and 7

have
committed
an offence
punishable
under
section 109 read with section 403 of the Indian

Penal Code and they are accordingly convicted for
having committed the aforesaid offence.
(xii)
Prosecution has established beyond
reasonable
doubt
that
accused
No.8
has

13(1) (c)
and
Corruption Act,
13(2)
1988
of
the
and he is
convicted for having committed

offence.
Prevention
of
accordingly
the
aforesaid
223
Prosecution has also established beyond
(xiii)
reasonable
doubt
that
accused
No.8
has

409
of
the
Indian
Penal
Code
and
he
is

aforesaid offence.
(xiv)
has
Prosecution
established
beyond
reasonable doubt that accused Nos. 9 and 1 0 have

403
of the Indian Penal code
and
they
are

said offence.
(xv)
Prosecution
has
established
beyond
reasonable doubt that accused Nos. 9 and 10 have

109 read with section 403 of the Indian Penal
Code
and
they are
accordingly
convicted
for
having committed the said offence.
[Note:-
When
the
order of conviction was
pronounced on 7th March, 2008 sub-clauses

to
(xv)
(vi)
were not typed inadvertently though in
the reasoned judgment I have held that these

accused have committed offences as mentioned in
the sub-clauses
(vi)
to
(xv)
in para 170.
is a typographical error sub-clauses
(vi)
Since it
to
(xv)
224
are incorporated in
the
2008 after sub-clause
(v)]
order dated 7th March,
The learned Counsel appearing on behalf of the accused Nos.1,

3, 5, 6, 7, 8, 9 and 10 are, therefore, called upon to argue on the
sentence. Stand over to 28th March, 2008.
On 28th March, 2008,
the matter was further adjourned to 1st April 2008 to enable the
learned Counsel for the accused to argue on the sentence.
Date:
1stApril, 2008
171. Heard Mr. Pradhan and Mr. Mhammane, the learned Special
Public Prosecutors appearing on behalf of the CBI. It is submitted that
so
far
and
as
sentence is concerned since the accused Nos. 1, 3, 5, 6, 7, 8, 9
10 had been held guilty of the offences punishable under section
120-B read with section 403, 409, 477-A of the Indian Penal Code read
with section 13( 1 ) (c) and 13(2) of the Prevention of Corruption Act,
1988, the lesser sentence may not be imposed and it was submitted
that considering the nature of the crime and the misappropriation of
the public funds by employees of the Bank and the Trust
illegal use of the money by the
Mr. Pradhan, lean1ed
brokers,
and
the
calls for a very strict sentence.
Special Public Prosecutor,
relied upon the
225
judgment of the Apex Court in
reported in
State
2003 SCC (Cri) 1935.
of M.P.
Vs. Ghanshyam Singh
He invited my attention to the
observations made by the Apex Court in the said judgment in respect

of various aspects which have to be taken into consideration while
awarding the sentence.
He invited my attention to paras 10, 11, 12,
13, 14 and 17 of the said judgment. He relied upon the judgment in

the case of Ram Narayan Popli Vs. Central Bureau of
reported in
Investigation
(2003) 3 sec 641.
172. Mr. Amit Desai, the learned Counsel appearing on behalf of

accused No.8 submitted that so far as accused No.8 is concerned,
no
independent charges were framed in respect of substantive offences

against him, since the charges were restricted to three transactions viz
10/10/1991, 22/10/1991 and 16/01/1992. He submitted that since

other charges were not pressed and since accused No.8 was primarily
alleged to have been involved in the said two transactions, the lesser
sentence may be awarded to accused No.8. He submitted that no loss
was caused to Canfina and the entire amount was returned with
interest. He submitted that already 1 5 years have elapsed after the FIR
was lodged and that the trial was pending
for a very long time and
this is an additional factor which has to be taken into consideration .
226
He invited my attention to the case of Ram Narayan Popli (supra) and
submitted that the Court had awarded lesser sentence
in that case.
He
submitted that the Apex Court has observed in the said case that the
accused should be let off on the sentence which they have already
undergone. He submitted that in the said case the accused were in jail
hardly for 10 to 1 5 days.
He invited my attention to
various
judgments of the Supreme Court in which it had been held that if no

