INTERNAL ASSESSMENT II - FINANCIAL & SYSTEMATIC FRAUD

CENTRAL BUREAU OF INVESTIGATION VS. COODLI

RAVIKUMAR AND ORS., 2017(1) BomCR(Cri)29

Judge: Shalini Phansalkar Joshi, J

SUBMITTED TO: Prof. Santosh Aghav

SUBMITTED BY: Navtej Bal

ROLL NUMBER: 60

SUBMITTED ON: March 07, 2019

 INDEX

A. BRIEF FACTS & ISSUES ………………………………………………..3

B. PROVISIONS APPLIED………………………………………………….7
C. ANALYSIS…………………………………………………………………8
D. CRITICAL ANALYSIS & CONCLUSION……………………………...9
E. REFERENCES……………………………………………………………18

Page | 2
 A. BRIEF FACTS AND ISSUES

There were as many as twenty-one charges levelled against the accused for different
transactions, the following points, which cover those charges, arose for the determination of
the court on the basis which the Judgment was based. Highlighting the enormity of the scam
the court pointed out at the following issues which were to be deliberated upon:
Sr. Points
No.
1. Whether it is proved by the prosecution that between 1st October 1991 to 2nd April
1992, or, thereabout, Accused No. 1 to Accused No. 10, or, any of them, have entered
into criminal conspiracy to commit criminal breach of trust by misappropriating the
funds of the NHB to the tune of Rs. 707,84,75,626=76 with an object to obtain
pecuniary advantage to Accused No. 4-HSM and Accused Nos. 9 and 10, without any
public interest, by crediting those funds to the account of Accused No. 4-HSM and to
the account of Accused Nos. 9 and 10 with the SBI and thereby committed an offence
punishable under Section 120B of I.P.C.?
2. Whether it is established by the prosecution that, in furtherance of the aforesaid
criminal conspiracy, Accused No. 1, Accused No. 2 and Accused No. 3, or, any of
them, committed criminal breach of trust by diverting the funds of the cheques issued
in favour of SBI in respect of purported purchase of securities, when there was no such
transaction at all, by dishonestly and fraudulently getting the amounts of those cheques
credited to the account of Accused No. 4-HSM with the SBI and thereby committed
an offence punishable under Section 409 r/w. Section 120B of IPC?
3. Whether it is proved by the prosecution that Accused Nos. 1 and 2, or, any of them,
being in the employment of the NHB, and Accused No. 3, being in the employment of
SBI, and as such being the public servants and having been entrusted in such capacity
with the funds of the said Banks, dishonestly misappropriated, or, converted to their
own use, or, allowed Accused No. 4-HSM to misappropriate the amounts of nine
cheques and thereby committed offence punishable under Section 13(1)(2) r/w.
Section 13(1)(c) of Prevention of Corruption Act and Section 120B of IPC?
4. Whether it is established by the prosecution that Accused Nos. 1 and 2, or, any of
them, made or caused to be made false BRs purported to have been issued by the NHB,
dishonestly and fraudulently with intention of causing it to be believed that these BRs
were made by the authority of NHB, by which authority Accused Nos. 1 and 2 knew
that they were not made and thereby committed an offence of forgery of valuable
security punishable under Section 467 r/w. Section 120B of IPC?

