1
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO.647 OF 2009
(Arising out of S.L.P.(Crl.)NO.5937 of 2007)
State of Madhya Pradesh ...Appellant
Vs.
Rameshwar & Ors. ...Respondents
WITH
Criminal Appeal No.648 of 2009
(Arising out of S.L.P.(Crl.)NO.6929 of 2007)
J U D G M E N T
ALTAMAS KABIR,J.
1. Leave granted in both the special leave
petitions which are taken up for hearing
and final disposal together.
2. The respondents were Directors of the
Indore Premier Co-operative Bank Limited
and were also members of the Loan Committee
for sanctioning loans. One Harish Patil and
Kanhaiyalal Yadav lodged a complaint with
the Special Establishment of the Lokayukt,
2
Madhya Pradesh at Indore, alleging that the
respondents had sanctioned loans amounting
to Rs.56,50,000/- in favour of 35 persons
without verifying their eligibility to
receive such loans or the end-use of such
loans and had intentionally acted in an
illegal manner to enable the said borrowers
to avail of the loans. On receiving the
complaint, the Special Establishment
Lokayukt, Indore, registered Crime
No.133/99 and after investigation filed a
charge-sheet against the respondents under
Sections 409, 420 and 120-B of the Indian
Penal Code (`IPC’ for short) together with
Sections 13(1)(d) read with Section 13(2)
of the Prevention of Corruption Act, 1988
(hereinafter referred to as the `P.C.
Act’). The Trial Court on due consideration
of the charge-sheet, found a prima facie
case against the respondents and by its
order dated 4.11.2006 directed framing of
charges as suggested in the charge-sheet.
3
3. Being aggrieved by the said order dated
4.11.2006, directing framing of charges,
the respondents moved in revision before
the Indore Bench of the Madhya Pradesh High
Court for setting aside the aforesaid order
passed by the Special Judge, Indore, in
Special Case No.1 of 2006 and for their
discharge from the above-mentioned charges.
4. Considering the case made out by the
respective parties, the High Court came to
the conclusion that admittedly the
respondents were members of the Loan
Committee and as such members they are only
required to consider the loan cases which
are put up to them by the concerned Bank
Manager for the grant of loan and it was
for the Branch Managers to verify the facts
regarding entitlement for grant of loan
before submitting the same to the Loan
Committee. Furthermore, it is only after
4
the Executive Officer had also verified the
applications for loan that the loan cases
were put up before the Loan Committee for
its sanction. In view of the aforesaid
procedure, the High Court held that it
could not be said that the Members of the
Loan Committee (the respondents herein) had
acted illegally and had wrongly sanctioned
loans to the concerned borrowers. The High
Court also took into consideration the fact
that out of the total amount of loan which
had been sanctioned by the Loan Committee
amounting to Rs.56,50,000/- a total sum of
Rs.64,69,000/- had already been deposited
by the concerned depositors in the Bank and
hence it could not be contended that by
sanctioning the loans to the concerned
borrowers the Bank had suffered any
monetary loss since the full amount of
loan, together with interest, had already
been deposited by the borrowers in the
Bank.
5
5. On the question of status of the
respondents as “public servants” for the
purpose of prosecution under the provisions
of the Prevention of Corruption Act, 1988,
the High Court relying on the judgment of
this Court in State of Maharashtra vs.
Laljit Rajshi Shah and others [(2000) 2 SCC
699] held that the respondents could not be
treated as public servants and could not,
therefore, be punishable either under the
provisions of the Prevention of Corruption
Act, 1988, or under Section 409 IPC.
6. On such finding, the High Court by its
order dated 17th March, 2007, allowed the
Revision Petition and set aside the order
of the Trial Court dated 4.11.2006 framing
charges against the respondents and
discharged them from the said charges under
Sections 409, 418, 420 and 120-B IPC and
6
Section 13(1)(d) read with Section 13(2) of
the P.C. Act.
7. The present appeals have been filed by the
State of Madhya Pradesh against the said
order of the High Court.
