Page 1

1

“  REPORTABLE”   

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.1454  OF 2013 (Arising out of SLP (Crl.) No.61 of 2012)

Ajoy Acharya … Appellant

Versus

State Bureau of Inv. against Eco. Offence … Respondent

With

CRIMINAL APPEAL NO.1455  OF 2013 (Arising out of SLP (Crl.) No. 400 of 2012)

J U D G M E N T

Jagdish Singh Khehar, J.

1. Investigation  into  the  affairs  of  the  Madhya  Pradesh  Industrial  

Development  Corporation  (renamed  as  Madhya  Pradesh  State  Industrial  

Development Corporation, hereinafter referred to as the ‘MPSIDC’) was ordered  

with  effect  from  3.1.1996,  by  the  State  Government.   Thereupon,  a  first  

information report  bearing no. 25 of 2004 was registered under Sections 409,  

406, 467, 468 and 120B of the Indian Penal Code, 1860 (hereinafter referred to  

as the ‘IPC’) and Section 13(1)(d) read with Section 13(2) of the Prevention of  

Corruption Act, 1988 (hereinafter referred to as the ‘PC Act’).  The allegations

Page 2

2

levelled in the first information report generally were, that the functionaries of the  

MPSIDC  had  permitted  investment  by  way  of  inter  corporate  deposits  

(hereinafter  referred  to  as  the  ‘ICD’s’)  through  a  resolution  of  the  Board  of  

Directors (of the MPSIDC) dated 19.4.1995.  By the instant resolution, the Board  

(of the MPSIDC) authorized its Managing Director, to extend short term loans  

(including ICD’s) out of the surplus funds with the MPSIDC, on suitable terms  

and  conditions.   The  gravamen  of  the  accusation  was,  that  the  Board  of  

Directors’  resolution  dated  19.4.1995  was  passed  in  disregard  of  an  earlier  

decision  taken in  the Cabinet  Review Meeting  held  on  28.1.1994,  wherein  a  

decision was taken that the MPSIDC would not extend financial assistance to  

industries.  The petitioner herein had admittedly attended the said meeting held  

on  28.1.1994.   The  accusation  also  included  the  insinuation,  that  after  the  

decision  of  the  Cabinet  Review  Committee  dated  28.1.1994,  the  Board  of  

Directors (of the MPSIDC) had passed an endorsing resolution dated 31.1.1994,  

wherein it was resolved by the MPSIDC to stop financing industries, from out of  

its  surplus  funds.   The  petitioner  herein  had  even  participated  in  the  instant  

proceedings held on 31.1.1994.  Based on the aforesaid factual position, it was  

sought  to  be  suggested,  that  undeterred  by  the  decision  during  the  Cabinet  

Review  Meeting  dated  28.1.1994,  and  the  resolution  of  the  Board  dated  

31.1.1994 (which had prohibited extension of financial assistance to industries),  

the  Board  of  Directors’  resolution  dated  19.4.1995,  authorized  its  Managing  

Director to extend short term loans (including ICD’s) to industries, out of surplus  

funds with the MPSIDC, on suitable terms and conditions.  It was also alleged,

Page 3

3

that  the above controversial  Board resolution dated 19.4.1995 was passed in  

complete disregard to the mandate contained in Section 292 of the Companies  

Act, 1965.  After the aforesaid Board resolution dated 19.4.1995, it was alleged,  

that the MPSIDC had extended ICD’s to a large number of companies, out of  

which  42  companies  had  committed  default  in  repayments.   In  the  

abovementioned  first  information  report,  it  was  also  alleged,  that  the  

abovementioned  transactions  executed  by  the  MPSIDC  were  illegal  and  in  

violation of law.

2. The ICD’s referred to in the foregoing paragraph were executed during the  

period between 1995 and 2004.  It was alleged, that four senior functionaries of  

the MPSIDC who were then members of the Board of Directors of the MPSIDC  

had  deliberately  supported  the  resolution  of  the  Board  of  Directors  dated  

19.4.1995, despite the fact that they were aware of the Cabinet Review Meeting  

decision  dated  28.1.1994,  as  well  as,  the  earlier  resolution  of  the  Board  of  

Directors  of  the  MPSIDC  dated  31.1.1994.   Without  their  participation  and  

support, it was alleged, that the controversial Board resolution dated 19.4.1995  

could not have been passed.

3. It  would also be relevant to mention, that allegations were also levelled  

against 42 defaulting companies in the first information report dated 24.7.2004.  

The said 42 companies had defaulted by not making repayments of the ICD’s  

released  to  them,  in  terms  of  their  contractual  obligations.   The  said  first  

information report, however, did not make any reference to a large number of

Page 4

4

other  companies  in  whose favour  the  MPSIDC had likewise  extended ICD’s,  

simply because the companies had returned the loaned amount to the MPSIDC,  

in consonance with their contractual obligations.

4. A brief description of the four senior functionaries of the MPSIDC, against  

whom allegations were levelled, is being delineated below:

(I) Rajender Kumar Singh :  He  was  the  then  State  Minister  in  the  Commerce and Industries Department.  He  was  also  the  then  Chairman  of  the  MPSIDC, having been appointed  as such  on 7.4.1994.

(ii) Ajoy Acharya  :  He  was  a  member  of  the  IAS  cadre,  belonging to the 1976 batch.  While holding  the  charge  of  the  office  of  Industries  Commissioner,  Government  of  Madhya  Pradesh, he was nominated as a Director  of the MPSIDC in 1993.  He continued as  such  till  1998.   In  June  1998,  he  was  transferred as Joint Secretary, Department  of  Heavy Industries,  Government  of India,  whereupon, he ceased to be on the Board  of Directors of the MPSIDC.

(iii) J.M. Ramamurthy : He was also a member of the IAS cadre.  He was appointed as Special Director, on  the  Board  of  the  MPSIDC  in  1993.   He  retired  from  the  IAS  on  30.6.1998.  Thereupon, he ceased to be on the Board  of Directors of the MPSIDC.

