Research › Search › Judgment

Andhra High Court · body

2008 DIGILAW 164 (AP)

K. Shivaram Shetty v. State

2008-02-27

R.B.NAIK

body2008
ORDER Since these two Revision Petitions arise out of the same order, they are taken up together, heard and disposed of by common order official position as Executive Director of Voyage Bank, and subsequently as C & MD, showed undue interest and fraudulently and dishonestly 2. Cri,R,P, 355 of 2000 is filed by with ulterior motives provided the sanction of Mr. K, Shivaram Shetty A-1, and Cri.R.P.No. various facilities toA-3, A-1 in violation of the 269 of 2000 is filed by Smt. Veena Sabharwal norms of the Bank participated in the meeting A-2 and M/s. Sabsom Freight Containers held for the purpose of recommendation of Pvt. Ltd" which is arrayed as A-3 of which A-various credit facilities toA-3 and had managed 2 is the Managing Director, to get various facilities to A-3 Company, that 3. The brief facts of the prosecution case the Order placed by M/s. ACTL, London with arethatA-1 K. Shivarama Shetty, while working A-3 Company was cancelled as the company as Executive Director and as then Chairman & failed to manufacture the prototype of the M.D, of Vijaya Bank, during the period 1989- containers ordered and thereby Vijaya Bank 90, entered into a criminal conspiracy to cheat has been exposed to a wrongful loss to the Vijaya Bank in securing various credit facilities tune of Rs. 466lakhs. Because of the aforesaid to A-3 M/s, Sabsom Freight Containers Pvt. acts of A-1, a complaint has been lodged Ltd" and in furtherance of the said conspiracy, against the three accused for the offences A-1 K. Shivarama Shetty committed criminal punishable under Section 120-B read with misconduct and by corrupt, illegal means and Section 420 of the IPC, and Section 13(2) read by ab use of his official position got sanctioned with Section 13(1)(d) of the Prevention of various credit facilities, such as packing credit, Corruption Act, 1988. clear cash credit, DPG facility, import letter of credit etc., to A-3 Company without actually 4. The investigating agency, after completion of the investigation, after securing proceeding or looking into the merits of the documents pertaining to the transactions and after examining about 13 witnesses filed wrongful loss to Vijaya Bank to a tune of a charge-sheet against the petitioners herein Rs. 466 lakhs and caused corresponding for the offences stated above. The Trial Court, wrongful gain to A-2 and A-3. 466 lakhs and caused corresponding for the offences stated above. The Trial Court, wrongful gain to A-2 and A-3. It is the further on being satisfied that there is prima facie case of the prosecution that M/s. Sabsom material issued process against the petitioners Freight Containers Pvt. Ltd., A-3 was a herein for the offences stated supra. After company incorporated in 1983 for the manufacture of 20 feet containers, that A-1 service of process, the petitioners put in was closely associated with A-2 Smt. Veena appearance and when the matter reached the Sabharwal who was a business partner of stage of arguments before charge, the petitioners since had chosen to address the M/s, Anupam Silk where Smt. Mamata Shetty, w/o, A-1 was the other partner as per the arguments, the learned trial Judge heard the arguments of the petitioners and by his order partnership deed, that A-1 was instruments in dated 1-4-2000 in C.C.No. 69 of 1997, refused getting sanctioned various facilities to A-3 to discharge the petitioners of the charges from Vijaya Bank since 1985, thatA-3, which leveled against them and rejected the claim of was manufacturing 20 feet containers, the petitioners for discharge and as such, approached Vijaya Bank for further funds during these two revision petitions have been filed 1990 on the strength of orders received from M/s, ACTL London, at the appropriate levels, challenging the order of the Trial Court and seeking for discharge of the charges leveled A-1 K. Shivaram Shetty, got approved various facilities and funds so sanctioned and were against the petitioners herein, released to the company without properly 5. The main ground surged by the petitioners ensuring the utilization, that A-1 by using his in support of their contention are: (1) That the documents produced by the petitioners should have been looked in to by the Trial Court while appreciating the fact whether there are sufficient grounds to proceed against the petitioners for framing of charge and since the Trial Court has failed to look in to the documents produced by the petitioners meticulously there is an error committed by the Trial Court and as such, it requires interference. (2) That the material produced by the prosecution does not reveal that the petitioners are guilty of the offences for which they are charged and with out there being sufficient material to produced against the petitioners, the Trial Court has erroneously rejected the claim of the petitioners for discharge and as such, erroneously directed framing of charge against the petitioners herein. (3) That the first petitioner since a public servant, there is a requirement of sanction order and without sanction order, the Trial Court could not have taken cognizance of the offence in question. 