Page | 3
5. Whether it is proved by the prosecution that, in furtherance of the aforesaid criminal
conspiracy, Accused Nos. 1 and 2 dishonestly and fraudulently used as genuine the
aforesaid BRs, which they knew or had reason to believe to be forged documents and
thereby committed an offence punishable under Section 471 r/w. Section 120B of IPC?
6. Whether it is proved by the prosecution that, in furtherance of the aforesaid criminal
conspiracy, Accused Nos. 1 and 2, or, any of them, being in the employment of the
NHB and while holding the positions as an Officer of the NHB, acting in that capacity
willfully and, with intent to defraud, falsified and caused to be falsified Deal Diary,
BRs, Cost Memos and relevant Vouchers in respect of the purported transactions of
sale of securities, as indicated by the aforesaid BRs with the respective Financial
Institutions, and made the false entries with regard to those transactions and committed
the offence punishable under Section 477A r/w. Section 120B of IPC?
7. Whether it is proved by the prosecution that, in furtherance of the aforesaid criminal
conspiracy and in the course of same transaction, Accused Nos. 1 and 2, being in the
employment of NHB and being the public servants, dishonestly and fraudulently
induced counter-Banks and Financial Institutions to part with their funds by falsely
representing that the NHB had entered into securities transactions, for which forged
Bank Receipts were issued and thereby committed offence punishable under Section
420 r/w. Section 120B of IPC?
8. Whether it is proved by the prosecution that, in furtherance of the aforesaid criminal
conspiracy, Accused Nos. 1 and 2, or, any of them, being in the employment of NHB,
as such, being the public servants, dishonestly and fraudulently issued or caused to be
issued the cheques for respective amounts in favour of SBI in relation to the purported
securities transactions which NHB, purportedly, had with the respective Financial
Institutions, which, in fact, had never taken place with an intention to aid and abet
Accused No. 4-HSM to misappropriate the amounts of the cheques and Accused No.
3 actively assisted in the same by abusing his position as public servant, without any
public interest, and thereby committed an offence of criminal misconduct punishable
under Section 13(2) r/w. Section 13(1)(d) of Prevention of Corruption Act and Section
120B of IPC?
9. Whether prosecution proves that, during the above-said period, in furtherance of the
aforesaid criminal conspiracy, Accused Nos. 5, 6 and 7, acting dishonestly for and on
behalf of Accused No. 4-HSM, engaged themselves in the said conspiracy and
dishonestly arranged and accepted the credit of the various amounts in connivance
with Accused No. 3, who, at the relevant time, was Officer in the Security Division of
SBI, where account of Accused No. 4-HSM was operated, actively assisted them in
doing so and thereby Accused Nos. 5, 6 and 7 acted, instigated and facilitated by
Accused Nos. 1 and 2, as also aided and abated by Accused No. 3 in committing the

Page | 4
 offence of criminal breach of trust and thereby committed the offence punishable
under Section 409 r/w. Section 109 r/w. Section 120B of IPC.
10. Whether prosecution further proves that, in furtherance of the aforesaid criminal
conspiracy, Accused No. 9, being the Partner of M/s. Extol Investments, and Accused
No. 8, acting dishonestly for and on behalf of Accused No. 9, dishonestly arranged
and accepted the credit of the amounts of Rs. 2,50,000/- and Rs. 13,00,000/- and Rs.
8,98,912/- and Accused Nos. 1 to 3 actively assisted, instigated and facilitated them
and thereby committed the offence punishable under Section 409 r/w. 109 r/w. 120B
of IPC.
11. Whether prosecution proves that, in furtherance of aforesaid conspiracy, Accused Nos.
1 and 2, being the Officers of NHB, Accused No. 3, being the Officer of SBI, Accused
Nos. 9 and 10, being the Partners of M/s. Extol Investments, dishonestly
misappropriated, on or about 21st February 1992, a sum of Rs. 2,50,000/- and, on 22nd
February 1992, a sum of Rs. 13,00,000/-, being the proceeds of the cheques issued at
the instance of Accused Nos. 1 and 2 for and on behalf of NHB drawn on the RBI and
payable to the SBI, by causing the same to be ultimately credited in the account of
Accused No. 9, knowing or having reason to believe that they did not have transactions
with the NHB and also knowing that the said amounts did not belong to them and
thereby committed an offence punishable under Section 403 r/w. Section 120B of IPC?
12. Whether prosecution further proves that, in furtherance of aforesaid criminal
conspiracy, Accused Nos. 1 and 2, being the Officers of NHB, and Accused No. 3,
being the Officer of SBI, and Accused Nos. 9 and 10, being the Partners of M/s. Extol
Investments, committed the offence of criminal misconduct by causing the above
mentioned cheques to be credited into the Personal Account of Accused No. 9 illegally
and which was ultimately misappropriated by them and thereby committed the offence
punishable under Sections 13(1)(c), 13(1)(d) r/w. 13(2) of the Prevention of
Corruption Act r/w. Sections 109 and 120B of IPC.
13. Whether the prosecution further proves that, Accused No. 9, in furtherance of aforesaid
criminal conspiracy, dishonestly received the sum of Rs. 2,50,000/-, Rs. 13,00,000/-
and Rs. 8,98,912/-, being the amounts purportedly payable to the SBI vide cheques
drawn on the RBI and ultimately credited to his own account No. 5660 with the SBI,
knowing or having reason to believe the same to be stolen property, being the property
in respect of which the criminal breach of trust had been committed and thereby
committed an offence punishable under Section 411 r/w. Section 120B of IPC.
14. Whether the prosecution further proves that, in furtherance of aforesaid criminal
conspiracy, Accused No. 8 made or caused to be made a false document, namely, a
letter dated 1st February 1992 addressed by NHB to SBI for causing the credit of Rs.
8,98,912/- into the Savings Bank Account No. 5660 of Accused No. 10 with SBI,