(iv) Munadutt Pillai Rajan :He was also a member of the IAS cadre.  He  was  appointed  as  the  Managing  Director  of  the MPSIDC.  He retired from  the  IAS  on  7.5.2000.   Thereupon,  he  ceased to be the Managing Director of the  MPSIDC.

Page 5

5

5. The first charge sheet was filed on 24.9.2007.  The allegations against the  

petitioner herein, Ajoy Acharya, were as follows:

“a) The petitioner  was present  at  the Cabinet  Review Meeting  dated  28.01.1994  and  Board  Meeting  dated  31.01.1994,  where  the  decision  relating  to  discontinuance  of  project  financing/providing  financial assistance was taken, and thus, the instant factual position  was within petitioner’s personal knowledge.”

b) The petitioner was present in the Board Meeting dated 19.04.1995 in  which  the  Board  Resolution  was  passed  to  engage  itself  in  Investments by way of ICD, and also in other Board Meeting after  28.01.1994 where decision relating to equity participation was taken.  The  petitioner  did  not  object  to  the  passing  of  these  resolutions  despite of his having been aware of the contrary decision taken at  the  Cabinet  Review  Meeting  which  was  endorsed  at  the  Board  Meeting dated 31.1.1994.

c) The petitioner did not act bonafidely as the Cabinet Review Meeting  had  specifically  stopped  giving  of  any  financial  assistance  to  industries out of the surplus funds available with the MPSIDC.

d) The Board Resolution dated 19.04.1995 empowering the Managing  Director  to  invest  in  ICD  was  in  violation  of  Section  292  of  the  Companies  Act,  and  also,  in  violation  of  Memorandum  of  Association and Articles of Association.

e) The petitioner facilitated the passing of the aforesaid allegedly illegal  Board Resolution, which became the foundation for all illegal ICD’s.

f) The petitioner facilitated the passing of  the resolutions referred to  above,  by attending the said Board Meetings,  wherein he did not  object to the proposed resolutions in the Board Meetings.”

6. The first charge sheet dated 22.9.2007 was filed in Special Case no. 7 of  

2007,  and  the  Special  Judge,  Bhopal,  took  cognizance  thereof.   It  is  the  

contention  of  the  petitioner  Ajoy  Acharya,  that  upon  his  having  perused  the  

charge sheet dated 22.9.2007 (and the documents enclosed therewith), he learnt  

that  no  sanction  was  applied  for  or  obtained,  before  initiation  of  the  above

Page 6

6

prosecution against him.  Under the belief, that prior sanction was a pre-requisite  

under Section 19 of the PC Act, as well as, under Section 197 of the Code of  

Criminal Procedure, 1973 (hereinafter referred to as the ‘CrPC’), the petitioner  

filed a petition under Section 239 of the CrPC (as well as, Section 19 of the PC  

Act) seeking discharge on the ground, that prosecution had been initiated against  

him without seeking sanction of the competent authority.  The petition filed under  

Section  239  of  the  CrPC  was  dismissed  by  the  Special  Judge,  Bhopal,  on  

11.4.2008.   

7. Dissatisfied  with  the  aforesaid  order  dated  11.4.2008,  the  petitioner  

preferred  Criminal  Revision  Petition  no.  1422  of  2008,  in  the  High  Court  of  

Madhya Pradesh (before its principal seat at Jabalpur, hereinafter referred to as  

the ‘High Court’).  The aforesaid Criminal Revision Petition was dismissed by a  

Division Bench of the High Court on 29.8.2011.  Aggrieved by the order passed  

by the Special Judge, Bhopal (dated 11.4.2008), and the order passed by the  

High Court (dated 29.8.2011), the petitioner preferred Petition for Special Leave  

to Appeal (Criminal) no. 61 of 2012.  This Court issued notice in the above matter  

(as also in a connected matter i.e., Special Leave to Appeal (Criminal) no. 400 of  

2012) on 6.1.2012.  While issuing notice, an interim order came to be passed on  

6.1.2012, staying proceedings before the Special Judge, Bhopal (in Special Case  

no. 7 of 2007).

8. We have concluded hearing in the matter.  Leave is granted.

9. We shall endeavour to first adjudicate the principal contention advanced at  

the hands of the appellant, namely, that the initiation of prosecution against the

Page 7

7

appellant was not sustainable in law, since sanction of the competent authority  

was not obtained before cognizance in the matter was taken.  The particulars of  

the allegations levelled against the appellant in the charge sheet filed against him  

(and others) are irrelevant for the determination of the present controversy.  We  

have already recorded hereinabove briefly, an outline of the controversy which  

resulted  in  the  filing  of  the  charge  sheet  (dated  22.9.2007)  involving  the  

appellant.   Despite  our  above  determination,  it  is  imperative  at  the  cost  of  

repetition  to  notice,  that  the  pointed  allegation  in  respect  of  the  appellant’s  

culpability is drawn from the resolution of the Board of Directors of the MPSIDC  

dated 19.4.1995.  For all intents and purposes, therefore, our determination on  

the merits of the controversy, will be based on the culpability of the appellant on  

account of his participation in the meeting of the Board of Directors, wherein the  

resolution dated 19.4.1995 was passed, without his having objected to the same.  