8. Appearing for the appellant State of Madhya
Pradesh, Mr. Ravindra Srivastava, learned
Senior Counsel submitted that the High
Court had erred both as to the role played
by the respondents and also on the question
of the status of the said respondents as
“public servants” for the purpose of
prosecution under the provision of the P.C.
Act. Mr. Srivastava also submitted that
the High Court had travelled beyond its
jurisdiction under Sections 397 read with
Section 401 Criminal Procedure Code in re-
assessing the factual position in order to
arrive at the conclusion that the
provisions, under which they had been
7
charged, were not supported by the
materials in the charge-sheet.
9. Referring to the inquiry report dated 21st
January, 1999, submitted by the District
Vigilance Committee, Indore, on the
complaint of Shri Kanhaiyalal Yadav, Mr.
Srivastava submitted that it had come to
light during the inquiry that the quotation
of Indore Motor and Agro Machinery, having
its registered office at 535 Scheme No.54,
Indore, loans were advanced by the Banks to
the persons named in the report for
purchase of different kinds of vehicles.
However, the said firm was not available at
the address indicated. It also transpired
that the firm was managed by one Shri
Himanshu Joshi, son of Shri Hem Joshi,
Public Contact Officer working in the
Indore Premier Co-operative Bank and the
Current Account of the firm was with the
Kila Maidan Branch, Indore and the various
8
Demand Drafts were deposited in the said
account and the cash was subsequently
withdrawn. It was also reported that the
loans were sanctioned with the connivance
of the Bank administration for the purchase
of vehicles, but were not used for the said
purpose and the Demand Drafts were encashed
with the intention of cheating the Bank.
Mr. Srivastava submitted that the tenor of
the Inquiry Report was that Shri Hem Joshi
had, in his capacity as the Public Contact
Officer of the Bank, in connivance with the
other respondents, set up a fictitious firm
in the name of his son Shri Himanshu Joshi
for the purpose of encashing the Bank
Drafts which were all deposited in the
account of the purported firm in the Kila
Maidan Branch, Indore.
10. Mr. Srivastava pointed out that from the
statements made by the Managers of the
different Branches of the Bank a prima
9
facie case was made out that not only were
the rules relating to sanctioning of loans
not followed, but the grant of such loans
revealed lack of awareness and application
on the part of the respondents. He also
submitted that the officers of the National
Bank for Agricultural and Rural Development
(hereinafter referred as `NABARD’)
conducted an inspection of the Indore
Premier Co-operative Bank in June, 1998 and
in their Report they also raised objections
with regard to the loans which formed the
subject matter of the present appeals.
11. Mr. Srivastava submitted that the finding
of the District Vigilance Committee was
that while the Branch Managers of the
different Branches of the Bank had not
complied with the directions given with
regard to the policy of sanctioning loans,
the Chairman, and the Chief Executive
Officer of the Bank, who are the Respondent
10
Nos. 1 and 3 herein, failed to take any
action despite the Inspection Report of
NABARD, which gave rise to the conclusion
that they had also played a decisive role
in defrauding the Bank. Mr. Srivastava
submitted that since the said Inquiry
Report indicted all the respondents, along
with several others, it had recommended
that a case be registered under Section 420
read with Section 120-B IPC against all the
persons named. A further recommendation was
made to register a case against the
officers of the Bank, including the
respondents herein, under Section 406, 409,
419 and 420 read with Section 120-B IPC.
Departmental action was also recommended
against the Members of the Loan Committee
of which the Respondent No.1, Rameshwar,
was the President, while the other
respondents, who were all Directors of the
Bank, were members.
11
12. Mr. Srivastava urged that the High Court
had erred in completely absolving the
respondents of any responsibility in
connection with the sanctioning of the
loans and placing the entire burden of the
fraud perpetrated on the Branch Managers
and the Executive Officer for inadequate or
improper verification of the entitlement of
the borrowers for grant of such loans.
Learned counsel also urged that the High
Court had erred in observing that the
members of the Loan Committee had a limited
role to play for the purpose of sanctioning
loans, since the ground work had already
been prepared upto the level of the Branch
Managers who had recommended the grant of
such loans.