loss
was
caused
to the complainant,
sentence
which
should be
awarded should be lesser sentence. He submitted that the parameters

of the said judgment of the Apex Court would also apply to the present
case.
He submitted th.at the accused No.8 has already served 28 days
in custody in the year 1992. He submitted that the accused No.8 also
had undergone angioplasty after heart attack and that he is suffering
from various ailments.
173. Mr. Shah, the learned Counsel appearing for accused No.6
submitted that accused No.6 was not directly involved and that he had
no knowledge of what had transpired between Canfina and CBMF and
that the accused No.7 was looking after the said transactions. He also
adopted the submissions made by the learned Counsel appearing on
behalf of accused No.8 and submitted that the lesser sentence may be
227
awarded taking into consideration the age of accused No.6.
He
submitted that the accused No.6 had entered into several other
transactions with Canfina and CBMF and he had no knowledge about
the present transaction.
all
He submitted that taking into consideration
these circumstances, lesser sentence may be awarded to accused
No.6.
1 74.
Accused No.1
submitted
S. Mohan who has appeared in person has
that he was
a junior
officer and was
following the
instructions of accused No.8 - M.K. Ashok Kumar who was the Vice
President and he had no other option but to follow the directions given
by accused No.8. He submitted that it has not been established that he
is benefited in any manner from the entire transaction. He submitted
that lesser sentence may be awarded to him.
175.
The learned Counsel for accused No.3
adopted the
submissions made by the learned Counsel appearing for accused No.8

and submitted that lenient sentence may be given to accused No.3.
176.
Mr. Kale, the learned Counsel appearing on behalf of accused
No. 5 - Hiten P. Dalal submitted that accused No.5 was involved only
228
m one transaction viz. transaction dated 16/1/1992.
that
there
was
no
financial
gain
to accused No.5
He submitted
in
the said
transaction. He submitted that so far as other two transactions are

concerned, the prosecution had not pressed the charges in respect of
these two transactions against accused No.5 and, therefore, he was
concerned only with a single transaction. He submitted that, therefore,
lesser sentence may be awarded to accused No.5.
1 77. The learned Counsel appeanng on behalf of accused No.7

adopted the arguments made by the learned Counsel appearing on
behalf of accused No.8 and submitted that the lesser sentence may be
awarded to accused No.7.
178. Mr. Jethmalani, the learned Senior Counsel appearing on behalf

of accused Nos. 9 and 10 submitted that, at the highest, accused Nos.
9 and 10 had acted as a conduit to transfer the money which was
received from CBMF to accused Nos. 6 and 7. He submitted th.at since
the Court has accepted the case of accused No. 9 and 10 that the
transaction in question was in respect of purchase of 5 lacs shares of
RIL, at the highest, it could be said that they had acted as conduit. He
submitted that it was a case of these accused that an amount of Rs 5
229
lacs had been retained by them towards brokerage but since this
aspect was not accepted by the Court, at the highest, it could be said
that this amount had been retained by them. He invited my attention
to the judgment in the case of Ram Narayan Popli (supra) and the
observations made by the Apex Court in the said judgment.
It is
submitted that, admittedly, the entire amount had been returned to

Canfina and, at the highest, it could be said that the . amount was
illegally obtained by the brokers. He submitted that so far as accused
No.10 is concerned, he is 73 years old and is a a heart patient and he
has already suffered an heart attack.
He submitted that the case is
pending for a very long ti.me and that is one of the factors which
should be taken into consideration. He submitted that the Apex Court
also had observed that the higher officials had not been prosecuted by
CBI and only small flies have been prosecuted and this fact was taken
into consideration by the Apex Court while awarding the sentence.
179.
I have given my anxious consideration to the submissions
made by the learned Public Prosecutors appearing on behalf of the CBI

and the learned Counsel appearing on behalf of the accused.
180.
In the present case, it is
an.
admitted position th.at the amount
- - --
230
which was siphoned off from Canfina through CBMF to brokers was
returned back with interest.
The fact remains, however, that the
amount was illegally siphoned off by creating false and

entries.
fictitious
I have already taken into consideration various facts and
circumstances while coming to the conclusion th.at the charge of

criminal conspiracy and abetment has been established.
charge having been established, the accused, even
if
directly involved or have not committed an overt act
The said
they are not

or had no
knowledge about the general conspiracy are still liable. However, the
another factor which is also to be taken into consideration is the fact
that the trial is pending for a very long time and some of the accused
have now reached the age and are senior citizens in the sense that
accused No.10 is 73 years of age and accused No.6 is 66 years of age
and some of them are suffering from various ailments. All the brokers
have already been notified under the Special Courts (Trial of Offences
Relating to Transactions in Securities) Act, 1992 and all their assets
have been seized.
The Apex Court also in the case of Ram Narayan
Popli (supra) in para 384 has observed as under:-
"384. The convictions of Accused 1 , 3 and 5

are in order and are maintained.
A question
about the sentence was raised. Normally, cases
231
involving offences which corrode the economic
stability are to be dealt with sternly. lt is,
however, noticed that A-5 has died during the
pendency of the appeal. A-1 and A-3 were
small flies who appear to have been caught in
Apparent
the web of A-S's machinations.
reason for their involvement is greed and
avarice. There may be substance in the plea
raised by the learned counsel for the accused
appellants that higher-ups of MUL and banks
cannot certainly be unaware of the goings-on,
and have not been proceeded with and given a
clear chit. Though this is certainly a matter of
concern, yet that cannot be a ground for taking
a sympathetic view of A-1 and A-3's conduct.
Considering the fact that the occurrence took
place a decade back, and the trial has spread
over a few years, and the death of A-5, we feel
custodial sentence for the period already
undergone (which we are told was for a
number of months) would meet the ends of
justice. While fixing the quantum of sentence,
we have duly considered the fact that in the
instant case the amounts have been paid back,
which as noted above, learned counsel for the
prosecution conceded was a factor for fixing
the quantum of sentence. The fine amounts
imposed remain unaltered with the default
sentence . Appeals by A-1, A-3 and A-5 are
dismissed subject to modification of sentence.
We respectfully agree with conclusions of
learned Brother S though not with the
reasoning in their entirety regarding dismissal
of the appeals against acquittal of A-2, and
setting aside the conviction of A-4."
181.
It is no doubt true that the Apex Court has in various judgments
has laid down guidelines for the purpose of awarding sentence.
- --
_J
232
However, there cannot be any strait jacket formula which
can
be
adopted while imposing the sentence and the question of the sentence
will
therefore depen.d on the facts and circumstances of each case.
The Apex Court in the case of State of M.P. Vs. Ghanshyam Singh,
reported in 2003 SCC (Cri) 1935 has observed in paragraphs 10, 1 1 ,
12, 13, 14 and 1 7 as under:-
The crucial question which needs to be

1110.
decided is the proper sentence and merely because
of lapse of time, whether the accused is to be
waived from undergoing it. It is to be noted that
the sentences prescribed for offences relatable to
section 304 Part I are imprisonment for life or up
to a period of 10 years. It is true that no minimum
sentence has been prescribed. The sentences can
be compared with prescription of similar sentences
and other provisions like Section 326 IPC and
Section 307 IPC when hurt is caused. Section 304
Part J is a species of homicidal death.
It is
statutorily described as culpable homicide though
not amounting to murder as defined under IPC.
Taking note of the purpose for which a sentence is
imposed, it cannot be laid down as a rule of
universal application that a long passage of time in
all cases would justify minimal sentence. Long
pendency of a matter by itself could not justify
lesser sentence
11
"11. The law regulates social interests, arbitrates

conflicting claims and demands Security of persons
and property of the people is an essential function
of the State.
It could be achieved through
instrumentality of criminal Jaw.
Undoubtedly,
233
there is a cross-cultural conflict where living law

must find an answer to the new challenges and the
courts are required to mould the sentencing system
to meet the challenges.
The contagion of
lawlessness would undermine social order and lay
it in ruins. Protection of society and stamping out
criminal proclivity must be the object of law which
must be achieved by imposing appropriate
sentence. Therefore, law as a cornerstone of the
edifice of "order" should meet the challenges
confronting the society. Friedman in his Law in
Changing Society stated that, "State of criminal law
continues to be - as it should be - a decisive
reflection of social consciousness of society."
Therefore, in operating the sentencing system, law
should adopt the corrective machinery or the
By deft
deterrence based on factual matrix.
modulation sentencing process has to be stern
where it should be, and tempered with mercy
where it warrants to be. The facts and given
circumstances in each case, the nature of the crime,
the manner in which it was planned and
committed, the motive for commission of the
crime, the conduct of the accused, the nature of
weapons
used
and
all
other
attending
circumstances are relevant facts which would enter
into the area of consideration. For instance, a
murder committed due to deep-seated mutual and
personal rivalry may not call for penalty of death.
But an organized crime or mass murder of innocent
people would call for imposition of death sentence
as deterrence. Jn Mahesh v. State of M.P. [(1987)
3 sec 80] this court while refusing to reduce the
death sentence observed thus: (SCC p.82, para 6)
lt will be a mockery of justice to permit the
accused to escape the extreme penalty of law when
faced with such evidence and such crue l acts. To
give the lesser punishment for the accused would
be to render the justicing system of the country
suspect. The common man will lose faith in courts.
In such cases, he understands and appreciates the
language of deterrence more than the reformative

jargon."
..12.
Therefore,
undue
sympathy
to
impose
inadequate sentence would do more harm to the

justice system to undermine the public confidence
in the efficacy of law and society could not long
endure under such serious threats.
It is, therefore,
the duty of every court to award proper sentence

having regard to the nature of the offence and the
manner in which it was executed or committed etc.
This
position was
illuminatingly
Court in Sevak.a Perumal v. State
stated by this
of T.N. [(1991) 3
sec 471]"
111 3.
Criminal law
principle
adheres
to the principle
in general to the
of proportionality
in
prescribing liability according to the culpability of

each kind of criminal conduct. It ordinarily allows
some significant discretion to the Judge in arriving
at a sentence in each case, presumably to perm.it
sentences that reflect more subtle considerations
culpability that are raised by the special facts of
each
case.
Judges,
in
essence,
affirm
that
punishment ought always to fit the crime; yet in

practice sentences are determined largely by other
Sometimes, it is the correctional
considerations.
needs of the perpetrator that are offered to justify a

sentence,
sometimes the desirability of keeping
him out of circulation, and sometimes even the

tragic
results
of his
crime.
Inevitably,
these
considerations cause a departure from just deserts

as the basis of punishment and create cases of
apparent
injustice
that
are
senous
and
widespread."
"14.
Proportion between crime and punishment is
a goal respected in principle, and in spite of errant

notions,
it remains
termination
of
strong
sentences.
influence
The
in
practice
the
of
235
punishing all serious crimes with equal severity is
now unknown in civilized societies, but such a
radical
departure
proportionality
has
in recent times.
from
the
principle
of
disappeared from the law only

Even now for a single grave
infraction drastic sentences are imposed. Anything

less than a penalty of greatest severity for any
serious crime is thought then to be a measure of
toleration that is unwarranted and unwise.
But in
fact, quite apart from those considerations that
make punishment unjustifiable when it is out of

proportion to the crime, uniformly disproportionate
punishment has some very undesirable practical
con.sequences."
17.
Imposition of sentence without considering its
effect on the social order in many cases may be in

reality a futile exercise.
crime
The
e.g. where it relates
social
impact of the
to offences against
women, dacoity, kidnapping, misappropriation of

public money, treason and other offences involving
moral turpitude or moral delinquency which have
great impact on social order and public interest
cannot
be lost
sight
exemplary
treatment.
imposing
meagre
of and
per
Any liberal
sentences
or
se
require
attitude
taking
by
too
sympathetic a view merely on account of lapse of

time in respect of such offences will be resultwise
counterproductive
in the long run and against
societal interest which needs to be cared for and

strengthened by a string of deterrence inbuilt in the
sentencing system."
There cannot be any doubt or two opinions about the observations

