Research › Search › Judgment

Punjab High Court · body

2003 DIGILAW 420 (PNJ)

Nirmal Singh v. State of Punjab through C. B. I.

2003-03-12

K.S.GAREWAL

body2003
JUDGMENT K.S. Garewal, J. - This judgment shall decide three criminal appeals which have been filed by Nirmal Singh (henceforth referred to as Nirmal Kumar Manon or N.K. Manon, Cr. Appeal 146 SB of 1995), Prem Chand Jain (Cr. Appeal 184-SB of 1995) and Om Parkash, Surinder Kumar and Vipan Kumar (Cr. Appeal 184-SB of 1994). 2. The appellants along with Dalip Singh, Hardev Singh and Raj Pal Jain faced trial before the learned Special Judge, C.B.I. for various offences under the Indian Penal Code and Prevention of Corruption Act with regard to a series of fraudulent transactions which led a huge loss to State Bank of India, Brahampuri Branch, Ludhiana. Dalip Singh and Raj Pal Jain were acquitted, Hardev Singh died during the trial but Nirmal Kumar Manon, Prem Chand Jain, Vipan Kumar, Surinder Kumar and Om Parkash were found guilty and convicted for various offences. They were sentenced to undergo various terms of imprisonments, which are detailed in the judgment of the learned Special Judge. 3. The principal actors in the scam were Om Parkash and his sons Surinder Kumar and Vipan Kumar. These appellants were businessmen of Ludhiana and were partners in three Ludhiana firms namely M/s Marshal Hosiery Factory, M/s Marshal Knitwears and M/s Vallabh Hosiery Mills. The said firms had CC accounts with the State Bank of India, Brahampuri Branch, Ludhiana during the relevant period of 1982-84. During this period Dalip Singh and Nirmal Kumar Manon (aka NK Manon) had been posted as Accountants in the said branch while Hardev Singh was a Messenger posted with the branch. The modus operandi adopted by Om Parkash and his sons was to issue cheques from some accounts in favour of their firms, produce these cheques and get them purchased by the said branch to receive credit for the amounts of the cheques in their respective accounts. The cheques thus purchased were later sent for collection but would be intercepted and destroyed en route. Therefore, the cheques would neither be returned after payment nor returned as dishonoured. 4. As a part of their plan, on January 7, 1983 Vipan Kumar, appellant, impersonated as Pawan Ahuja before Central Bank of India, Panipat and gave his address as Ahuja Handicrafts, 32, Amar Bhawan Chowk, Panipat. Therefore, the cheques would neither be returned after payment nor returned as dishonoured. 4. As a part of their plan, on January 7, 1983 Vipan Kumar, appellant, impersonated as Pawan Ahuja before Central Bank of India, Panipat and gave his address as Ahuja Handicrafts, 32, Amar Bhawan Chowk, Panipat. He opened an account (Account No. 1658) in the name of Pawan Ahuja with the Central Bank of India, Panipat and for the purpose of introduction he availed the services of Prem Chand Jain, appellant, who already had an account with the said bank. Vipan Kumar (aka Pawan Ahuja) procured cheque books from the Panipat Bank and issued as many as 67 cheques in favour of Marshal Hosiery Factory, Marshal Knitwears and Vallabh Hosiery Mills. The cheques were drawn in various amounts and on various dates but all amounts were less than Rs. 25,000/-. 5. Dalip Singh and N.K. Manon as Accountants were empowered to purchase cheques from a firm but only upto Rs. 25,000/- as per the financial powers of the Accountants laid down in the Regulations of the bank. Each individual cheque was for less than Rs. 25,000/- and was purchased by the bank. Thereafter, the bank sent these cheques for collections through registered letters but these letters never reached the Panipat bank. The letters were handed over to Hardev Singh for posting but Hardev Singh, in connivance with the account holders, i.e. Om Parkash and his sons, instead of posting the letters destroyed the letters. The firm of Om Parkash and others to received credit for the amounts mentioned in the respective cheques without the Ludhiana bank recovering the amount from the Panipat Bank, upon which the cheques had been drawn since the cheques never reached their destination for the purpose of collection because they were destroyed by Hardev Singh. 6. Investigation in the case was conducted by C.B.I. and during the investigation it was revealed that Dalip Singh, Hardev Singh and N.K. Manon received illegal gratification from the firms of Om Parkash and his sons. It was also found that it was Vipan Kumar who had opened the account in the name of Pawan Ahuja on January 7, 1983 and the account was closed on July 11, 1984. All the accused were charged under Section 120-B Indian Penal Code. Dalip Singh, N.K. Manon and Hardev Singh were charged under Section 5(2) of the Prevention of Corruption Act. All the accused were charged under Section 120-B Indian Penal Code. Dalip Singh, N.K. Manon and Hardev Singh were charged under Section 5(2) of the Prevention of Corruption Act. Om Parkash, Surinder Kumar and Vipan Kumar were charged under Sections 201, 419, 420, 468 and 471 Indian Penal Code. The accused pleaded not guilty and claimed to be tried. The prosecution examined 30 witnesses. When the accused were examined without oath under Section 313 Criminal Procedure Code, they pleaded that cases were false. Defence evidence was also examined. The learned Special Judge concluded that they had been in conspiracy with each other and held all the appellants guilty as charged but acquitted Dalip Singh and Raj Pal Jain. Hardev Singh died during trial. 