1
PGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
APPELLATE SIDE
Criminal Revision Application No.221 of 2003
R. Narasimhan ... ... Applicant
(Orig.Accused No.4)
v/s.
The State (C.B.I., A.C.B., Mumbai) ... Respondent
(Orig.Complainant)
Mr.Yusuf Iqbal with Mr.Neville Majra i/by M/s.Yusuf &
Associates for Applicant.
Mr.Mangar Goswami with Mr.A.S. Gadkari for Res.No.1-CBI.
Mrs.A.A. Mane, APP for State.
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CORAM : SMT.ROSHAN DALVI, J.
Date for reserving the judgment : 15th December 2009
Date for pronouncing the judgment : 19th December 2009
JUDGMENT :
1. This Application has challenged the order of the
learned Special Judge, CBI/Additional Sessions
Judge, Greater Bombay, dated 13.3.2003, rejecting
the Discharge Application of the Applicant herein,
who was accused No.4 in Special Case No.61 of 1999
before the learned Judge and also of accused No.3
therein. Accused No.3 has not challenged the said
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order.
2. The Applicant/accused No.4 herein was charged with
having committed offences under Section 120B of the
Indian Penal Code read with Sections 5(2) and 5(1)
(b) of the Prevention of Corruption Act, 1947 (PC
Act) corresponding to Sections 13(2) and 13(1)(d) of
the PC Act, 1988. The Applicant served as Vice
President at New York Branch, Bank of Baroda. The
Applicant was appointed to the said post in
September 1987, which
ig he continued to hold until
December 1990. The acts committed by the various
officers of the Bank as also the third parties with
whom they had certain transactions of sanctioning an
overdraft facility, credit facility and Letters of
Credit (LCs) were stated to be for the period
between 1984 and 1988. Hence, in respect of the
Applicant, the period between September 1987 and
December 1988 would be material. The Applicant
returned to India in 1991 and retired on 27th
February 1999. The case was registered by the CBI
in the year 1992.
3. The charge-sheet contains documents of the relevant
period as also several other documents being
letters, notes etc. of the accused/Applicant of the
period between 1989-90, which has been argued upon
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on behalf of the accused/Accused.
4. The Applicant was arraigned along with 3 other Bank
Officers. They had previously retired. The
prosecution applied for sanction to prosecute the
Applicant. The competent Authority being the
Chairman and Managing Director of the Bank, refused
to sanction prosecution against the Applicant. The
charge-sheet came to be served upon the Applicant
after his retirement on the premise that the
sanction to prosecute
ig him would not then be
required.
5. Disciplinary proceedings were instituted by way of a
departmental inquiry against the Applicant. The
Applicant was served with the articles of charge and
the statement of allegations in that inquiry on
12.2.1999. The Central Vigilance Commission (CVC)
is stated to have conducted that inquiry. The CVC
has exonerated the Applicant of the charges levelled
against him under its Report dated 22.10.1999. The
Applicant claims that the inquiry was conducted on
identical charges upon the same documents.
6. The charge against the Applicant showed that accused
No.1-K.C. Chokshi, who was the then Executive Vice
President at the New York Branch of Bank of Baroda,
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accused No.2 one Premjit Singh, who was then the
Chairman and Managing Director, Central Office, Bank
of Baroda in Mumbai and accused No.3-Dr. A.C. Shah,
who was then the Executor Director of the Central
Office of Bank of Baroda in Mumbai, were charged
along with the Applicant. The prosecution case is
that the Applicant granted and recommended various
credit facilities by increasing credit limits from 1
Million U.S. Dollars to 5 Million U.S. Dollars
(USD), granted the overdraft facility as well as
allowed opening igof LCs to one M/s.Kulmer INC.
(Kulmer), a Private Firm based in New York. It is
also the prosecution case that based upon the
recommendations of the Applicant put up through
accused No.3 to accused No.2, these facilities were
granted and enhanced. This was despite the said
Firm being classified as having doubtful credit
limit by the Regulatory Authority, the Federal
Deposit Insurance Corporation (FDIC) of the U.S.A.
7. The prosecution case is based upon source
information. It is made out despite the fact that
the account of Kulmer was not treated as fraudulent
by the Bank.
8. The prosecution has, inter alia, relied upon several
letters of the Applicant with the Central Office in
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Mumbai as well as two Telexes dated 10.9.1987 and
12.2.1988 and the Fax dated 2.12.1987, which have
been recited and considered in the impugned order.
9. To understand a prima facie case against the
Applicant, the documents relied upon by the
prosecution and which are a part of the CVC inquiry
must be seen. A telex message sent by the Applicant
as the Senior Vice President, New York to the DGM
(International) in the Main Office at Bombay, does
show that the LC
ig of USD 4 Lakhs had not been
considered favourably. The Applicant has requested
to consider it favourably for the reasons that the
Company had shown improvement in its performance, it
had made profits and reduced the carry forward
losses, it had substantial orders in hand and its
liquidity problems were due to direct payment. The
Applicant proposed that the LC would help it to meet
the orders on hand, as was the case of the Company,
and hence recommended reconsideration.
10. After the appointment of the Applicant as Senior
Vice President of Bank of Baroda, New York, in
September 1987, the telex issued by the New York
Branch upon the DGM (International) at the Head
Office in Mumbai dated 12.12.1988, does show that
sanction limit enjoyed by Kulmer was USD 2.4
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Millions since 16th December 1987. Ad-hoc limits
have been allowed by the Chairman and Managing
Director. Their overdraft has been overdrawn due to
payment of bills under the LCs. They had approached
the Bank to sanction the credit limit of USD 3.5
Million immediately. The Bank was required to open
further LCs. The Fax further states that they could
not achieve their sales target because of certain
embargo placed by the US Government and quota
restrictions in India. They were hopeful to achieve
the sales target during that current year.
ig Hence,
the Fax shows that, the ad-hoc limits of USD 3.5
Million may be sanctioned for 3 months.
11. The aforesaid Telex and the Fax thus show the
advocacy on the part of the Applicant on behalf of
Kulmer.
12. However, there are several other letters which show
a restraint on further recommendations, calling upon
Kulmer to strengthen its account and make payment
and thereafter refusing to allow or recommend any
further facilities.
13. The charge-sheet contains a last of correspondence
relied upon by the CBI. The Advocate on behalf of
the Applicant has produced copies of the documents
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considered by the CVC in the departmental inquiry
which are much the same.
14. The letter dated 20th June 1988 addressed by the
Applicant to Kulmer shows that its operations are
below targets despite the increase in the credit
limit from USD 2.5 Million to USD 3.5 Million. The
cheque was returned. The matter was referred to
higher Authorities. It calls upon Kulmer to sort
out the matter by proper planning before further
increase in credit limit to USD 5 Million could be
considered. In the letter dated 24.6.1988, the
Applicant has informed the DGM (International) at
Mumbai that Kulmer has requested the increase to USD
5 Million without proper justification either to
continue the ad-hoc credit or to increase it. It is
not able to reduce the credit. The said letter sets
out the limit granted and calls upon Bombay Office
to confirm the action of continuing the ad-hoc
excess credit limit. That letter does not recommend
further increase in the credit limit asked for by
Kulmer.
15. On 26.7.1988, a note has been sent by the Deputy
General Manager (International) to the then Chairman
and the Managing Director, who is accused Premjit
Singh in the aforesaid case based upon the letter of
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the Applicant advising that he was unable to give
his recommendations and had proposed to decline the
request of Kulmer to open ad-hoc LC.
16. Thereafter the Applicant wrote to Kulmer on 4th
October 1988 putting on record that ad-hoc LCs were
opened purely to accommodate its requirements and
calling upon it to reduce its limit to USD 2.4
Million with a sub-limit for overdraft of USD 1
Million. In a letter dated 14th October 1988 of the
Applicant to the DGM (International) Mumbai, he put
on record the strained relationship between the Bank
and the Company as also the Bank s Attorneys and
called for suggestions and comments. Thereafter on
13th December 1988, the Applicant wrote to the
Company that the Bank would not be able to exceed
the limits in view of the classification by the
regulatory Authority of its account as doubtful. He
called upon Kulmer to quicken collection, meet the
commitments and take necessary measures to avoid
requiring the Bank to initiate steps against it.
17. He has thereafter not recommended any further
additional credit limits for any other facilities to
be granted to Kulmer.
18. It is, therefore, seen that though ad-hoc limits
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were increased initially upon recommendations of the
Applicant for Kulmer and Kulmer was allowed to open
ad-hoc LC, when it was seen that Kulmer was not
achieving its target and reducing its limits and yet
calling for further increase in the limit and
further ad-hoc LCs, the Applicant had exercised
restraint and had recommended that such limits be
declined. Consequent upon such letters, the DGM
(International) had recommended confirmation of the
Applicant s actions and declined the Company s
request for opening the ad-hoc LCs to the Chairman
and Managing Director and other accused in this
case.
19. The aforesaid are the relevant documents of the
period 1984 to 1988 showing the acts of the
Applicant, for which he is charged.
20. The Applicant has continued to write further letters
to Kulmer, calling for explanation and reprimanding
it in the year 1989 onwards, which is not the period
considered in the charge. However, the CVC has
considered the documents of that period also. The
Applicant unaware of the charge that would be framed
against him later, is shown to have written certain
letters to which my attention has been drawn by the
learned Counsel on behalf of the Applicant.