6. It is not in dispute that the 1" accused petitioner was working as a General Manager, Vijaya Bank till 1987 and that there was no allegation against him during the said period. On 3-7 -1987 he became the Executive Director and worked as such till 22-9-1990. He was also in charge Chairman and M.D. till 22-6-1992 and he took charge as Chairman and M.D. on 22-6-1992 and retired from service on 30-6-1992. The allegation of the prosecution is that A-1 , who was closely associated with A-2, who was a partner of another firm in which the wife of A-1 was also a Partner, evinced interest in sanctioning various loans to A-3 Company and hurriedly allowed A-3 to withdraw the money sanctioned in quick succession, though there was no requirement of the utilization of the money for which they were sanctioned and that A- 1 did not ensure to take necessary precautions to recover the money so disbursed. It is also not in dispute that on 11-3-1983 A-3 Company came into existence and in the year 1985 it opened an account with Vijaya Bank and one Surendra Chowdry introduced A-3 to Vijaya Bank of which A-1 was the Chairman and M. D. That on 1 0- 7 -1985 a credit loan was sanctioned to A-3. By the time of sanction of the credit loan to A-3, A-3 had already availed Term Loans from KSFC and KSSIDC and without taking concurrence from the said Financing Institutions, it is alleged that credit loan was sanctioned and disbursed to A-3 Company. 7. By the time of sanction of the credit loan to A-3, A-3 had already availed Term Loans from KSFC and KSSIDC and without taking concurrence from the said Financing Institutions, it is alleged that credit loan was sanctioned and disbursed to A-3 Company. 7. It is submitted by the Counsel for A-1 that various credit facilities so sanctioned to A-3 was not by A-1, but it was by 14 Board of Directors and none of the Directors, who participated in the meeting while sanctioning various credit facilities, had raised any objection for extending the loan facilities to A-3 Company. It is also submitted that none of these Directors have been made as accused in the instant case and that after retirement of A-1 the Banking Institution, with an intention to humiliate and harass, as filed a false case against A-1 making false allegations that the various credit facilities were sanctioned to A-3 individually by A-1 during the tenure of his service, though they were sanctioned long prior to he taking charge as Chairman and M.D. on 22-6-1992 and the sanction of credit facility was by the Board of Directors. It is further submitted by A-1 that he only participated in the Consortium Meeting and the sanction of the credit facilities to A-3 was not on the basis of the resolution passed in the Consortium Meeting, but they were sanctioned long prior to the holding of the Consortium Meeting. It is submitted that the approach of the prosecuting agency in targeting A-1 is not bona fide and the same is perverse. The new incumbent, who had taken charge, to tarnish the image of A-1, had embroidered a false case against the petitioner to falsely implicate him. The very allegation of the prosecution that the sanction of loans to A-3 by itself would not that amount to A-1 having conspired and caused loss to the Bank of which he was the Chairman and MD. It is also submitted that not even a single Loan or credit facility was extended by A-1 to A-3 and as such, he cannot be held responsible for the loans, which have been sanctioned to A-3. 8. It is also submitted that not even a single Loan or credit facility was extended by A-1 to A-3 and as such, he cannot be held responsible for the loans, which have been sanctioned to A-3. 8. The learned counsel for A-1 relied upon a judgment in the case of the Bongaigaon Refinery and Petrochemicals Ltd. and others v. Girish Chandra Sarma and contended that the extension of the credit facility to A-3 was a collective decision of the Board of Directors and as such, the petitioner A-1, who is an individual, cannot be targeted without the Directors being held responsible for the sanction of such loans. Held also relied upon a judgment in the case of Maharashtra State Mining Corporation v. Sunil' in support of the said contention and argued that the acceptance by the Board would lead to a ratification and even a the time of extension of the credit facility if there was any error, that would amount to ratification and would establish that the Board has ratified all the errors, if any, found at the time of extension extending the credit facilities to A-3 Company and as such, A-1 cannot be held to be guilty of any offence. He relied upon the judgment in the case of State of Orissa v. Oebendra Nath Padit and contended that the material produced by the defence which would establish that the accused is innocent person also be looked into at the time of framing of charge and while ascertaining whether there are sufficient grounds to frame charge. 9. A-2 and A-3, who have separately filed a Revision Petition, which is referred to above, adopting the arguments addressed by A-1 submitted that the Company, A-3 was established in the year 1983 and it was a bona fide establishment and the fact of KSFC and KSSIDC having extended Term Loan after due verification of the bona fides of A-3 Company would establish that with all good intention the Company was found and they intended to manufacture 20 feet containers, which were in demand during the said duration and the correspondence with a London Company, which was supposed to place orders, would all reveal the good intention of A-3 Company to manufacture and supply containers to the said London Company. But, however, at the initial stage of manufacturing the sample of five containers, as there was difficulty in procuring the raw materials, the Company could not commence production within the scheduled time and because of the said fact the accused company sustained loss and it cannot be held that A-3 has committed the offence alleged and cheated the bank, merely because A-2 was a partner of another firm of which the wife of A•1 was also a partner, the same would not necessarily lead to an interference that A-1 has favoured A-3 to avail the credit facilities. The Board of the Bank granted credit facilities on due verification of the