7. The main accused in this case are Om Parkash, Surinder Kumar and Vipan Kumar. Indeed Vipan Kumar can be said to be the king pin in the scam and the real link between the Ludhiana bank and Panipat bank. Vipan Kumar impersonated as Pawan Ahuja and opened the account at Panipat. It was Vipan Kumar who issued the cheques in favour of the three family firms. The cheques on presentation were purchased for the Ludhiana bank by the Accountants of the bank namely Dalip Singh. After Dalip Singh was transferred and N.K. Manon took over, the cheques were purchased by the latter. After purchase money was credited to the various accounts of the firms the cheques were sent to Panipat for collection through registered post and for this purpose the registered letters were handed over to Hardev Singh who never posted them. A minor role was also played by Prem Chand Jain who identified Vipan Kumar before the Panipat bank as Pawan Ahuja. 8. According to the learned counsel for the appellants it was standard practice in banks to purchase cheques and drafts and credit the amounts to the drawee of the cheques. The cheques/drafts were sent for collections, when the amount was received it would be credited to the account of the party. This was how wheels of business would move and the commercial interest of businessmen did not suffer for the delay in collecting the amounts. The safe guard which the bank had in case of cheques returning unpaid was to either debit the amount of the party or institute civil/criminal action. This was how wheels of business would move and the commercial interest of businessmen did not suffer for the delay in collecting the amounts. The safe guard which the bank had in case of cheques returning unpaid was to either debit the amount of the party or institute civil/criminal action. The bank had indeed filed three Civil suits on March 10, 1986 for the recovery of the outstanding amount. Plaints in the suits entitled State Bank of India v. M/s Marshal Hosiery Factory and others, State Bank of India v. M/s Marshal Knitwears and others and State Bank of India v. M/s Vallabh Hosiery Mills and others are on record as Exs. DW3/1, DW3/2 and DW3/3. 9. Examination of the plaints shows that suit against M/s Marshal Hosiery Factory relates to 42 cheques of the value of Rs. 5,34,571.92/-, suit against M/s Marshal Knitwears relates to 21 cheques of the value of Rs. 3,44,411.10/- and the suit against M/s Vallabh Hosiery Mills relates to 4 cheques of the value of Rs. 29,220.00/-. The plaintiff in the three plaints has described the procedure for collecting the amount of cheques, discounted/purchased/negotiated from the drawee accounts. After describing the procedure the plaintiff pleaded that the procedure had been strictly followed in the instant case affording the credit of the amounts of the cheques in the aforesaid accounts of the defendants but when the cheques were sent by the plaintiff bank to the responding branches for collections, they were dishonestly taken by the defendants from Hardev Singh, Messenger with mala fide intention to defraud the bank. Consequently, the said cheques were never received by the responding branches and, therefore, the payments of the said cheques could not be claimed/realised/collected by the responding branches from the drawee branches. Since the responding branches were neither receiving the cheques nor the payments, these branches were not sending any intimation of realisation/collection of the proceeds of the said cheques to the banks. Inter Office Accounts Department. The entries sent by the Ludhiana Branch to the I.O.A. department could not be reconciled by the corresponding entries which were to be sent by the responding branches regarding collection. It was thus the fraud was detected. 10. Inter Office Accounts Department. The entries sent by the Ludhiana Branch to the I.O.A. department could not be reconciled by the corresponding entries which were to be sent by the responding branches regarding collection. It was thus the fraud was detected. 