made by the Apex court in the said judgment.
Keeping in view the
observations made by the Supreme Court in the case of Maruti Udyog
236
and in the case of State of M.P. (supra), in my view, in the present
case, so far as accused No.1 is concerned, he was a junior officer
working under accused No.8 and he was duty bound to follow the
instructions which were given by accused No.8.
182. Under these circumstances, in my view, it

accused
No.1
S.
Mohan
is
sentenced
will
to
be appropriate
undergo
if
rigorous
imprisonment for a period of six months.
183. So far as accused No.3 - B.R. Acharya is concerned, in my view

taking into consideration the various facts and circumstances of the
case
and more particularly the fact that he was responsible for
siphoning off the amount from CBMF to the brokers, he was the key
accused who was responsible for siphoning off the funds and without
his assistance the amount would not have been reached the brokers.
However, since the amount has already been received back, in my
view, it would be appropriate
to
sentence
him to
undergo rigorous
imprisonment for a period of one year.
184. So far as accused No.8 is concerned, he was a Vice President,

working with Canfina. On his directions, accused No.1 sent money to
237
CBMF. Though accused No.8 has been separately charged in respect

of the other two transactions for the substantial offences, the fact
remains that he has been convicted for the offences of conspiracy and
abetment
even
in
respect
of
transactions
dated
10/10/1991,
22/10/1 991 and 16/01/1992. In my view, accused No.8 was also the
"'--'
key witne and the main conspirator in respect of the scheme of

siphoning off the funds from Uinfina to CBMF and to the said brokers.
In my view, it would be appropriate
if
he
is
sentenced to undergo
rigorous imprisonment for one year.
185.
So far as accused No.5 is concerned, it is no doubt true that he
is involved only in one transaction viz transaction dated 16/01/1992.

However, taking into consideration the facts and circumstances of the
case, it would be appropriate to sentence
him
to undergo rigorous
imprisonment for one year.
186. So far as accused Nos. 6 and 7 are concerned, they have received
a substantial chunk of the amount which was siphoned off and it
would
be
appropriate
to
sentence
them
to
suffer
rigorous
238
187. So far as accused Nos. 9 and 10 are concerned, in my view, it
would be appropriate to sentence accused No.9 to undergo rigorous

However, so far as accused No.10 is
concerned, as was rightly pointed out by Mr. Jethmalani, the learned

Counsel appearing on his behalf that he has merely signed 'the cheque
on behalf of the firm and there is no evidence on record to indicate
that he has received anything in return personally. He is also 73 years
of age and is a heart patient who has already suffered an heart attack.
Considering these factors, in my view, it would be appropriate to
sentence him to undergo simple imprisonment for six months.
188. It is clarified that under section 428 sentence which is already
undergone shall be set off against the sentence which is already

awarded.
The learned Counsel appearing on accused No.5 submits
that accused No.5 has already undergone two and half years sentence
in respect of conviction in other cases and the period undergone by
him in the said cases may be set off so
far as sentence in this case is
concerned. In support of his submission he relied upon the judgment

in the case of State of Maharashtra and another Vs. Najajsat alias
Mubarak Ali. reported in AIR 200 1 SC 2255. ln my view, it would be
appropriate if the liberty is granted to accused No.5 to file a separate
- ----
L.
239
application on this aspect.
Accordingly the liberty is granted to
accused No.5 to file separate application on
this aspect.
Accordingly, the following order is passed:-
189.
O R D ER
(i)
Accused No.1 - Saranathan Mohan is sentenced to .
suffer rigorous imprisonment for six months

offence
punishable
for an
under section 120-B read
with
section 403, 409, 477A of lndian Penal Code read with

section
13(1)(c)
and
1 3 (2)
of
the
Prevention
of
Corruption Act 1988.
(ii)
Accused No.1 - Saranathan Mohan is sentenced to
suffer rigorous imprisonment for six months
for an
offence punishable under section 120-B, 403, 409, 477A

read with section 13(1)(c) and 1 3 (2) of the Prevention
of Corrup tion Act, 1988 and under section 109 of Indian
Penal Code.
240
(iii) Accused No.1 - Saranathan Mohan
is sentenced to
suffer rigorous imprisonment for six months for an

offence punishable under section , 409, 477A of Indian
Penal Code read with section 13(1)(c) and 13 (2) of the
Prevention of Corruption Act 1 988.
(iv)
Accused No.3 - B.R. Acharya and accused No.8 -
M.K Ashok Kumar are sentenced to suffer rigorous

imprisonment for one year for an offence
punishable
under section 120-B read with section 403, 409, 477A of

Indian Penal Code read with section 13(l)(c) and 13(2)
of the Prevention of Corruption Act, 1988.
(v) Accused No.3 - B.R.. Acharya and accused No.8 - M.K.