Page | 5
 which letter was purported to have been issued by NHB, which was dishonestly or
fraudulently made with the intention of causing it to be believed that the said letter was
made and signed by the Assistant Manager/ Manager of the NHB, knowing that it was
not so made and thereby committed an offence of forgery of valuable security
punishable under Section 467 r/w. Section 120B of IPC.
15. Whether the prosecution further proves that, in furtherance of aforesaid criminal
conspiracy, Accused No. 9 made or caused to be made false documents, namely, the
letters dated 21st February 1992 and 22nd February 1992, addressed by NHB to SBI,
for causing the credit of Rs. 2,50,000/- and Rs. 13,00,000/- given to his Savings Bank
Account No. 5660 with SBI, which letters were purported to have been issued by NHB
and which were dishonestly or fraudulently made with the intention of causing it to be
believed that the said letters were made and signed by the Assistant Manager/Manager
of the NHB, knowing that they were not so made and thereby committed an offence
of forgery of valuable securities punishable under Section 467 r/w. Section 120B of
IPC.
16. Whether the prosecution further proves that, in furtherance of aforesaid criminal
conspiracy, Accused Nos. 8 and 9 dishonestly and fraudulently used as genuine the
letter dated 1st February 1992, which they knew or had reason to believe to be a forged
document and thereby committed an offence punishable under Section 471 r/w.
Section 120B of IPC.

Page | 6
 B. PROVISIONS APPLIED

➢ PREVENTION OF CORRUPTION ACT, 1988

• Section 7, Public servant taking gratification other than legal remuneration in
respect of an official act: Whoever, being, or expecting to be a public servant,
accepts or obtains or agrees to accept or attempts to obtain from any person, for
himself or for any other person, any gratification whatever, other than legal
remuneration, as a motive or reward for doing or forbearing to do any official act
or for showing or forbearing to show, in the exercise of his official functions, favour
or disfavour to any person or for rendering or attempting to render any service or
disservice to any person, with the Central Government or any State Government or
Parliament or the Legislature of any State or with any local authority, corporation
or Government company referred to in Clause (c) of Section 2, or with any public
servant, whether named or otherwise, shall be punishable with imprisonment which
shall be not less than three years but which may extend to seven years and shall also
be liable to fine."

• Section 13(1)(d), Criminal misconduct by a public servant:

(1) A public servant is said to commit the offence of criminal misconduct-
(d) if he- (i) by corrupt or illegal means, obtains for himself or for any other
person any valuable thing or pecuniary advantage; or
(ii) by abusing his position as a public servant, obtains for himself or for any
other person any valuable thing or pecuniary advantage;

• Section 13(2), Criminal misconduct by a public servant:

(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.

Page | 7
 C. ANALYSIS

To prove the charge of criminal conspiracy, the learned Advocates had relied upon the
landmark decision of the Hon'ble Apex Court in the case of Ram NarainPoply v. Central
Bureau of Investigation,1 wherein the Hon'ble Apex Court had, at length, dealt with the said
charge, in the backdrop of the similar allegations, in a case arising out of the decision of the
Special Court in the matter of Harshad Mehta and others.

The arguments are weighty as they are leading to the conclusion that to establish a charge of
conspiracy knowledge about indulgence in either an illegal act or a legal act by illegal means
is necessary.2 In some cases, intent of unlawful use being made of the goods or services in
question may be inferred from the knowledge itself.3 This apart, the prosecution hadalso not
established that a particular unlawful use was intended, so long as the goods or service in
question could not be put to any lawful use. Finally, when the ultimate offence consists of a
chain of actions, it would not be necessary for the prosecution to establish, to bring home the
charge of conspiracy, that each of the conspirators had the knowledge of what the collaborator
would do, so long as it is known that the collaborator would put the goods or service to an
unlawful use.4