10. It is important to note that in the plaint the plaintiff branch i.e. Brahampuri Branch categorically pleaded that the branch had strictly followed the procedure for collecting the amount of the cheques discounted/purchased/negotiated from the drawees branch. This means that the officers of the Ludhiana branch including the Accounts Officers were not in conspiracy with Om Parkash, Surinder Kumar and Vipan Kumar. The bank has pleaded that the cheques sent for collection had been dishonestly taken by the defendants from the Messenger with mala fide intention to defraud the bank. The defendants were Om Parkash and his sons and some others. There is no pleading in the plaint to the effect that the Accountants Dalip Singh or N.K. Manon had connived with the main accused who defrauded the bank. The pleadings in all the three plaints were identical and seem to completely absolve the Accountants. 11. Learned counsel for the appellants has contended that all the three suits had been withdrawn by the plaintiff bank as the matter had been settled with the defaulting firms out of court. The entire claim of the bank had been fully satisfied and the suit were dismissed in view of the compromise on August 12, September 12 and October 22, 1997. On this ground the counsel has pleaded for leniency in sentence to the appellants in Criminal Appeals 184-SB of 1995 and 183-SB of 1995. 12. At this stage, it may be appropriate to briefly go through the prosecution evidence in an attempt to discover if there was concrete evidence of conspiracy between the Accountants of the bank and the three account holders. Postman Tek Chand (PW 1) of Panipat testified that there was no business establishment in the Amar Bhawan Chowk area of Panipat named Ahuja Handicrafts. This certainly establishes that the firm of Pawan Ahuja (or Vipan Kumar) did not even have a postal address. Similar was the statement of Postman Dhana Ram (PW 5) who also testified that in 1983-84 he never delivered any correspondence to Pawan Ahuja, Ahuja Handicrafts, Shop No. 32, Amar Bhawan Chowk, Panipat. This certainly establishes that the firm of Pawan Ahuja (or Vipan Kumar) did not even have a postal address. Similar was the statement of Postman Dhana Ram (PW 5) who also testified that in 1983-84 he never delivered any correspondence to Pawan Ahuja, Ahuja Handicrafts, Shop No. 32, Amar Bhawan Chowk, Panipat. A number of bank officers of the State Bank of India appeared as witnesses and they testified regarding the different stages of the various transactions. S.P. Singla, Branch Manager, Industrial Area, Panipat appeared as P.W.6 and testified that it was the discretion of the bank Manager to purchase cheques as demand drafts and this was done in case of persons having accounts in the bank and were known to the Manager. He also admitted that there was a limit for purchasing D.Ds. per day. Similar was the statement of S.P. Jain (PW 7) of State Bank of India. He further went on to state that after purchasing of the cheques a daily schedule was prepared by the Clerk and sent to the Dispatcher. On receipt of cheque an acknowledgement was sent by the payee bank that the cheque has been paid. S.C. Madan (PW 8). Accountant of the Brahampuri Branch also stated that Indervir Kaur, Accountant of the branch used to sign the vouchers authorising daily purchase. He worked as Accountant from 1981 to 1982 and was succeeded by Dalip Singh but he could not say who was the Accountant thereafter. Sita Devi (PW 9) testified that she was the Despatch Clerk on D.D. side of the Brahampuri Branch and used to enter all the documents of D.Ds. purchased in a register and after entering those she used to hand it over to the Head Clerk after being stamped by Hardev Singh Messenger who used to close the letters. A.N. Sharma, Manager S.B.I. (PW 10) also give instances of purchase of certain cheques. In cross-examination he admitted that cheques had been validly purchased as per the record of the bank and also stated that if the cheque was not paid by the party on whom it was drawn, the bank charged interest on that cheque for the unpaid period. He further admitted that a civil suit had been filed regarding the amount realised. 13. He further admitted that a civil suit had been filed regarding the amount realised. 13. H.L. Vohra (PW 11) Accountant of Central Bank of India, Panipat proved the account opening application form dated January 7, 1983 filed by Pawan Ahuja to open the account of Ahuja Handicrafts, Shop No. 32, Amar Bhawan Chowk, panipat. The identification had been made by Prem Chand Jain of Haryana Saree House, Panipat. Pawan Ahuja had also given his specimen signatures. The statement was further confirmed by N.K. Garg (PW 12) who was posted as Sub Accountant, Central Bank of India, Panipat in 1983-84 and testified that an account of Ahuja Handicrafts was opened on the introduction of Prem Chand Jain, partner of Haryana Saree House. The account number was 1658 and it was opened on January 7, 1983. 