10. Having recorded the cause for his being arrayed as an accused, the next  

step  in  the  process  of  the  present  adjudication  is  to  determine  whether  the  

participation  of  the  appellant  in  the  meetings  in  question  was  based  on  his  

position as a nominee Director on the Board of Directors of the MPSIDC, and/or  

in his capacity as a member of the IAS cadre allocated to the State of Madhya  

Pradesh.   The  above  determination,  would  make  all  the  difference  to  the  

outcome on the principal  issue canvassed on behalf  of  the appellant.   If  the  

appellant’s position as nominee director of the MPSIDC was abused, then the  

holding  of  the  said  position  itself  would  be  relevant  for  deciding  the  present

Page 8

8

controversy.  If however, the office of Industries Commissioner, Government of  

Madhya Pradesh was abused, the consideration would be different.  In the latter  

situation, the appellant being a member of the IAS cadre, his said position would  

necessarily have a relevant nexus to the issue in hand.  It is essential to notice,  

that besides being a nominee Director of the Board of Directors of the MPSIDC,  

the  appellant  was  simultaneously  nominated  as  a  Director  of  six  other  

companies.  The nomination of the appellant as Director in the other companies  

(besides the MPSIDC), has no nexus to the allegations levelled against him in  

the charge sheet dated 22.9.2007.  However, there is some doubt about the fact,  

whether the appellant participated in the controversial meeting of the Board of  

Directors (of the MPSIDC) only because of his holding the office of Industries  

Commissioner  of  the  Government  of  Madhya  Pradesh,  which  position  he  

occupied as a member of the IAS cadre of the State of Madhya Pradesh.

11. The  case  set  up  by  the  appellant  was,  that  it  was  mandatory  for  the  

prosecution to obtain sanction before initiating prosecution against  him, as he  

held  a  government  post,  namely,  the  post  of  Industries  Commissioner,  

Government  of  Madhya  Pradesh.   It  was  also  submitted  on  the  appellant’s  

behalf,  that  he  was  a  public  servant,  and  the  President  of  India  was  his  

appointing  authority,  as  also  his  dismissing  authority.   Even  while  he  was  

discharging  his  duties  as  Industries  Commissioner,  Government  of  Madhya  

Pradesh,  and thereafter,  when he had proceeded on appointment  by  way of  

deputation to the Central Government, his appointing and dismissing authorities

Page 9

9

remained the same.  Insofar as his being nominated as a Director on the Board  

of  the MPSIDC is concerned,  the case set up by the appellant  was, that  his  

nomination  co-existed  with  his  appointment  as  Industries  Commissioner,  

Government of Madhya Pradesh.  In this behalf it was asserted, that his being  

nominated as a Director (with the MPSIDC) was the outcome/consequence/result  

of  his  holding  the  office of  Industries  Commissioner,  Government  of  Madhya  

Pradesh.   It  was  submitted,  that  had  he  not  held  the  office  of  Industries  

Commissioner,  he  would  not  have  been  nominated  as  a  Director  (with  the  

MPSIDC).  It was further asserted, that consequent upon his appointment by way  

of deputation to the Central Government, his successor on the post of Industries  

Commissioner,  came  to  be  nominated  as  a  Director  on  the  Board  of  the  

MPSIDC.   It  was  therefore,  sought  to  be  canvassed,  that  the  appellant’s  

nomination as Director of the Board of the MPSIDC, was a fallout/sequel of his  

appointment as Industries Commissioner, Government of Madhya Pradesh.  It  

was accordingly his contention, that he continued to occupy the same position as  

he  had  occupied  while  holding  the  office  of  Industries  Commissioner,  

Government  of  Madhya  Pradesh,  even  after  cognizance  was  taken  by  the  

Special  Judge,  Bhopal.   The  submission  projected  was  premised  on  the  

foundation,  that  the  offices  held  by  the  appellant  were  the  outcome  of  his  

appointment  to  the  IAS  cadre.   As  such,  according  to  the  appellant,  his  

participation  in  the  proceedings  of  the  Board  of  Directors  culminating  in  its  

resolution dated 19.4.1995, must be deemed to have been taken in his capacity  

as a member of the IAS cadre.  

Page 10

10

12. On  the  pleas  canvassed  at  the  hands  of  the  learned  counsel  for  the  

appellant,  as have been noticed in the foregoing paragraph,  there can be no  

doubt that merely the position held by the appellant as Commissioner Industries,  

Government  of  Madhya  Pradesh,  would  not  have  vested  in  him the  right  to  

participate in the affairs of the MPSIDC.  It was only on account of the nomination  

of the appellant as director of the MPSIDC, that vested in him the authority to  

participate in the controversial meeting where the MPSIDC passed its resolution  

dated 19.4.1995.  Likewise, his nomination as a Director in six other companies  

did not vest in him any right whatsoever, to deal with the affairs of the MPSIDC.  

It is only on account of his being a nominee Director of the MPSIDC, that he  

assumed the responsibility and the power, to deal with the affairs of the MPSIDC.  

His participation in the proceedings of the Board of Directors which passed its  

resolution dated 19.4.1995 was therefore exclusively on account of his having  

been nominated as a Director on the Board of the MPSIDC.  We must therefore,  

first endeavour, to deal with the credibility of the submission canvassed on behalf  

of the appellant, that the appellant’s nomination as Director (with the MPSIDC)  

was  the  outcome  of  his  holding  the  office  of  Industries  Commissioner,  

Government  of  Madhya  Pradesh.   It  was  not  disputed  during  the  course  of  

hearing, that the appellant’s nomination as Director (with the MPSIDC) emerges  

from  clause  89(2)  of  the  Memorandum  and  Articles  of  Association  of  the  

MPSIDC.  Clause 89 aforementioned is being extracted hereunder:

Page 11

11

“89 (1) The number of Directors shall not be less than three and more  than twelve but the number can be increased or decreased by the  Governor subject to the provisions of the Act.

(2) Unless otherwise  determined by the Governor  from time to  time  not  more  than  five  Directors  shall  be  nominated  by  the  Governor  so  long  as  the  Government’s  share  does  not  exceed  Rs.26 lakhs.   In the event  of  Government’s  share exceeding this  amount, the number of Directors to be nominated by the Governor  will  increase.   The  number  of  Directors  so  increased  will  be  in  proportion to the Government’s share in excess of Rs.26 lakhs and  the shares held by persons other than Government.  The Directors  other than those nominated by the Governor shall be appointed by  the Company in the general meeting.

(3) The tenure of all Directors including Chairman and excluding  Managing Director shall be for the period as fixed or determined by  the State Government  from time to time.  The Managing Director  shall retire on his ceasing to hold the office of the Managing Director.  A retiring Director shall be eligible for reappointment.