13. Mr. Srivastava submitted that in going into
factual aspects of the matter, the High
Court had travelled beyond its revisional
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powers in coming to findings of fact, which
were yet to be established on evidence.
14. To support his submission, Mr. Srivastava
firstly referred to a decision of this
Court in Stree Atyachar Virodhi Parishad
vs. Dilip Nathumal Chordia & Anr. [(1989) 1
SCC 715], wherein, while considering the
question relating to discharge of or
framing of charges against an accused, it
was held that when the Trial Court, finding
a prima facie case prefers to frame charges
against the accused, the High Court should
not interfere by probing into the
sufficiency of grounds for conviction of
the accused and ordering his discharge.
15. Mr. Srivastava then referred to another
decision of this Court in Om Wati (Smt) &
Anr. vs. State, through Delhi Admn. & Ors.
[(2001) 4 SCC 333], wherein also, while
considering the provisions of Sections 227,
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228 and 401 of the Criminal Procedure Code,
1973, this Court, inter alia, observed that
the High Court should not ordinarily
interfere with the Trial Court’s order for
framing of charge unless there is glaring
injustice.
16. Reference was lastly made to the decision
of this Court in Munna Devi vs. State of
Rajasthan & Anr. [(2001) 9 SCC 631],
wherein it was held that the revisional
powers of the High Court could not be
exercised in a routine and casual manner
for quashing the charges framed against an
accused, except where there was a legal bar
or where no offence is made out against an
accused in the F.I.R.
17. Mr. Srivastava submitted that apart from
the above, the finding of the High Court
that the respondents were not public
servants was erroneous, as they had been
14
elected as Office Bearers of the Co-
operative Bank. He submitted that the High
Court had wrongly relied upon the decision
of this Court in State of Maharashtra vs.
Laljit Rajshi Shah & Ors. (supra), in which
the definition of “public servant” as
contained in section 2 of the Prevention of
Corruption Act, 1947 was under
consideration. In the said Act, “public
servant” has been defined in Section 2 to
mean “public servant” as defined in Section
21 of the Indian Penal Code. Mr.
Srivastava urged that the definition of
“public servant” in the Prevention of
Corruption Act, 1988 has been given a much
wider connotation and the limited
interpretation of the said expression in
Laljit Rajshi Shah & Ors.’s case (supra)
would not, therefore, be applicable to the
facts of this case.
15
18. Mr. Srivastava submitted that on account of
being an Office Bearer of a registered Co-
operative Society engaged in banking, the
respondents came within the definition of
“public servant” under Section 2(c)(ix) of
the 1988 Act. He also submitted that the
High Court had failed to take note of
Section 87 of the M.P. Co-operative
Societies Act, 1960, which provides that
the Registrar and other officers, as well
as employees of a Co-operative Bank or a
Co-operative Society, would be deemed to be
“public servants” within the meaning of
Section 21 of the Indian Penal Code.
19. In this regard, Mr. Srivastava referred to
the decision of this Court in Govt. of
Andhra Pradesh & Ors. Vs. P. Venku Reddy
[(2002) 7 SCC 631], where reference was
made to the decision in Laljit Rajshi Shah
& Ors.’s case (supra) and it was observed
that the same was distinguishable as it was
16
based on an interpretation of the
definition of “public servant”, as defined
in the 1947 Act, which restricted such
definition to cover only such “public
servants” as were included in Section 21 of
the Indian Penal Code. Reference was also
made to another decision of this Court in
State of Maharashtra & Anr. vs.
Prabhakarrao & Anr. [(2002) 7 SCC 636], in
which the wider definition of the
expression “public servant” under Section 2
(c) of the Prevention of Corruption Act,
1988 was held to be applicable and not the
narrow definition under Section 21 of the
Indian Penal Code.
20. Mr. Srivastava submitted that as far as the
State of Madhya Pradesh was concerned, the
same submissions would also be relevant in
SLP(Crl.)No.6929/07.