14. Indervir Kaur (PW 14) testified that in 1983 Nirmal Kumar Manon was the Accountant of the Brahampuri Branch, Ludhiana and she was on relieving duty for him for five days and had purchased five cheques at his instance. The accused had told her that no D.D. of the firms Marshal Hosiery and Marshal Knitwears was to be returned. She admitted that Surinder Kumar, Om Parkash had come to her to get the D.Ds. authorised but no act was done under pressure. She also admitted that D.D. purchase was of yarn and cloth sent by the accused. Lastly, it was stated that apparently all transactions that she had authorised were legal. 15. S.P. Sharma (PW 15) who was incharge of the clearing side of Brahampuri Branch gave the procedure for purchase of D.D.. He stated that D.D. first went to a Clerk who entered the same in the subsidy book and then it went to the concerned officer who directed authorised officer to purchase the D.D. and then D.D. came to the D.D. Purchase Section and finally it came to the passing officer who passed it. The passing officer was to see whether a certain person had been authorised to purchase the D.D. After the passing of the D.D it was sent to the Despatch Section. The witness was put 39 D.D. vouchers and testified that these had been purchased by Nirmal Kumar Manon. In cross- examination he admitted that an Accountant could purchase bills upto Rs. 25,000/-. The witness was put 39 D.D. vouchers and testified that these had been purchased by Nirmal Kumar Manon. In cross- examination he admitted that an Accountant could purchase bills upto Rs. 25,000/-. V.P. Kapoor (PW 16) was the Passing Officer at the Brahampuri Branch during 1981-83 and testified to having passed 34 D.D. invoices and he had initialled all the copies as Passing Officer. He also stated that he had received all the supporting documents before passing the documents. Sanction to prosecute had been proved by V.S. Davit (PW 18). The sanctions are Exs. PW18/1 in respect of Dalip Singh and PW 18/2 in respect of Nirmal Kumar Manon. The sanction orders had been passed by the Chief General Manager, State Bank of India, Chandigarh Circle on December 22, 1987. 16. Subhash Chander (PW 19) who also worked as Passing Officer in 1983 at Brahampuri Branch identified initials and signatures of N.K. Manon. He further stated that after the purchase of D.D. it is sent for despatch along with the cheque, a list and acknowledgement. If the acknowledgement card is not received by the bank then a reminder is issued by the bank. Shuttle inquiry memo is received from the Central Office of the Bank at Bombay after 6/7 months and from this memo it can be ascertained as to which of the D.Ds. has been paid and which was outstanding. No inquiry memo was received regarding D.Ds of Marshal Hosiery Factory. In cross-examination he testified that D.D. purchase was normal banking practice. The prosecution examined S.C. Bhagat (PW 24) who was the Internal Auditor of the bank. S.S. Jham (PW 26) produced the original despatch register and proved photostat copies of despatch register of relevant entries. 17. From the above it becomes obvious that direct evidence of a conspiracy between the Accountants and the account holders is really not present. At best it can be said that the Accountants, who were purchasing the D.Ds were careless in continuing to advance credit to the party by purchasing the D.Ds without verifying the fate of the previous transactions. Any astute Accountant would have cross checked about the earlier transactions and come to know that the amounts are not being collected. This would have led him to make further inquiry and he may have discovered the reason, why the amounts were not being collected. Any astute Accountant would have cross checked about the earlier transactions and come to know that the amounts are not being collected. This would have led him to make further inquiry and he may have discovered the reason, why the amounts were not being collected. The reason in this case being that the cheques had not been despatched to their destination, therefore, there could be no question of the cheques getting paid and the amounts getting adjusted in the accounts of the firms. Was it a direct involvement or carelessness that permitted the mal-practice to continue for a long time may be difficult to determine through the voluminous oral and documentary evidence but the most important factor in deciding the criminal liability would be that in the suits filed by the bank to recover the amounts, there was no allegation that there had been any criminal conspiracy or misconduct on the part of the Accountants to cause loss to the bank. It is likely that the Accountants, by purchasing the cheques, may have thought that they were making an investment on behalf of the bank because the bank was charging due interest for the period for which the amount remained unpaid. They may also have thought that the bank still had the legal remedy of launching criminal prosecution or civil action against the defaulting parties. It was when the scam was unearthed and a pattern emerged that inquiries revealed failure on the part of the Accountants to safe guard the banks interest. Nevertheless, one cannot lose sight of the fact that the bank itself in the three plaints appeared to have totally absolved the Accountants by laying the blame squarely on the Messenger who had not despatched the cheques for collection. Till the stage of despatch the bank had followed the proper procedure, even the Accountants were necessarily innocent of the crime. 