bona fides of A-3, after spot inspection, after ascertaining the financial health of A-3 Company, the project that it had taken up and the feasibility of the project and prospects of it coming out with the manufacturing of a product which was in great demand, which would all go to establish that it was a bona fide Company. Merely because of the fact that there was a loss in running of the Company, it cannot be held that A-3 or A-2 are guilty of an offence. In addition, it is also submitted that the husband of A-2, who was managing A-3 Company, since died, A-2 had taken the great responsibility of running the Company. She with the assistance of experts in the field had put in all efforts to commence the production, but because of the contingencies, which were beyond the control of A-2, the manufacturing process could not commence and as such, ultimately it lead the Company running into huge monetary loss and mere loss caused to the Company would not establish that the Company is guilty of having committed the offence of cheating the financiers. 10. On the other hand, the learned counsel for the prosecution submitted that till 1989 the transactions were found to be bona fide and 1990 onwards in quick succession A-l, who was the Chairman of the Bank, went on extending credit facilities to A-3 Company, which ultimately was to the tune of more than 5.17 lakhs. When A-3 Company applied for the credit facilities it was already found to have availed credit facilities of Rs. 120 lakhs from KSSIDC, KSFC, Indian Bank and other Bankers. When A-3 Company applied for the credit facilities it was already found to have availed credit facilities of Rs. 120 lakhs from KSSIDC, KSFC, Indian Bank and other Bankers. This aspect of the matter was not taken into account while extending additional credit facilities by the Vijaya Bank. A sum of Rs. 21.611akhs was found to be outstanding as on the date on which A-3 Company approached the Vijaya Bank for sanction of the loan. Despite the same, a sum of Rs. 6 lakhs were disbursed to A-2. A Consortium Meeting was held on 13-3-1989 and on 20-3-1990A-l being the Chairman of the Bank participated in the said meeting. It was noticed that A-3 Company had availed more than 4 crores 171akhs of credit facilities under different heads of accounts. An inspection of A-3 Company was ordered for. A Special Officer was deputed to inspect the functioning of A-3 Company. A-2 being the Managing Director of the said Company did not co-operate with the said Inspector and as there was no co-operation by A-2, he had to resign the job and submitted a report to the bank. This was brought to the notice of A-l, who was the then Chairman of the Bank. Despite the same, he did not take any action to ascertain the financial health and functioning of A-3 Company, but he went on permitting A-3 to withdraw the sanctioned loan amount in quick succession and from time to time. Though the loan and credit facilities were not sanctioned by A-l individually and such sanction was by the Board, A-l being a responsible officer of the Bank having come to know that the condition of A-3 Company was deteriorating and it was a sinking establishment should not have allowed further withdrawal of money from the bank. A-l has not taken any action to stop extension of the said facilities though the Inspecting Authority had put a report to the effect that the facilities sanctioned to A-3 Company should not be extended further. Overruling the objections raised by the Inspecting Authority, the facility was further extended to A-3 and A-3 was permitted to withdraw the money from time to time. It is also noticed from the records that the purpose for which the loan was sanctioned was not utilized for the said purpose. Overruling the objections raised by the Inspecting Authority, the facility was further extended to A-3 and A-3 was permitted to withdraw the money from time to time. It is also noticed from the records that the purpose for which the loan was sanctioned was not utilized for the said purpose. On the contrary, A-2 being the Director of A-3 Company has purchased a new Contessa Car out of the loan amount given for the purpose of establishing the factory. 11. The learned counsel for the respondent relied upon a judgment in the case of Hardeo Singh v. State of Bihar' and submitted that mere prosecuting an accused for the offence under Section 120-B r/w 420 IPC and 13(2) r/w 13(1 )(d) of Prevention of Corrupt ion Act by itself does not amount to harassment and on the ground that it causes harassment the accused cannot seek a discharge. He also relied upon a judgment in the case of Esher Singh v. State of Andhra Pradesh' and submitted that conspiracy will have to be presumed because conspiracies are hatched in secrecy and not in public. 12. The fact in the instant case that the bank having sustained a loss of more than Rs. 4.66 lakhs and the Company A-3 having been found to be a Company without credit would establish that A-l being the Chairman of the Bank had hatched conspiracy with A-2, Director of A-3 Company and had extended various credit facilities, ultimately resulting in huge financial loss to the complainant bank. It is also noticed that credit facilities were enlarged to A-3 Company without taking sufficient security, though securities were supposed to be taken as per the conditions indicated by the sanctioning authority, the same were ordered to be waived by A-1. 