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21. The letter dated 27.1.1989 calls upon Kulmer to
explain certain anomalies and clarify its position.
The letter dated 8.2.1989 shows that there was a
shortfall in its deposits into the account with the
Bank and the collection efforts have considerably
slowed down. It calls for certain Bank statements.
The letter dated 28.2.1989 of the Applicant to the
DGM (International) at Mumbai, sets out the position
of Kulmer. It calls for advice upon the decision to
release additional overdraft facility.
ig A note to
the then Chairman and Managing Director through the
Executive Director (both of whom are accused) sent
by the Assistant General Manager at Mumbai dated
3.3.1989, shows an endorsement that the Applicant,
as the Senior Vice President, has not recommended
the facilities and overdraft mentioned therein. The
note specifically sets out thus:-
Senior Vice President, New York is unable to
offer recommendations as the Company has not
been able to explain the reasons for poor
recovery. &..
22. Despite this, Premjit Singh, the co-accused of the
Applicant, sanctioned further facilities on
15.5.1989 on the ground that there were reasonable
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requests considered on merits by him. Under those
circumstances, the Applicant contends that he was
obliged and bound to grant further facilities
specifically not recommended by him.
23. On 16.8.1989, the Applicant wrote to the General
Manager, International, Mumbai, that Kulmer had not
heeded his request and he was not in a position to
monitor the account in an effective manner. In a
similar letter dated 18.8.1989, he has informed the
General Manager, International, that Kulmer had not
fulfilled its commitments and the balance overdraft
account was well above the stipulated limit. In a
further letter dated 11.9.1989, he has informed the
General Manager, International (referring to the
Telex of Mumbai, requesting for his recommendations
on the request of Kulmer for additional ad-hoc loan
of USD 3 Lakhs) that the account was classified as
doubtful by the regulatory Authorities, despite
which the Chairman (the co-accused/ Premjit Singh)
by his letter dated 5th May 1989, had opted to give
additional finance to the Company. He, therefore,
requested suitable decision on the request of the
Company for additional loan in the overall interest
of the Bank. In the year 1990, similar letters have
been addressed by the Applicant to Kulmer, calling
upon it to improve its financial position with the
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Bank and regretting that he was not in a position to
open further LCs, requested by the Company in the
letter dated 12th April 1990.
24. The aforesaid documents would show that though the
Applicant did recommend additional credit limits
initially, he stopped after he saw that the account
of Kulmer did not improve as called upon. The
contention on his behalf is that though, as the
Senior Vice President, he had to take a certain
amount of risk ig and allow a certain amount of
discretion of recommending credit limit, he has not
exceeded his authority. When he realized that
Kulmer did not improve its position, he called for
the opinion from the Bombay Office. He did not
recommend further limits. He recommended that it
not be increased. Despite his recommendations he
was overruled by the then Chairman and Managing
Director, the co-accused/ Premjit Singh. These
aspects have been considered by the CVC. He has
been fully exonerated.
25. The loan of Kulmer has been written off in 1991.
The case has been filed in 1992. Investigation
continued until 1997. Sanction to prosecute was
applied for and refused on 15.1.1998. A departmental
inquiry was instituted on 12.2.1999. The Applicant
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was exonerated after extensive evidence was
considered on 22.10.1999. The Bank passed its order
of exoneration of the charges against the Applicant
on 31.5.2000 based upon the CVC s order dated
22.10.1999. Thereafter the charge-sheet came to be
filed, levying the aforesaid charges, inter alia,
upon the Applicant.
26. The prosecution of a public officer for corruption
charges is required to be made under the PC Act,
1988 by the CBI.
ig CBI is a watch-dog for that
purpose; it cannot be a bloodhound to persecute a
public officer in the place of prosecuting him.
Therefore, the salutary provision for sanction to be
obtained by the competent Authority is required.
27. The competent Authority has refused sanction in a
detailed letter spanning 10 pages, setting out the
reasons for refusal. It sets out the establishment
of the New York Branch of the Bank in February 1978,
the licence for lending activities obtained by it in
1982. The account with Kulmer was opened in
September 1983 well before the Applicant was posted
at the Branch. The default for recoveries by Kulmer
despite increased sales has been set out. It shows
that Kulmer did not reduce outstandings despite its
increased sales and profitability in the period 1987
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to 1989. It also sets out that investigation
commenced in 1992 for the period 1983 to 1989-90,
which were completed only in 1997, which de-
motivated the Applicant and hampered his career,
though his contribution and performance has always
been to the utmost satisfaction of his superiors.
It also sets out that from 1983 till 1987 Kulmer s
account was functioning normally. Hence when
occasions for higher credit facilities arose the
Bank Authorities deemed it fit to accede to its
request. At that
ig time, the true status of the
account was reported by the Branch Authorities to
the Central Office and hence the case for criminal
conspiracy to cheat the Bank of its commitments was
not at all made out any where or at any stage.
28. The letter sets out the various facilities granted
to Kulmer beginning 9.3.1983 well before the
Applicant was posted in May 1987 and worked under
K.C. Choksi, the co-accused, who was the Executive
Vice President. He became Senior Vice President in
September 1987 when K.C. Choksi was repatriated to
India. The credit limit was then USD 1.4 Million.
It was raised to USD 2.08 Million due to overdrafts
in its bills portfolio. It also sets out that the
recommendation made by the Applicant initially was
for regularisation of the ad-hoc credit given. The
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request for reconsideration was submitted by the
Applicant since Kulmer showed the increased
profitability and substantial orders. It sets out
that the Applicant, as the Senior Vice President,
reported the entire picture to the Head Office. The
ad-hoc proposal was not recommended by the New York
Office. The reconsideration was called for by the
Applicant because the outstanding had already
reached saturation level and without further LC and
further ad-hoc facilities, the operations in the
account would have
ig come to a stand-still.
Consequently, the additional ad-hoc limit was
increased for commercial considerations for keeping
the operations in the account alive at that time.
The proposal for still further limit of USD 3.5
Million was submitted to the Central Office for
consideration. This was in turn submitted by the
Deputy General Manager (International) to the
Executive Director. Hence it is concluded in the
letter that no fault, deficiency or omission of duty
can be imputed upon the Applicant.
29. Further the letter has considered the Fax dated
2.12.1987 of the Applicant, which recommended
increase because the sales position of the Company
had improved. The additional ad-hoc facility was
considered and sanctioned by the Chairman and
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Managing Director (the co-accused). It shows that
the limit was recommended to be increased to USD 3.5
Million, which effectually amounted to
regularization of the limits enjoyed by the Company.
This was discussed and approved by the Chairman and
Managing Director and confirmation for excess grant
of credit was conveyed to New York Branch under
letter dated 24.2.1988. Similarly, the opening of
the LC of USD 35,000 has been justified. It is also
set out that after the account was termed doubtful
by the FDIC, no further limit was recommended.
ig The
letter, therefore, refuses to sanction prosecution
to the Director, Central Vigilance Commission.
30. No such sanction has been obtained by the CBI
either.
31. From a reading of these documents, it can be seen
that there is no prima facie case of conspiracy or
any act of corruption shown against the Applicant.
Mere recommendations do not tantamount to conspiracy
or corruption. They have to be independently
considered and appreciated. Where a particular
employee has stopped short has to be seen. The
officer, who acts upon the directions of his
superiors, despite his own opinion being made known,
cannot be prosecuted for an act done upon the
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directions of his superiors. Consequently, from the
documents relied upon by the prosecution, more
specially the aforesaid Telexes, Fax and the
letters, the charge is not made out against the
Applicant.
32. It has been argued on behalf of the Applicant that
in the case of P.S. Rajya vs. State of Bihar, (1996)
9 Supreme Court Cases 1, it has been held by the
Hon ble Supreme Court that once the departmental
inquiry has exonerated the Applicant, the criminal
prosecution would not lie since the standard of
proof is much higher than the criminal prosecution.
Nevertheless, I have gone through the material to
satisfy myself upon whether the charge can be prima
facie made out against the Applicant, based upon the
factual evidence relied upon by the CBI. I have
found that it cannot be, since the two documents
cannot be read in isolation when the charge-sheet
contains a bulk of documentary evidence. I am
satisfied that the Applicant is required to be
discharged upon the material produced by the CBI on
merits and upon the fact that sanction to prosecute
was earlier refused and the Applicant has been
charge-sheeted only after his retirement to evade
the statutory provision regarding the obtaining of
sanction to prosecute the Applicant. The learned
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Special Judge/Sessions Judge has not considered any
documentary evidence to see any prima facie case
against the Applicant herein. In a charge such as
this, the main case would be made out by the
documentary evidence which consists in
correspondence over a large period of time forming a
chain of correspondence which has to be looked into
as a whole.
33. I am gratified to have received exemplary assistance
from the Counsel on behalf of the Applicant who has
in the most lucid manner set out before me the
entire documentary evidence to unfold the
Applicant s act as the Senior Vice President of the
Bank at its New York Branch over a period of years
from the compilations of the CBI as well as the CVC.
34. Consequently, the order of the learned Special
Judge/Sessions Judge, Greater Bombay, is seen to be
suffering from a material irregularity. Hence the
order of the learned Judge dated 13.3.2003 is set
aside. The Criminal Revision Application is allowed
accordingly. The Applicant is discharged from
Special Case No.61 of 1999.
(SMT.ROSHAN DALVI, J.)
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