Ashok
Kumar
are
sentenced
to
suffer
ngorous
imprisonment for one year for an offence punishable

under section 120-B, 403, 409, 477A of Indian Penal
Code read with section 13(1) (c) and 13(2) of the
Prevention of Corruption Act, 1988 and under section
r
I
241
(vi)
Accused No.3 - B.R. Acharya and accused No.8 -
M.K. Ashok Kumar are sentenced to suffer rigorous

under section 13(1)(c) read with section 13(2) of the
Prevention of Corruption Act, 1988 and section 109 read
with section 403 of the Indian Penal Code.
(vii)
Accused Nos. 5 - Hiten P. Dalal, accused No. 6 -
S.K. Jhaveri, accused No. 7 - Pallav Seth and accused

No.9 - Ketan V. Parekh are sentenced to suffer rigorous
under section 120-B read with section 403, 409, 477A of
Indian Penal Code read with section 13(l) (c) and 13(2)
of the Prevention of Corruption Act 1988.
(viii)
Accused Nos. 5 - Hiten P. Dalal, accused No. 6 -
S.K. Jhaveri, accused No. 7 - Pallav Seth and accused

No.9 - Ketan V. Parekh are sentenced to suffer rigorous
under section 120-B read with
403, 409,
and section
242
(ix)
Accused No.S - Hiten P. Dalal is sentenced to
suffer rigorous imprisonment for one year for an offence

under section 403 and under section 109 read with
section 403 of Indian Penal Code.
(x)
Accused No.6 - S.K. Jh.averi is sentenced to suffer
rigorous imprisonment for one year for an offence under

section 403 of the Indian Penal Code.
(xi) Accu sed No. 7 - Pall.av Seth is sentenced to suffer
rigorous imprisonment for one year for an offence under

section 403 of the Indian Penal Code .
(xii) Accused No.8 - M.K. Ashok Kumar is sentenced to

under section 13(l)(c) and 13 (2) of the Prevention of
Corruption Act, 1988.
(xiii) Accused No.8 - M.K. Ashok Kumar is sentenced to

243
under section 409 of lndian Penal Code.
(xiv) Accused No.9 - Ketan V. Parekh
is sentenced to

under section 403 of Indian Penal Code.
(xv)
Accused No.9 - Ketan V. Parekh
is sentenced to

under section 109 read with 403 of Indian Penal Code.
(xvi)
Accused No.10
- Navinchandra N. Parekh
is
sentenced to suffer simple imprisonment for six months

for an offence under section 403 of Indian Penal Code.
(xvii)
Accused No.10 - Navinchandra N. Parekh
is

for an offence under section 109 read with 403 of Indian
Penal Code.
(xviii)
Accused No.6 - S.K. Jhaveri & accused No. 7
Pallav
Seth
are
sentenced
to
suffer
rigorous
l
244
i.mprisonment for one year for
an
offence under section
109 read with section 403 of Indian Penal Code.
(xix)
Accused
sentenced
to
suffer
10 - Navinchandra N. Parekh is
simple imprisonment for
six
months
for an offence punishable under section 120-B read with

section 403, 409, 477A
of the Indian Penal Code read
with section 13(1)(c) and 13(2) of the Prevention of