18. Another factor which emerges in this case is that the scam in fact originated from Panipat and not Ludhiana since it was at Panipat that the fictitious account was opened by a fictitious person namely Pawan Ahuja on the basis of the identification of Prem Chand Jain, who identified Vipan Kumar as Pawan Ahuja of Ahuja Handicrafts. There was no Pawan Ahuja and no shop known as Ahuja Handicrafts. There was no Pawan Ahuja and no shop known as Ahuja Handicrafts. Vipan Kumar needed the account to obtain the cheque books containing the cheques which he would sign and issue to his own three firms to obtain D.D. purchase facilities. 19. There is no doubt that Om Parkash, Surinder Kumar and Vipan Kumar had conspired with each other to take illegal benefit of the cheque discounting scheme of the bank. The scheme was a legitimate banking practice which entitled a customer to immediate credit for a cheque deposited with the bank for collection instead waiting for some time before the amount was collected and deposited in the account. If the party had been using the scheme for legitimate purposes to collect cheques issued to it by genuine customers then there may be some ground to hold that a couple of cheques out of 67 cheques getting lost would not raise any criminal liability. In the present case not only were a large number of cheques lost but each of those cheques had been drawn on a specific bank in Panipat and the account had been opened by none other than Vipan Kumar impersonating Pawan Ahuja, proprietor of Ahuja Handicrafts, Panipat, a non-existing firm. While the officers operating the discounting scheme on behalf of the Brahampuri branch namely Dalip Singh and N.K. Manon had been absolved of all liability by the bank itself, Om Parkash, Surinder Kumar and Vipan Kumar do not deserve to be absolved of criminal liability as they actively connived in ensuring that the cheques never reached their destination for collection and they got financial benefits from their criminal machinations. 20. The question which remains to be considered is whether the settlement of the civil dispute by payment of all outstanding dues entitles the appellants to some concession or leniency in terms of sentence. The judgment of the learned Special Judge convicting the appellants and sentencing them was passed on February 17, 1995, more than two years before the suits were compromised. Therefore, the factor regarding the settlement of the suits and payment of all outstanding amounts was not a factor which was available for consideration when the sentence was passed. That factor is now a relevant one. Therefore, the factor regarding the settlement of the suits and payment of all outstanding amounts was not a factor which was available for consideration when the sentence was passed. That factor is now a relevant one. Learned counsel for the appellants submitted that the appellants may be given the benefit of reduction of sentence to the period already undergone in view of the fact that all outstanding dues had been cleared. 21. As a result of the above discussion, it is hereby held that N.K. Manon (aka Nirmal Kumar) had been completely absolved of any liability in the case of the bank itself since he had observed the proper procedures while implementing the discounting scheme. Consequently, his appeal (Cr. Appeal No. 146-SB of 1995) deserves to be accepted and he is acquitted of all the charges. 22. As regards Om Parkash, Surinder Kumar and Vipan Kumar (appellants in Cr.Appeal No. 184-SB of 1994) and Prem Chand Jain (Appellant in Cr. Appeal 183 SB of 1995) charges against them stood fully proved. Their appeals are dismissed qua conviction, which is upheld as recorded by the learned Special Judge. 23. However, in view of the fact that the outstanding dues had been paid to the bank, sentence is hereby reduced to the period already undergone. Nevertheless, the appellants Om Parkash, Surinder Kumar and Vipan Kumar shall be liable to pay fine of Rs. 1.00 lac each, Prem Chand Jain shall pay Rs. 25,000/-, in default of payment of fine they shall undergo rigorous imprisonment for six months. The amount shall be paid within two months from today. Rs. 1.00 lac out of the amount, if recovered, shall be awarded as costs of investigation prosecution to C.B.I. and the balance amount shall be deposited in the account of District Legal Service Authority, Patiala. No compensation is awarded to the State Bank of India as its dues have been cleared. 24. The other two appeals (Cr.Appeal No. 184-SB of 1995 and Cr.Appeal No. 183-SB of 1995) stand disposed of in terms of the above modification in sentence. Appeal allowed.