(4) The Governor shall  have the power to remove any Director  appointed and nominated by him including the Chairman and the  Managing Director from Office at any time in his absolute discretion.

(5) The Governor shall  have the right to fill  any vacancy in the  Office  of  a  Director  caused  by  retirement,  removal,  resignation,  death or otherwise of the Directors nominated/appointed by him.

A perusal of sub-clause (2) of clause 89 reveals, that nominee Directors to the  

MPSIDC are appointed by the Governor.  The Governor (under sub-clause (4)  

extracted above) is also vested with the absolute discretion to remove a nominee  

Director.  But what needs emphasis is, that clause 89 of the Memorandum and  

Articles of Association of the MPSIDC, does not contemplate that the Industries  

Commissioner,  Government  of  Madhya  Pradesh  would  necessarily,  or  

automatically, or as a matter of course, must be nominated as Director of the  

MPSIDC.   Likewise,  clause  89  aforementioned,  does  not  require  a  nominee

Page 12

12

director to be drawn out of members of the IAS cadre.  In fact, in our view, the  

Governor  under  clause  89  has  the  absolute  discretion  to  nominate  anyone  

suitable as per his wisdom, as nominee Director to the MPSIDC.  In the above  

view of the matter, it is not possible to accept, that the appellant’s nomination as  

Director of the MPSIDC, was the outcome of his holding the office of Industries  

Commissioner, Government of Madhya Pradesh, or on account of his being a  

member  of  the  IAS cadre.   In  the  above  view  of  the  matter  it  is  natural  to  

conclude, that the participation of the appellant in the meeting of the Board of  

Directors of the MPSIDC on 19.4.1995 was not on account of his holding the  

office  of  Industries  Commissioner,  Government  of  Madhya  Pradesh,  or  on  

account of his being a member of the IAS cadre.  Having so concluded, we shall  

now endeavour to determine, on the basis of the law declared by this Court, the  

veracity  of  the  assertion  made  by  the  appellant,  that  prior  sanction  was  

mandatory,  and in its absence,  the prosecution initiated against  the appellant  

should be considered to be without jurisdiction.

13. We shall first endeavour to deal with the law declared by this Court on the  

proposition being canvassed before us.  In this behalf, reference may first of all  

be made to R.S. Naik vs. A.R. Antulay, (1984) 2 SCC 183.  Observations made  

by  this  Court,  as  are  relevant  to  the  proposition  canvassed  on  behalf  of  the  

appellant, are being extracted hereunder :

“21. Re: (b) and (c): It was strenuously contended that if the accused has  held or holds a plurality of offices occupying each one of which makes him  a public servant, sanction of each one of the competent authorities entitled

Page 13

13

to  remove  him  from  each  one  of  the  offices  held  by  him,  would  be  necessary and if anyone of the competent authorities fails or declines to  grant sanction, the court is precluded or prohibited from taking cognizance  of the offence with which the public servant is charged. This submission  was sought to be repelled urging that it is implicit in Section 6 that sanction  of  that  authority  alone is  necessary  which is  competent  to  remove  the  public  servant  from the  office  which  he  is  alleged  to  have  misused  or  abused  for  corrupt  motives.  Section  6(1)(c)  is  the  only  provision  relied  upon on behalf of the accused to contend that as M.L.A. he was a public  servant on the date of taking cognizance of the offences, and therefore,  sanction of that authority competent to remove him from that office is a  sine qua non for taking cognizance of offences. Section 6 (1)(c) bars taking  cognizance  of  an  offence  alleged  to  have  been  committed  by  public  servant  except  with the previous sanction of  the authority  competent  to  remove him from his office.

xxx xxx xxx xxx

23. Offences prescribed in Sections 161, 164 and 165 IPC and Section  5 of the 1947 Act have an intimate and inseparable relation with the office  of a public servant. A public servant occupies office which renders him a  public servant and occupying the office carries with it the powers conferred  on the office. Power generally is not conferred on an individual person. In a  society governed by rule of law power is conferred on office or acquired by  statutory status and the individual occupying the office or on whom status  is conferred enjoys the power of office or power flowing from the status.  The holder of the office alone would have opportunity to abuse or misuse  the office. These sections codify a well-recognised truism that power has  the  tendency  to  corrupt.  It  is  the  holding  of  the  office  which  gives  an  opportunity to use it for corrupt motives. Therefore, the corrupt conduct is  directly attributable and flows from the power conferred on the office. This  interrelation  and  interdependence  between  individual  and  the  office  he  holds is substantial and not severable. Each of the three clauses of sub- section (1) of Section 6 uses the expression 'office' and the power to grant  sanction  is  conferred  on  the  authority  competent  to  remove  the  public  servant  from his office and Section 6 requires  a sanction before taking  cognizance of offences committed by public servant. The offence would be  committed by the public servant by misusing or abusing the power of office  and it is from that office, the authority must be competent to remove him so  as  to  be  entitled  to  grant  sanction.  The  removal  would  bring  about  cessation of interrelation between the office and abuse by the holder of the  office. The link between power with opportunity to abuse and the holder of  office would be severed by removal from office. Therefore, when a public  servant  is accused of  an offence of  taking gratification other  than legal  remuneration for doing or forbearing to do an official act (Section 161 IPC)

Page 14

14

or as a public servant abets offences punishable under Sections 161 and  163 (Section 164 IPC) or as public servant obtains a valuable thing without  consideration  from  person  concerned  in  any  proceeding  or  business  transacted by such public servant (Section 165 IPC) or commits criminal  misconduct  as defined in Section 5 of the 1947 Act, it  is implicit  in the  various offences that the public servant has misused or abused the power  of office held by him as public servant. The expression 'office' in the three  sub-clauses  of  Section  6(1)  would  clearly  denote  that  office  which  the  public servant misused or abused for corrupt motives for which he is to be  prosecuted  and  in  respect  of  which  a  sanction  to  prosecute  him  is  necessary  by the  competent  authority  entitled  to  remove him from that  office which he has abused.  This interrelation between the office and its  abuse if severed would render Section 6 devoid of any meaning. And this  interrelation clearly provides a clue to the understanding of the provision in  Section 6 providing for sanction by a competent authority who would be  able to judge the action of the public servant before removing the bar, by  granting sanction, to the taking of the cognizance of offences by the court  against  the public  servant.  Therefore,  it  unquestionably  follows that  the  sanction to prosecute can be given by an authority competent to remove  the  public  servant  from  the  office  which  he  has  misused  or  abused  because that  authority  alone would be able to know whether  there has  been a misuse or abuse of the office by the public servant and not some  rank outsider. By a catena of decisions, it has been held that the authority  entitled  to  grant  sanction  must  apply  its  mind to the facts  of  the case,  evidence collected and other incidental facts before according sanction. A  grant of sanction is not an idle formality but a solemn and sacrosanct act  which removes the umbrella of protection of government servants against  frivolous prosecutions and the aforesaid requirements must therefore, be  strictly complied with before any prosecution could be launched against  public  servants.  (See Mohd.  Iqbal  Ahmad v.  State  of  Andhra  Pradesh,  [1979] 2 S.C.R. 1007). The Legislature advisedly conferred power on the  authority competent to remove the public servant from the office to grant  sanction for the obvious reason that that authority alone would be able,  when  facts  and  evidence  are  placed  before  him,  to  judge  whether  a  serious  offence  is  committed  or  the  prosecution  is  either  frivolous  or  speculative. That authority alone would be competent to judge whether on  the facts alleged, there has been an abuse or misuse of office held by the  public servant. That authority would be in a position to know what was the  power  conferred on the office which the public  servant  holds,  how that  power could be abused for corrupt motive and whether prima facie it has  been so done. That competent authority alone would know the nature and  functions discharged by the public servant holding the office and whether  the same has been abused or misused. It is the vertical hierarchy between  the authority competent to remove the public servant from that office and  the nature of the office held by the public servant against whom sanction is

Page 15

15

sought which would indicate a hierarchy and which would therefore, permit  inference of knowledge about the functions and duties of the office and its  misuse or abuse by the public servant. That is why the legislature clearly  provided that that authority alone would be competent to grant sanction  which is entitled to remove the public servant against whom sanction is  sought from the office.

24. Now if  the public  servant  holds two offices and he is accused of  having abused one and from which he is removed but continues to hold  the other  which is  neither  alleged to have been used nor abused,  is  a  sanction of the authority competent to remove him from the office which is  neither alleged or shown to have been abused or misused necessary? The  submission is that if the harassment of the public servant by a frivolous  prosecution and criminal waste of his time in law courts keeping him away  from discharging  public  duty,  are  the  objects  underlying  Section  6,  the  same would be defeated if it is held that the sanction of the latter authority  is not necessary. The submission does not commend to us. We fail to see  how the competent authority entitled to remove the public servant from an  office which is neither alleged to have been used or abused would be able  to decide whether the prosecution is frivolous or tendentious. An illustration  was posed to the learned counsel  that a Minister who is indisputably a  public servant greased his palms by abusing his office as Minister,  and  then ceased to hold the office before the court was called upon to take  cognizance  of  the  offence  against  him  and  therefore,  sanction  as  contemplated by Section 6 would not be necessary; but if after committing  the offence and before the date of taking of cognizance of the offence, he  was elected as a Municipal President in which capacity he was a public  servant under the relevant Municipal law, and was holding that office on  the  date  on  which  court  proceeded  to  take  cognizance  of  the  offence  committed by him as a Minister, would a sanction be necessary and that  too  of  that  authority  competent  to  remove  him  from  the  office  of  the  Municipal President. The answer was in affirmative. But the very illustration  would show that such cannot be the law. Such an interpretation of Section  6 would render it as a shield to an unscrupulous public servant. Someone  interested in protecting may shift him from one office of public servant to  another  and  thereby  defeat  the  process  of  law.  One  can  legitimately  envisage a situation wherein a person may hold a dozen different offices,  each one clothing him with the status of a public servant under Section 21  IPC and even if he has abused only one office for which either there is a  valid sanction to prosecute him or he has ceased to hold that office by the  time court was called upon to take cognizance, yet on this assumption,  sanction of 11 different competent authorities each of which was entitled to  remove him from 11 different public offices would be necessary before the  court  can  take  cognizance  of  the  offence  committed  by  such  public  servant, while abusing one office which he may have ceased to hold. Such

Page 16

16

an interpretation is contrary to all canons of construction and leads to an  absurd and product which of necessity must be avoided. Legislation must  at all  costs be interpreted in such a way that it  would not operate as a  rougue's charter. (See Davis & Sons Ltd. v. Atkins)

xxx xxx xxx xxx

26. Therefore, upon a true construction of Section 6, it is implicit therein  that sanction of that competent authority alone would be necessary which  is  competent  to  remove  the  public  servant  from the  office  which  he  is  alleged to have misused or  abused for  corrupt  motive and for  which a  prosecution is intended to be launched against him.

27. In the complaint  filed against  the accused it  has been repeatedly  alleged that the accused as Chief Minister of Maharashtra State accepted  gratification other than legal remuneration from various sources and thus  committed various offences set out in the complaint. Nowhere, not even by  a whisper, it is alleged that the accused has misused or abused for corrupt  motives his office as M.L.A. Therefore, it is crystal clear that the complaint  filed against  the accused charged him with criminal abuse or misuse of  only his office as Chief Minister. By the time, the court was called upon to  take cognizance of the offences, so alleged in the complaint, the accused  had ceased to hold the office of the Chief Minister. On this short ground, it  can be held that no sanction to prosecute him was necessary as former  Chief Minister of Maharashtra State. The appeal can succeed on this short  ground. However, as the real bone of contention between the parties was  whether as M.L.A. the accused was a public servant and the contention  was canvassed at some length, we propose to deal with the same.

xxx xxx xxx xxx

68. Re. (f) & (g): The learned Judge after recording a finding that M.L.A.  is a public servant within the comprehension of clause (12)(a) and further  recording the finding that as on the date on which the Court was invited to  take  cognizance,  the  accused was  thus  a public  servant  proceeded  to  examine  whether  sanction  under  Section  6  of  the  1947  Act  is  a  pre- requisite to taking cognizance of offences enumerated in Section 6 alleged  to have been committed by him. He reached the conclusion that a sanction  is necessary before cognizance can be taken. As a corollary he proceeded  to investigate and identify, which is the sanctioning authority who would be  able to give a valid sanction as required by Section 6 for the prosecution of  the accused in his capacity as M.L.A.? We have expressed our conclusion  that  where  offences  as set  out  in  Section 6 are  alleged to  have been  committed by a public  servant,  sanction of  only that authority  would be  necessary who would be entitled to remove him from that office which is

Page 17

17

alleged  to  have  been  misused  or  abused  for  corrupt  motives.  If  the  accused has ceased to hold that office by the date, the court is called upon  to take cognizance of  the offences alleged to have been committed by  such  public  servant,  no  sanction  under  Section  6  would  be  necessary  despite the fact that he may be holding any other office on the relevant  date which may make him a public servant as understood in Sec 21, if  there is no allegation that office has been abused or misused for corrupt  motives.  The allegations in the complaint  are all  to  the effect  that  the  accused  misused  or  abused  his  office  as  Chief  Minister  for  corrupt  motives.  By the time the Court  was called upon to take cognizance of  those  offences,  the  accused  had  ceased  to  hold  the  office  of  Chief  Minister. The sanction to prosecute him was granted by the Governor of  Maharashtra but this aspect we consider irrelevant for concluding that no  sanction was necessary to prosecute him under Section 6 on the date on  which  the  court  took  cognizance  of  the  offences  alleged to  have been  committed by the accused. Assuming that as MLA the accused would be a  public servant under Section 21, in the absence of any allegation that he  misused or  abused his  office as MLA that  aspect  becomes immaterial.  Further Section 6 postulates existence of a valid sanction for prosecution  of a public servant for offences punishable under Sections 161, 164, 165  IPC and  Section  5  of  the  1947  Act,  if  they  are  alleged  to  have  been  committed by a public servant. In view of our further finding that M.L.A. is  not a public servant within the meaning of the expression in Section 21 IPC  no sanction is necessary to prosecute him for the offences alleged to have  been committed by him.”

(emphasis is ours)

The conclusions drawn by this Court in R.S. Naik’s case (supra) were affirmed by  

this Court in Prakash Singh Badal vs. State of Punjab, (2007) 1 SCC 1, wherein  

this Court held as under:

“23. Offences prescribed in Sections 161, 164 and 165 IPC and Section  5 of the 1947 Act have an intimate and inseparable relation with the  office  of  a public  servant.  A public  servant  occupies  office which  renders him a public servant and occupying the office carries with it  the powers conferred on the office. Power generally is not conferred  on an individual  person. In a society governed by the rule of law  power is conferred on office or acquired by statutory status and the  individual occupying the office or on whom status is conferred enjoys  the power of office or power flowing from the status. The holder of  the  office  alone  would  have  opportunity  to  abuse  or  misuse  the

Page 21

21

sanction was essential before the appellant could be prosecuted.  It would be  

pertinent to mention, that extracts from the judgments referred to in paragraph 13  

reproduced above,  deal  with two pointed situations.   Firstly,  whether sanction  

before prosecution is required from each of the competent authorities entitled to  

remove  an  accused  from  the  offices  held  by  him,  in  situations  wherein  the  

accused holds a plurality of offices.  The second determination was in respect of  

the requirement of sanction, in situations where the accused no longer holds the  

office, which he is alleged to have abused/misused, for committing the offence  

(s)  for  which  he  is  being  blamed.   In  answer  to  the  first  query,  it  has  

unambiguously been concluded, that if an accused holds a plurality of offices,  

each one of which makes him a public servant, sanction is essential only at the  

hands of the competent authority (entitled to remove him from service) of the  

office which he had allegedly misused.  This leads to the clear inference, that  

other public offices held by the accused wherein an accused holds a plurality of  

offices, are irrelevant for purposes of obtaining sanction prior to prosecution.  On  

the second issue it was concluded, that sanction was essential only if, at the time  

of taking cognizance, the accused was still holding the public office which he had  

allegedly  abused.   If  the legal  position determined in the above judgments is  

taken  into  consideration,  there  is  certainly  no  doubt,  that  in  the  facts  and  

circumstances of  this case, sanction if  required,  ought to have been obtained  

from the Governor of the State of Madhya Pradesh.  The instant determination is  

premised on the fact, that the appellant is stated to have misused his position  

while discharging his responsibilities as a nominee Director of the MPSIDC.  It is

Page 22

22

clear  to  us,  specially  from  the  deliberation  recorded  hereinabove,  that  the  

appellant’s participation in the Cabinet Review Meeting dated 28.1.1994, and in  

the relevant meetings of the Board of Directors (of the MPSIDC) had no nexus to  

the post of  Industries Commissioner,  Government  of  Madhya Pradesh,  or the  

subsequent  office  held  by  him  as  Joint  Secretary,  Department  of  Heavy  

Industries, Government of India.  Accordingly, in our considered view, sanction of  

the  authorities  with  reference  to  the  post  of  Industries  Commissioner,  

Government  of  Madhya  Pradesh  and  Joint  Secretary,  Department  of  Heavy  

Industries, Government of India held by the appellant, was certainly not required.  

We therefore, hereby reject the submission advanced at the hands of the learned  

counsel for the appellant, that since the appellant continued to hold the above-

mentioned public office(s) in his capacity as a member of the IAS cadre, at the  

time  the  first  charge  sheet  was  filed  on  24.9.2007,  prosecution  could  be  

proceeded with,  and cognizance taken,  only  upon sanction by the competent  

authority(ies) of the said two offices (Industries Commissioner,  Government of  

Madhya  Pradesh  and  Joint  Secretary,  Department  of  Heavy  Industries,  

Government of India), as wholly misconceived.

15. The abuse/misuse of authority,  alleged against  the appellant pertains to  

the discharge of his responsibilities as a nominee Director (on the Board of the  

MPSIDC).  Therefore, the further question which arises for our consideration is,  

whether sanction at the hands of the Governor of the State of Madhya Pradesh,  

(who had the  power  to  remove  any Director  appointed  or  nominated  by  him

Page 23

23

under clause 89 of the Memorandum and Articles of Association of the MPSIDC),  

was a prerequisite  before  taking cognizance in the  matter.   In  the facts  and  

circumstances  of  this  case,  we  are  of  the  view,  that  answer  to  the  instant  

question has also to be in the negative.  Our aforesaid determination is based on  

the fact  that the appellant  remained a nominee Director  of  the MPSIDC from  

1993 to 1998.  The first charge sheet in the matter was filed on 24.9.2007.  Well  

before the filing of the first charge sheet, the appellant had relinquished charge of  

the office which he is alleged to have abused/misused (i.e. the office of nominee  

Director of the MPSIDC).  In the above view of the matter, since the appellant  

was not holding the public office which he is alleged to have abused, when the  

first charge sheet was filed, in terms of the law declared by this Court (referred to  

in the judgments extracted in paragraph 13 above), there was no need to obtain  

any  sanction  before  proceeding  to  prosecute  the  appellant,  for  the  offences  

alleged against him.   

16. It would be relevant to mention, that during the course of hearing learned  

counsel for the appellant placed emphatic reliance on the judgment rendered by  

this Court in State of Madhya Pradesh vs. Sheetla Sahai & Ors., (2009) 8 SCC  

617.   It  is  not  necessary  for  us  to  refer  either  to  the  factual  position  in  the  

judgment relied upon, or even the conclusions recorded thereon.  We say so  

because, the issues canvassed and determined in the aforesaid judgments were  

not  the ones on the basis whereof  we have recorded our conclusions,  in the  

foregoing paragraphs.  It is sufficient for us to note, that the judgment rendered

Page 24

24

by this Court in State of Madhya Pradesh vs. Sheetla Sahai & Ors. (supra), does  

not  carve  out  any  exception,  to  the  two  propositions  relied  upon  for  the  

conclusions drawn by us, from the judgments referred to in paragraph 13 above.

17. The second contention advanced at the hands of the learned counsel for  

the appellant, was based on the determination rendered by this Court in Soma  

Chakravarty vs. State through CBI, (2007) 5 SCC 403.  Pointed reliance was  

placed by the learned counsel for the appellant on paragraph 23 which is being  

extracted hereunder:-

“23. In a case of this nature, the learned Special Judge also should have  considered the question having regard to the 'doctrine of parity'  in  mind. An accused similarly situated has not been proceeded against  only  because,  the departmental  proceedings ended in his  favour.  Whether an accused before him although stands on a similar footing  despite  he  having  not  been departmentally  proceeded  against  or  had not been completed exonerated also required to be considered.  If  exoneration  in  a  departmental  proceeding  is  the  basis  for  not  framing  a  charge  against  an  accused  person  who  is  said  to  be  similarly situated, the question which requires a further consideration  was as to whether the applicant before it was similarly situated or  not  and/or  whether  the  exonerated  officer  in  the  departmental  proceeding also faced same charges including the charge of being a  party to the larger conspiracy.”

(emphasis is ours)

It  was the vehement  contention of the learned counsel  for the appellant,  that  

sanction  to  prosecute  another  co-accused  similarly  situated  as  the  appellant,  

having been obtained, it  was not permissible to treat the appellant  differently.  

We find no substance in the second contention advanced at the hands of the  

learned counsel  for the appellant.   Having concluded on the basis of  the law  

declared  by  this  Court,  that  prior  sanction  for  prosecuting  the  appellant  was

Page 25

25

unessential, it is futile to suggest that sanction ought to have been obtained all  

the same.  The instant submission needs no further consideration in view of the  

deliberations recorded by us hereinabove.  Parity in law can be claimed only in  

respect of action rightfully executed.  And not otherwise.  Having concluded that  

sanction was not required in the case of the appellant, it is not possible for us to  

accept on the analogy of the submission advanced at the hands of the learned  

counsel for the appellant, that merely because sanction was obtained in respect  

of another co-accused, it needed to have been obtained in the appellant’s case  

as well.

18. The next contention advanced at the hands of the learned counsel for the  

appellant was based on Section 141 of the Negotiable Instruments Act, 1881  

(hereinafter referred to as the ‘NI Act’).   Section 141 aforementioned is being  

extracted hereunder:-

“141. Offences by companies.-  (1) If the person committing an offence  under section 138 is a company, every person who, at the time the  offence was committed, was in charge of, and was responsible to  the company for the conduct of the business of the company, as well  as the company, shall be deemed to be guilty of the offence and  shall be liable to be proceeded against and punished accordingly:

Provided  that  nothing  contained  in  this  sub-section  shall  render any person liable to punishment if he proves that the offence  was committed without his knowledge, or that he had exercised all  due diligence to prevent the commission of such offence:

Provided further that where a person is nominated as a Director  of a company by virtue of his holding any office or employment in the  Central Government or State Government or a financial corporation  owned  or  controlled  by  the  Central  Government  or  the  State  Government,  as  the  case  may  be,  he  shall  not  be  liable  for  prosecution under this Chapter.

Page 26

26

(2) Notwithstanding anything contained in sub-section (1), where  any offence under this Act has been committed by a company and it  is proved that the offence has been committed with the consent or  connivance of, or is attributable to, any neglect on the part of, any  director, manager, secretary or other officer of the company, such  director, manager, secretary or other officer shall also be deemed to  be guilty of that offence and shall be liable to be proceeded against  and punished accordingly.

Explanation.--For the purposes of this section,--

(a) "company" means any body corporate and includes a firm or other  association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.”