While dealing with the offence of criminal conspiracy in respect of the financial frauds, it has
been observed that the law making conspiracy a crime, is designed to curb immoderate power
to do mischief, which is gained by a combination of the means.5 The encouragement and
support which co-conspirators give to one another rendering enterprises possible which, if left
to individual effort, would have been impossible, furnish the ground for visiting conspirators
and abettors with condign punishment. The conspiracy is held to be continued and renewed as
to all its members wherever and whenever any member of the conspiracy acts in furtherance
of the common design.6

In the context of Section 10 of the Indian Evidence Act, in the instant case, the evidence on
record, discussed above, clearly goes to prove that without the active connivance and collusion
of Accused No. 1-Ravikumar and Accused No. 2-Suresh Babu at the NHB end and Accused
No. 3-Sitaraman at the SBI office, the crores of funds from the Financial Institutions would not
have been diverted to the account of Accused No. 4-HSM. The evidence on record also goes
to prove that there was blatant violation of all the canons and rules and regulations of the

1
Ram NarainPoply v. Central Bureau of Investigation,MANU/SC/0017/2003 : AIR 2003 SC 2748
2
State of Maharashtra v. SomNathThapa, MANU/SC/0451/1996 : (1996) 4 SCC 659
3
Yash Pal Mittal v. State of Punjab, MANU/SC/0169/1977 : (1977) 4 SCC 540
4
Ajay Aggarwal v. Union of India, MANU/SC/0265/1993 : (1993) 3 SCC 609
5
State of Kerala v. P. Sugathan, MANU/SC/0601/2000 : (2000) 8 SCC 203
6
State of Maharashtra v. SomNathThapa, MANU/SC/0451/1996 : (1996) 4 SCC 659

Page | 8
Banking Institutions and financial transactions.7 Without having securities or Bank Receipts in
hand, the cheques were issued and the sale proceeds of the same were then credited to the
account of Accused No. 4-HSM without there being such mandate by NHB to SBI, 8 which
clearly goes to prove that all these three officers, Accused No. 1-Ravikumar, Accused No. 2-
Suresh Babu and Accused No. 3-Sitaraman, have acted hand-in-gloves for the benefit of
Accused No. 4-HSM.

It was due to only the encouragement and support which the co-conspirators, like, Accused No.
1-Ravikumar, Accused No. 2-Suresh Babu and Accused No. 3-Sitaraman gave to each other,
that the siphoning of funds of the Banks was rendered possible, which, if left to individual
effort of Accused No. 1-Ravikumar, Accused No. 2-Suresh Babu and Accused No. 3-
Sitaraman, would have been impossible and, therefore, it furnishes the ground for proving the
charge of criminal conspiracy. Hence, in this case, I have no hesitation in holding the charge
under Section 120B of IPC proved against the Accused personnel.

In this decision, the Hon'ble Apex Court has further categorically held that, "when a person
misappropriates to his own use the property that does not belong to him, the misappropriation
is dishonest even though there was an intention to restore it at some future point of time"9In
this case, in the face of gross violation of the various rules, guidelines, when the funds have
been transferred, the mere fact that ultimately under the direction of RBI, the repayment of the
said funds was made, that too under protest, does not dilute, in any way, the nature of the
offence.

D. CRITICAL ANALYSIS AND CONCLUSION

It is true that, in this case, the offence has taken place, way back in the year 1992, and about
twenty-four years have lapsed since then, as this verdict is coming in the year 2016. It is also
true that during this period of twenty-four years, the accused persons had undergone both, the
physical and mental sufferings, not only of attending the Court regularly, which they are doing,
as can be seen from the record of this case also, but also because the sword of conviction and
sentence was always hanging on their heads. It is also true that the approach, which is adopted
by the Hon'ble Supreme Court while considering the appeal preferred by them, is of leniency,

7
R. Venkatkrishnan v. Central Bureau of Investigation, (2009) 11 SC 737
8
Vinayak Narayan Deosthali v. Central Bureau of Investigation, MANU/SC/1128/2014 : (2015) 2 SCC 553
9
R. Venkatakrishnan v. Central Bureau of Investigation, MANU/SC/1411/2009 : AIR 2010 SC 1812

Page | 9
in the sense that they are released on the punishment already undergone by them in some of
the cases.10

However, at the same time, it is also true that the offence, which is committed by them;
especially, Accused No. 1-Ravikumar, Accused No. 2-Suresh Babu and Accused No. 3-
Sitaraman is of a grave and serious nature, it is of siphoning of crores of funds of the
Nationalized Bank, Financial Institutions to the account of some third person, who was not
entitled thereto, like Accused No. 4-HSM. The country has witnessed the repercussions of the
said offence in the sense that the economy of the country was totally shattered on account of
this scam. The Hon'ble Apex Court is also serious as regards the economic offences. The
offences in these cases were not of the conventional or traditional type. The ultimate objective
was to use public money in a carefully planned manner for personal use with no right to do
it.11Funds of public bodies were utilized as if they were private funds. There was no legitimacy
in the transactions. Huge funds running into hundreds of crores of MUL a Government
Company, were diverted and all the concerned accused persons A1, A3 and A5 played dubious
roles in these illegitimate transactions. Their acts had serious repercussions on the economic
system of the country and the magnitude of financial impact involved in the present appeal is
only tip of the iceberg.

Therefore, while awarding the sentence, the Court has to do the balancing act and in such
situation, the principle of proportionality assumes significance. The sentence has to be
proportionate to the offence committed by the accused and at the same time the Court has to
take into account all the relevant factors, like, the delay in pronouncement of the verdict, the
period during which the accused has undergone this entire trial process, then the physical and
financial conditions of the accused and their liabilities, coupled with their age and the ailments,
which they may be suffering.12 If all these facts are kept in mind, it is needless to state that,
though it is first offence and the only conviction of Accused No. 9-Deepak, the benefit of the
provisions of the Probation of Offender's Act cannot be invoked for his offence; especially
when his conviction is for the offence punishable under Section 409 r/w. Sections 109 and
120B of IPC and, therefore, that is out of question.So far as remaining accused, like Accused
No. 1-Ravikumar, Accused No. 2-Suresh Babu and Accused No. 3-Sitaraman, are concerned,
as they are charged for committing the offence of misusing their position as public servants
and, therefore, for the offence punishable under Section 409 of IPC and Section 13(2) of the
Prevention of Corruption Act, 1988, it cannot be accepted that undue lenient view should be
taken, so as to release them on the punishment already undergone.

10
The Barium Chemicals Ltd. and Anr. vs. The Company Law Board and Ors. MANU/SC/0037/1966
11
Alamgir vs. State (NCT, Delhi) MANU/SC/0987/2002;
12
Alamgir vs. State (NCT, Delhi) MANU/SC/0987/2002;

Page | 10
1. ANNEXURE 1 – LIST OF WITNESSES

Page | 11
Page | 12
Page | 13
Page | 14
Page | 15
Page | 16
 2. ANNEXURE 2 – WASTE BOOK CREDIT/DEBIT SALE
(SBI)
TABLE: ONE OF THE MANY WASTE BOOK CREDIT/DEBIT SIDE SAMPLE (DT. 16.11.1991)

Page | 17
 E. REFERENCES

i. Books Referred:

o A.S. Ramchandra Rao, Commentary on the Prevention of Corruption Act, Universal

Law Publications, 3rd ed. (2016)
o Ashok Dhamija, Prevention Of Corruption Act, LexisNexis Butterworths Wadhwa, 2nd
ed. (2009)
o Sandeep Mukherjee, Commentaries on the Prevention of Corruption Act, Hind
Publishing House, (1990)

ii. Cases Referred:

o Alamgir vs. State (NCT, Delhi) MANU/SC/0987/2002;

o Ajay Aggarwal v. Union of India, MANU/SC/0265/1993 : (1993) 3 SCC 609
o R. Venkatakrishnan v. Central Bureau of Investigation, MANU/SC/1411/2009 : AIR
2010 SC 1812
o R. Venkatkrishnan v. Central Bureau of Investigation, (2009) 11 SC 737
o Ram NarainPoply v. Central Bureau of Investigation,MANU/SC/0017/2003 : AIR 2003
SC 2748
o State of Kerala v. P. Sugathan, MANU/SC/0601/2000 : (2000) 8 SCC 203
o State of Maharashtra v. SomNathThapa, MANU/SC/0451/1996 : (1996) 4 SCC 659
o State of Maharashtra v. SomNathThapa, MANU/SC/0451/1996 : (1996) 4 SCC 659
o The Barium Chemicals Ltd. and Anr. vs. The Company Law Board and Ors.
MANU/SC/0037/1966
o Vinayak Narayan Deosthali v. Central Bureau of Investigation, MANU/SC/1128/2014
: (2015) 2 SCC 553
o Yash Pal Mittal v. State of Punjab, MANU/SC/0169/1977 : (1977) 4 SCC 540

Page | 18