17
21. Replying to the submissions made on behalf
of the appellant, Mr. Vivek Tankha, learned
Senior Counsel, firstly, took us to the
Charge framed against the respondents under
Section 13(1)(d) read with Section 13(2) of
the Prevention of Corruption Act, 1988 and
Sections 409, 418, 420 and 120-B of the
Indian Penal Code. Mr. Tankha pointed out
that the Charge was framed against the
Respondent No.1 in his capacity as
Chairman/Manager of the Indore Premier Co-
operative Bank and as a Member of the Loan
Sanctioning Committee during the period
from 4th March, 1997 to 4th May, 1998, when
he was a public servant. The charge
against the Respondent No.1 was that in
connivance with the other accused persons
and on the basis of forged documents
relating to “Indore Motor and Agro
Machinery”, he had, without verification of
the loan applications filed for the purpose
of purchasing of vehicles by the other co-
18
accused, without ensuring that the margin
money was deposited as per the rules and
without obtaining security, sanctioned the
loans in contravention of the Bank Rules
and issued the cheque/drafts of such loans
to the applicants directly who withdrew the
amount without purchasing the vehicles,
resulting in misappropriation of
Rs.56,50,000/-. Accordingly, the
Respondent No.1 was purported to have
committed the offence punishable under the
above-mentioned provisions of the
Prevention of Corruption Act, 1988 and the
Indian Penal code. Similar charges were
framed against the other respondents.
22. Mr. Tankha submitted that from the Inquiry
Report of the District Vigilance Committee
it would be quite apparent that it was the
Branch Managers of the different Branches
of the Bank who had failed to comply with
the procedure relating to grant and
19
sanction of loans and that all the lapses
which were attempted to be foisted on the
respondents by Mr. Srivastava during the
course of his submissions, were required to
be fulfilled at the Branches before
proposals were put up for sanctioning of
the loans. Mr. Tankha submitted that the
Loan Sanctioning Committee had to deal with
innumerable loan applications and it was
not possible for the said Committee to
scrutinize each application to ensure
whether all the conditions for grant of
loan had been satisfied. Mr. Tankha, in
fact, urged that in the Inquiry Report, the
only allegation made against the
respondents herein was that they had not
taken any action despite the Inspection
Report of NABARD and it was only a
presumption that as a result thereof a
conclusion must be drawn that the Chairman
of the Bank and the Chief Executive Officer
20
had also played a main role in the fraud
committed upon the Bank.
23. Mr. Tankha submitted that apart from the
above, the only other allegation against
the respondents in the Inquiry Report was
that the members of the Loan Committee had
failed to perform their duties efficiently.
He submitted that the allegations pointed
out by Mr. Srivastava had really been
directed at the Branch Managers of the
various Branches and the concerned officers
of the said Branches.
24. Mr. Tankha submitted that there was no
justification whatsoever for framing of
charges against the respondents herein,
either under the provisions of the Indian
Penal Code or under the provisions of the
Prevention of Corruption Act, 1988. He
urged that if any irregularity had been
committed by the Respondents in sanctioning
the loans, there was sufficient scope for
21
action to have been taken against them
under the M.P. Co-operative Societies Act
instead of taking recourse to the criminal
process to apply pressure in respect of a
dispute, which was basically civil in
nature. Referring to the decision of this
Court in Indian Oil Corpn. vs. NEPC India
Ltd. 7 Ors. [(2006) 6 SCC 736], Mr. Tankha
relied on the observations made by this
Court in holding that it was necessary to
take notice of a growing tendency in
business circles to convert purely civil
disputes into criminal cases and at the
stage of an application under Section 482
Cr.P.C. all that was required to be seen
was whether necessary allegations existed
in the complaint to make out an offence as
alleged.
25. Further, reference was made to the decision
of this Court in Nikhil Merchant vs.
Central Bureau of Investigation & Anr.
22
[2008 (11) SCALE 379], where, while taking
recourse to Article 142 of the
Constitution, it was observed that the
dispute involved in the case had overtones
of a civil dispute with certain criminal
facets. Mr. Tankha submitted that similar
was the position in the present case, where
the dispute was mainly of a civil nature,
which had been given a criminal twist to
bring it within the scope of the Indian
Penal code and also the Prevention of
Corruption Act, 1988.
26. Mr. Tankha also referred to the decision of
this Court in Manoj Sharma vs. State & Ors.
(MANU/SC/8122/2008), where the question
which fell for determination was whether
the First Information Report for offences
which were not compoundable, could be
quashed either under Section 482 Cr.P.C. or
under Article 226 of the Constitution when
the accused and the complainant had
23
compromised and settled the matter between
themselves. Mr. Tankha submitted that this
Court had set aside the order upon holding
that once a dispute of a civil nature
between private parties, had been settled,
the more pragmatic view would be to
exercise powers under Section 482 Cr.P.C.
or Article 226 of the Constitution to bring
and end to such litigation.
27. As to the question whether the respondents
were public servants or not, Mr. Tankha
submitted that in a series of decisions
this Court had held that certain officers
discharging public functions had been held
not to be public servants, except for
purposes confined to the enactments under
which they perform their functions. In
this regard, Mr. Tankha also referred to
the decision in Laljit Rajshi Shah & Ors.,
which had been referred to by Mr.
Srivastava, wherein it had been held that
24
the Chairman and Members of the Managing
Committee were not public servants but were
deemed to be public servants under the M.P.
Co-operative Societies Act, but not for any
other purpose.
28. Mr. Tankha took us through the M.P. Co-
operative Societies Act, 1960, in support
of his submissions. He submitted that the
said Act was a complete self-contained Code
by itself and provided for different
eventualities relating to the
administration of Co-operative Societies.
Referring to Section 74 of the Act, Mr.
Tankha submitted that Clause (d) thereof is
the remedy contemplated in respect of an
offence alleged to have been committed of
the instant type. Further- more, Section
75 provided for penalties to be inflicted
in case of a proven offence and Section 76
also provided that offences under the Act
25were triable by a Magistrate of the Ist
Class.
29. As to the definition of “public servant” in
Section 2(c)(ix) of the Prevention of
Corruption Act, 1988, it was submitted that
the same should be read in two parts and
that the definition of “public servant” in
the said provision in respect of a Co-
operative Society would be covered by the
first part and not by the second part.
30. Mr. Tankha submitted that the charges
against the respondents were without any
foundation, as would be clear from the
Inquiry Report of the District Vigilance
Committee which laid the responsibility for
grant of the loans to the 35 persons at the
door of the Branch offices and had only
included the respondents within the scope
of the charge for their alleged failure of
not having taken action on the report of
26
NABARD and also in not having discharged
their duties efficiently. Mr. Tankha
submitted that the same were not sufficient
to maintain the charges against the
respondents under Sections 409, 418, 420
and 120-B IPC read with Sections 13(1)(d)
and 13(2) of the Prevention of Corruption
Act, 1988 and the High Court had quite
rightly quashed the charges against the
respondents.
31. As to SLP(Crl.)No.6929/07, Mr. Tankha
submitted that the same was in regard to a
hospital loan of Rs.2 lacs, which had been
advanced and had also been repaid with
interest on 10th July, 2008. Mr. Tankha
submitted that in both the cases, the
principal amount of the several loans
together with interest had been repaid and
consequently, the very foundation of the
charges were nonest and the prosecution was
liable to be quashed.
27
32. In addition to Mr. Tankha’s submissions,
Mr. Sushil Kumar Jain, who appeared for
some of the respondents, submitted that
unless there was a criminal intent
disclosed in the charge-sheet, no charge
either under Section 406 or Section 409
would lie. He also urged that in order to
invoke the provisions of the Prevention of
Corruption Act the accused would have to be
a public servant and the property alleged
to have been misappropriated, must have
been entrusted to him while he was a public
servant. He urged that the charge-sheet
did not contain any allegation that the
loan advanced by the Society was out of any
fund or contribution received from the
State. Accordingly, the question of
misappropriation of any amount received by
the public servant in his capacity as a
public servant did not arise.