Relying on sub-Section (1) of Section 141 extracted above, it was the vehement  

contention of the learned counsel for the appellant, that the appellant was not in  

charge  of  the  conduct  of  the  business  of  the  MPSIDC.   It  was  also  his  

submission,  that  the  appellant  was  not  responsible  to  the  MPSIDC  for  the  

conduct of its day to day activities.  In this behalf it was sought to be asserted,  

that the appellant was not aware of the fact, that the functionaries of the MPSIDC  

were extending short term loans (including ICD’s) out of the surplus funds of the  

MPSIDC to industrial establishments.  It was also pointed out, that the appellant  

had  neither  examined  nor  approved  any  financial  assistance  extended  to  

industries, out of the surplus funds of the MPSIDC, on the basis of the resolution  

of the Board of Directors dated 19.4.1995.  As such it was asserted, that the  

accusations levelled against  the appellant were misconceived.  Insofar as the  

instant aspect of the matter is concerned, learned counsel for the appellant relied  

on the decision rendered by this Court in National Small Industries Corporation

Page 28

28

Industries Corporation Ltd. (supra), is misconceived.  The appellant is not being  

blamed for the implementation of the resolution of the Board of Directors of the  

MPSIDC dated 19.4.1995.  The appellant is being blamed for having allowed the  

aforesaid resolution dated 19.4.1995 to be passed despite the earlier decision  

taken in  the Cabinet  Review Meeting  held  on 28.1.1994,  as also,  the earlier  

resolution of the Board of Directors of the MPSIDC dated 31.1.1994.  It is not a  

matter of dispute before us, that the appellant had participated in the decision  

making  process  in  the  meeting  of  the  Cabinet  Review  Committee  dated  

28.1.1994, as also, the resolution of the Board of Directors of the MPSIDC dated  

31.1.1994.  The  charge  against  the  appellant  is  based  on  the  fact,  that  the  

appellant allowed the Board of Directors of the MPSIDC to pass the resolution  

dated  19.4.1995,  inspite  of  the earlier  decisions  at  the hands  of  the  Cabinet  

Review  Committee  (in  meeting  dated  18.1.1994)  and  the  consequential  

resolution of the Board of Directors (dated 31.1.1994).  We, therefore, reject the  

submission advanced at the hands of the learned counsel for the appellant based  

on Section 141 of the NI Act.  All the same, it would be relevant to notice, that the  

second proviso under Section 141(1) of the N.I. Act is inapplicable to the facts of  

this case, because the appellant was not nominated as a Director of the MPSIDC  

on  account  of  holding  the  office  of  Industries  Commissioner,  Government  of  

Madhya  Pradesh.   The  appellant’s  appointment  as  nominee  Director  of  the  

MPSIDC was based on the determination of the Governor of Madhya Pradesh  

under clause 89 of the Memorandum and Articles of Association of the MPSIDC.  

If the factual position alleged against the appellant is correct, the culpability of the

Page 29

29

appellant would emerge from sub-Section (2) of Section 141 of the N.I. Act.  The  

instant  inference  is  inevitable,  because  it  is  not  disputed  on  behalf  of  the  

appellant, that he had actually participated in the Cabinet Review Meeting dated  

28.1.1984, as well as, in the meetings of the Board of Directors leading to the  

passing of the resolutions dated 31.1.1994 and 19.4.1995.  In the facts of the  

present case, the accusation implicating the appellant, is directly attributable to  

the appellant, as nominee Director of the MPSIDC.  The aforesaid inference has  

been  drawn by  us,  to  negate  the  submission  of  the  learned  counsel  for  the  

appellant based on Section 141 of the N.I. Act.  In our view, the instant issue  

does  not  arise  for  adjudication  in  the  present  controversy  in  view  of  the  

conclusions already drawn hereinabove, that the culpability of the appellant, lies  

in the mischief of passing the resolution dated 19.4.1995.  The implementation of  

the said resolution is the consequential effect of the said mischief.   

20. For  the  last  contention  advanced  on  behalf  of  the  appellant,  learned  

counsel  placed  reliance  on  a  decision  rendered  by  this  Court  in  C.K.  Jaffer  

Sharief vs. State (through CBI), (2013) 1 SCC 205.  Our pointed attention was  

drawn to the following observations recorded therein:-

“17. It has already been noticed that the appellant besides working as the  Minister  of  Railways  was  the  Head  of  the  two  public  sector  undertakings in question at the relevant time. It also appears from  the materials on record that the four persons while in London had  assisted the appellant in performing certain tasks connected with the  discharge of duties as a Minister.  It is difficult to visualise as to how  in  the  light  of  the  above  facts,  demonstrated  by  the  materials  revealed  in  the  course  of  investigation,  the  appellant  can  be  construed  to  have  adopted  corrupt  or  illegal  means  or  to  have  abused his position as a public servant to obtain any valuable thing

Page 31

31

inferences on the basis of the established factual position, whether the accused  

is guilty of the accusation levelled against him.  Therefore, it is neither proper nor  

possible for us to deal  with the last contention advanced at  the hands of  the  

learned counsel for the appellant, at the present juncture.

21. No further contention was advanced at the hands of the learned counsel  

for the appellant.   

22. For  the  reasons  recorded  hereinabove,  we find  no  merit  in  the  instant  

appeals.  The same are accordingly hereby dismissed.  While disposing of the  

instant appeals,  we consider it  just and appropriate to direct the trial Court to  

expedite the trial, keeping in mind, that the charge sheet in the matter was filed  

as far back as in 2007.  On account of the proceedings initiated at the hands of  

the appellant, no further proceedings were taken by the Special Judge, Bhopal.  

In the above view of the matter, we consider it appropriate to direct the trial Court  

to hold proceedings for the disposal of Special Case No. 7 of 2007 on a weekly  

basis.

…………………………….CJI. (P. Sathasivam)

……………………………….J. (Jagdish Singh Khehar)

New Delhi; September 17, 2013.

Page 32

32