Corruption Act 1988.
(xx)
Accused
10
- Navinchandra
N.
Parekh is

for an offence punishable under section 120-B read with
section 403, 409
and
section 109 of the Indian Penal
Code.
All the
aforesaid sentences to run concurrently.
Set off to be given to all the accused for the period

already undergone if any.
At this
stage,
the learned
Counsel for
accused Nos. 1 , 3,5, 6, 7, 8, 9 and 10 submitted
245
that
the
conviction
and
sentence
may
be
suspended in order to enable the accused to prefer

appeal before
the Apex Court.
It is submitted that
since the vacation of the Apex Court will begin in

the month of May, 2008 and the Apex Court
reopen
in
will
July, sufficient period may be given to
the accused . This submission is accepted. In view

of the provisions of section 389 sub-clause (3),
sentence
is
suspended
Accused are released on
till
31st
bail.
July,
2008.
They should
execute fresh bonds within one week.
'
V\T " -
(V.M. KANADE, J.)

Judge,
Special Court.

Ketan Parekh 1992 Stock Scam Judgement Special Court Mumbai

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-,

BEFORE THE SPECIAL COURT AT BOMBAY

Central Bureau of Investigation

4. Mr P.J. Subb arao

8. M.K. Ashok Kumar

10. Navinchandra N. Parekh

.... Accused No.11.

Mr. V.G. Pradhan with Mr. S. Mhamane, Special Public Prosecutors

Mr. A.Z. Mookhtiar, advocate (Legal Aid) for accused No.1.

Mr. Girish Kulkarni, advocate for accused No.2.

Mrs. B.A. Jakhade (Legal Aid), advocate for accused No.3.

Mr. P.D. Sawardekar, advocate for accused No.4.

Mr. Sunil Kale, advocate for accused No.5.

advocates for accused No.7.

Mr. D.R. Pinge, advocate (Legal Aid) for accused No.11.

CORAM: V.M. KANADE, J.

: 7th March, 2008 & 1st April, 2008

On 01/06/1994, a complaint came to be registered in the Bank

Securities and Fraud Cell of Central Bureau of Investigation vide R.C.

the FIR th.at during 1991-92, Mr. S. Mohan (Accused No.1)

and Mr. N. Balasubramaniam (Accused No.2) were posted as Assistant

a dealer and Mr. N. Balasubramniam was looking after

Funds Management Department.

It was alleged that there was a

conspiracy between employees of Canfina and Canbank Mutual Fund

25/03/1996, other accused were arrested and were released on bail.

alleged that the accused had committed an offence punishable under

The prosecution examined 19 witnesses in

support of its case.

47, 70,68,200/- was transmitted

in five instalments from Canfina to

securities by Canbank for canfina. The first transaction took place on

The third transaction took place on

16/01/1992 and was for an amount of Rs 5 crores.

transaction was initiated on 07/02/1992 and was also for an amount

During the course of argument, Mr. V.G. Pradhan, the learned

Special Public Prosee utor appearing on behalf of the prosecution

It is the case of the prosecution that so far as the first

is concerned i.e dated 10/10/1991, the funds to the tune of Rs 17.29

The prosecution has examined 19 witnesses in order to establish

that these funds were diverted from Canfn

It is essential to briefly state the transactions which are involved

regarding purchase of "RIL'' from Canbank Mutual Fund for Rs 17.29

receipt of the said amount, voucher dated

not refunded to Canfina

along with B.V. Srinivasan - accused No.11, issu

crores in favour of S.K. Jhaveri -

firm in which Ketan

and Navinchandra N. Parekh, the accused Nos. 9 and 10 respectively

Thereafter, this amount of Rs 17.29 crores was

It is further alleged that in furtherance of the aforesaid criminal

conspiracy, N. Balasubramaiam - accused No.2 made an entry dated

It is alleged that even then

amount of Rs 12 crores was transferred to Canbank Mutual Fund

amount in CBMF, a voucher was prepared showing the said receipt of

Rs 12 crores as "wrongly remitted" from Canfina which

to S.K. Jh.averi, as per Canfina's instructions and, accordingly, an

receipt of the said amount.

It is alleged by the prosecution that N. Balasubramaniam -

accused No.2 made an entry dated 16/01/1992 in Canfina's record

with Canbank Mutual Fund (herein.after called as ''CBMF").

amount was received,

Subbarao issued directions to Canara Bank, Tamarind Lane Branch,

Scheme", though CBMF was