28
33. Mr. Jain reiterated the other submissions
made by Mr. Tankha that the respondents had
no conscious knowledge of the ineligibility
of the borrowers to apply for and receive
the loans and that the loans had been
sanctioned on the basis of the
recommendations and proposals put up by the
Branch office.
34. Mr. Jain also submitted that the
allegations against the respondents were
misconceived and the remedy in respect of
the lapses, if any, lay not under the
general criminal process, but under the
provisions of the M.P. Co-Operative
Societies Act, 1960, itself.
35. Having considered the submissions made on
behalf of the respective parties and the
various decisions cited in support thereof,
we are unable to agree with the views
29
expressed by the High Court in the order
impugned in these appeals.
36. While it is no doubt true that in the
Inquiry Report of the District Vigilance
Committee the role attributed to the
respondents in sanctioning loans was shown
to be purely managerial where the
groundwork had been completed by the Branch
offices and that as members of the Loan
Sanctioning Committee, they had acted
inefficiently, it has also been suggested
that the Chairman and the Executive Officer
of the Bank had connived with the other
accused in defrauding the Bank. In the
Inquiry Report it was stated that the
respondents had in conspiracy with Shri Hem
Joshi, the Public Contact Officer of the
Bank, whose son, Himanshu Joshi, maintained
a current account of a fictitious firm –
Indore Motor and Agro Machinery in the Kila
Maidan Branch of the Bank at Indore
30
encashed the various Demand Drafts issued
on account of the loans, by using the said
account without purchase of any vehicle for
which the loans had been sanctioned.
37. The High Court also did not, while
considering the definition of the
expression “public servant”, take into
account the fact that the decision in
Laljit Rajshi Shah & Ors.’s case (supra)
was no longer applicable in view of the
amended provisions of Section 2(c) of the
Prevention of Corruption Act, 1988,
defining the said expression. Prima facie,
it appears to us that the Respondent Nos.1
and 3, in their capacity as the Chairman
and Executive Officer of the Bank, come
within the definition of “public servant”
under Section 2(c)(ix) of the 1988 Act,
which reads as follows :-
“public servant” means – any person who
is the President, Secretary or other
31
office-bearer of a registered co-
operative society engaged in agriculture,
industry, trade or banking, receiving or
having received any financial aid from
the Central Government or a State
Government or from any corporation
established by or under a Central,
Provincial or State Act, or any authority
or body owned or controlled or aided by
the Government or a Government Company as
defined in Section 617 of the Companies
Act, 1956 (1 of 1956).”
38. Mr. Tankha’s submissions, which were echoed
by Mr. Jain, that the M.P. Co-operative
Societies Act, 1960 was a complete Code in
itself and the remedy of the prosecuting
agency lay not under the criminal process
but within the ambit of Sections 74 to 76
thereof, cannot also be accepted, in view
of the fact that there is no bar under the
M.P. Co-operative Societies Act, 1960, to
take resort to the provisions of the
general criminal law, particularly when
charges under the Prevention of Corruption
Act, 1988, are involved.
32
39. The judgments referred to by Mr. Tankha
regarding the tendency to convert civil
disputes into criminal cases to pressurize
the accused, are unimpeachable, but the
same will not apply to the facts of this
case where a conspiracy to cheat the Bank
is alleged.
40. We are, therefore, inclined to accept Mr.
Srivastava’s submissions that the High
Court had in revision erroneously quashed
the charges framed against the respondents.
Consequently, the orders dated 17th March,
2007, passed by the High Court in Crl.
Revision No.1303 of 2006 and Crl. Revision
No.36 of 2007, impugned in these two
appeals are set aside and the charges
framed by the Trial Court against the
respondents are restored. The appeals are,
accordingly, disposed of with a direction
to the Trial Court to proceed with the
trial. We make it clear that the views
33
expressed in this judgment are prima facie
in nature for the disposal of these appeals
only and should not influence the trial in
any way.
______________J.
(ALTAMAS KABIR)
______________J.
(CYRIAC JOSEPH)
New Delhi
Dated:06.04.2009