13. ln support of the case of the prosecution, during the course of investigation, the Investigating Agency has examined one Devadas as C.W. 1 and he in his statement he has stated, he was working as an Officer in succession in Bangalore Zonal Office. He has spoken to regarding the credit facilities sanctioned to A-3 Company and the role played by A-1. He has spoken to regarding the credit facilities sanctioned to A-3 Company and the role played by A-1. He has stated that A-1 was taking a lead role as and when the issue of disbursement of various credit facilities to A-3 Company was being taken up and at the instance of A-1 a relief was given to A-3 to open LC to an extent of about 6.00 lakhs to enable the company to import five numbers of kits initially and the margin money was waived without even ascertaining the technical viability of providing facility of opening LC. He has further stated that when a Consortium Meeting dated 20-2-1990took place, the loan proposal of A-3 Company received by the Zonal Office was yet to be processed. Even then in violation of the norms of the bank, A-1 made a request to the participating Institutions to give cooperation and render necessary assistance to the project and asked A-2 Smt. Veena Sabharwal to take over the Company as a Managing Director and as such, he has shown keen interest in A-3 Company. He is also responsible for sanction of the working capital with nil margin to be provided by A-3 Company. Another witness Vasanth Shetty- CW.2 has stated that the Mayo Hall Branch of Vijaya Bank released import LCs to an extent of Rs. 1,72,07,600/- without creating second charge on the fixed assets as stipulated in the sanction order. That the records verified revealed that a Memorandum for Board of Directors was straightaway put upon on 6-8-1990 by the DGM recommending the enhancement of the limit by Rs. 30 lakhs and though CW. 2 Vasanth Shetty was supposed to sign the same, his signature was not taken and the enhanced credit facilities from time to time were given to A-3 at the instance of A-1. CW. 4, ACB Nair has given statement to the effect that the retired as a Divisional Manager, Vijaya Bank in the year 1982. After retirement, he acted as a Monitor on a couple of occasions and he had issued the report dated 22-7-1990 in which he had clearly brought out the withdrawals of the funds from the OD account of A-3 Company, which was found to be not prudent and that he had also made a note that Smt. Veena Sabharwal A-2, Managing Director of the Company, was not competent technically and managerially to run the company. The advice rendered by him to the company to maintain proper accounts was ignored. That he had highlighted the observations in his report, even then no action was taken by the Bank and as such, he had to tender resignation as a Monitor on 9-9-1990. C.W. 5, O.S. Rama Murthy has stated that he was promoted as a Deputy General manager during 1987 to 1992. His statement also makes references to various transactions of A-3 Company with regard to the credit facilities availed from the Bank. He has stated that in respect of one credit facility extended to A-3 Company the margin money was kept at bare minimum of 5% i.e., a sum of Rs. 22 lakhs from Rs. 50 lakhs as a special case and finally at the instance of A-1, LC limit was extended with nil margin as a special case, though it was well within the knowledge of the Bankers that A-3 Company had no ability to bring the margin money. In the meeting a commitment was made to extend the credit facilities i.e., Letter of Credit, packing credit, clean cash credit, DPG facility etc., which exceeded more than Rs. 370 lakhs and such extension was at the instance of A-1 and the same would indicate extraordinary interest shown by A-1 in extending facilities to A-3. The other witnesses examined by the Investigating Officer also speak about various credit facilities availed by A-3. 13-A. As in the instant case, since it is not obligatory at the stage of the trial to consider in detail and hold that the defence if proved would be incompatible with the offence of the accused or not and standard of test is to be finally applied at the time of judgment while deciding, whether the accused is guilty or not, at this stage I have to only ascertain whether there are sufficient grounds made out by the prosecution to proceed to frame charge against the accused persons and to proceed with the case. With the material referred to above, I am satisfied that the grounds made out are sufficient to frame charge against the accused persons and to proceed with the trial. 14. With the material referred to above, I am satisfied that the grounds made out are sufficient to frame charge against the accused persons and to proceed with the trial. 14. The other two points raised by the learned counsel for the accused need not detain me for long, since as regards the documents produced by the accused, which are to be relied upon at the time of considering the application for discharge or framing the issue of discharge, the Hon'ble SC in the case State of Orissa v. Debendra Nath Padit" has held that at the stage of dealing with the case under Sections 227, 228, 239 and 340, the Court cannot look into the material produced by the defence and as such, in view of the judgment referred to above the material produced by the accused in the present case is not looked in to at the time of consideration of the application by the Trial Court and as well in this Revision Petition. 15. As regards sanction order to prosecute A-1, the said issue is also decided by the Hon'ble Supreme Court that in respect of an official, who is retired from service, no sanction order is required. Accordingly, in view of the different views taken by different Courts at different points of time with regard to the question of sanction, the validity of sanction, absence of sanction, omission or irregularity of sanction, since are to be considered at the time of final decision of the case, leaving the said question open for determination at the time of final decision of the case, I pass the following: