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Non-Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.782 OF 2011

KEDARI LAL      …. Appellant

Versus

STATE OF M.P. AND ORS.    …. Respondents          

J U D G M E N T  

Uday Umesh Lalit, J.

1. This appeal seeks to challenge the judgment and order dated 16.12.2010  

passed by the High Court of Madhya Pradesh, Bench at Gwalior in Criminal  

Appeal No. 58 of 2006 dismissing the appeal and affirming the judgment of  

conviction recorded by the Special Judge (Prevention of Corruption Act) Shiv  

Puri,  Madhya Pradesh  in  Special  Sessions  Trial  No.  4  of  1996 against  the  

appellant herein.

2. The  appellant  joined  the  services  of  Public  Health  Engineering  

Department  of  the  State  of  Madhya  Pradesh  on  15.07.1978  as  Assistant

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Engineer  and  thereafter  served  in  various  capacities.   According  to  the  

prosecution, during the period of 15.07.1978 to 9.02.1994, the appellant had  

earned total amount of Rs.3,86, 966/-  as public servant but he was found to be  

in possession of assets worth Rs.7,97,243/- at the end of that period and as  

such he was in possession of assets disproportionate to his known sources of  

income to the tune of Rs.4,08,077/-.  Accordingly Crime No. 17 of 1994 was  

registered  on  9.02.1994  by  the  Special  Police  Establishment,  Lokayukta  

Sanghthan for the offence punishable under Section 13(1)(e) read with Section  

13(2) of the Prevention of Corruption Act, 1988 (the Act, for short).   After  

conducting appropriate investigation chargesheet was filed and the appellant  

was accordingly charged and tried.

3.   The  prosecution  in  support  of  its  case  examined  10  witnesses.  The  

defence of the appellant was that:-  

(i)  On the occasion of his marriage he had received gifts from his in- laws, (ii) he had received certain sums as and by way of his share in  family partition, (iii) he had received bequest under the will executed by  his mother, and (iv) he had taken loan or advances for purchase of plot  and construction from his relations and friends. It  was submitted that  every such receipt was duly intimated by him to the department. The  details of such receipt and intimation as submitted, are as under:-

a. On  16.04.1984,  the  appellant  got  married  and  had  received  gifts  from his  in-laws such as Fridge,  Colour  TV, Sofa Set,  Almirah,  which  fact  was  intimated  to  the  Department  vide  letter dated 25.04.1984.

b. In 1987, in terms of the family partition that took place,  an  amount  of  Rs.1,45,000/-  was  agreed  to  be  given  to  the  appellant  by  his  father.  The father  of  the  appellant  gave  an

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amount  of  Rs.60,000/-  which  was  intimated  by  him  to  his  Department vide letter dated 10.05.1987.

c. The balance amount was remitted to  the appellant  vide two  Bank Drafts of Rs.45,000/- and Rs.40,000/- and the same was  intimated to the Department vide letter dated 14.11.1991.

d. In the year 1987, the appellant wanted to purchase a plot of  land, for which he took a loan of Rs.20,000/- from PW-6 Ramji  Lal Agarwal, a friend and resident of the same area, which was  intimated to the Department vide letter dated 03.09.1987.

e. In  the  year  1988-1989,  the  appellant  had  applied  for  a  construction  loan  which  had  not  been  sanctioned  by  the  Department till then. To ensure continuous construction work,  he took loans or received gifts from his close relative, details  of which were reflected in his letter to the department dated  15.12.1989. The details being:-

(i) On  09.09.1988  and  01.04.1989  he  received gifts  in cash of  the amounts Rs.20,000/-  and  Rs.15,000/-  from  his  brother  PW  7  Brij  Narayan  and  on  03.12.1988  and  10.04.1989  he  received   gifts  of  Rs.20,000/-  and  Rs.15,000/-  in  cash from his other brother PW5 Gopal Agarwal.  

(ii)     Furthermore, he took a loan of Rs.75,000/- from  M/S Radhaballabh Dal Mills, a company in which  PW 5 Gopal Agarwal his brother was a partner and  the loan was given through a cheque.

f. On  17.01.1991  the  mother  of  the  appellant  passed  away  leaving behind a will  under which the appellant received an  amount   Rs.50,672/-  which  fact  was  intimated  to  the  Department vide letter dated 14.11.1991.

g. In the year 1993, in order to purchase a gun, the appellant took  a  loan  of  Rs.10,000/-  from his  brother-in-law PW1 Kapoor  Chand which fact was intimated by him to the Department vide  letter dated 15.03.1993.

4.   The appellant had thus intimated the department on every occasion that

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he received any advance or gifts or share in partition or entitlement by way of  

bequest.  These  facts  are  spoken  to  by  various  prosecution  witnesses.  

Moreover, the appellant had filed his Income Tax Return on 28.09.1992, which  

clearly reflected the details of the loan transactions and the amounts that he had  

received. Copy of the Income Tax Return was also filed with the department on  

5.01.1994, well before the present F.I.R. was filed on 9.02.1994.  The appellant  

submitted that if these amounts which were duly intimated and stood reflected  

in  his  Income  Tax  Returns  were  to  be  taken  into  account,  the  alleged  

disproportionate assets would not be to the tune of Rs.4,08,077/- but would  

stand reduced to the sum of  Rs.37,605/-.

5.   The Trial Court held that the prosecution had established the case against  

the appellant and thus by its judgment and order dated 30.12.2005 convicted  

the appellant under Section 13(1)(e) read with Section 13 (2) of the Act and  

sentenced him to suffer 3 years rigorous imprisonment and a fine of Rs. 15,000  

in default whereof to undergo further sentence of rigorous imprisonment for 1  

year.  

6.  While dealing with Criminal Appeal preferred by the appellant, the High  

Court  took  the  view that  Rules  14,  17  and  19  of  the  M.P.  Civil  Services  

(Conduct) Rules, 1965  (“the Rules” for short) prohibit the public servant from  

accepting  gifts  or  loan  except  in   the  manner  prescribed  therein.   It  was  

observed  that  given  the  expression  “known  sources  of  income”  appearing

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under  Section  13(1)(e)  of  the  Act,  the  income   must  be  such  which  was  

received from lawful source and that it must be in compliance of the Rules as  

well.  The High Court held disclosure of receipt of money in the Income Tax  

Returns  was  of  no  assistance  to  the  appellant  unless  the  Rules  were  duly  

complied with. The High Court thus affirmed the view taken by the Trial Court  

and dismissed the appeal confirming the sentence.

7.   The correctness of the judgment passed by the High Court is challenged  

in this appeal by Special Leave. During the pendency of this appeal, this court  

was pleased to direct the release of the appellant on bail.

8. Appearing in support of the appeal, Mr. Siddharth Luthra, learned Senior  

Counsel  submitted that  every receipt  of  amount  was duly intimated by the  

appellant to the department contemporaneously and such amounts were also  

reflected in  his  Income Tax Report,   filed  well  before the initiation of  the  

prosecution in the instant case.  It was further submitted that after taking into  

account the amount so intimated, the balance of Rs. 37,605 at best remains  

unexplained. But such amount being less than 10% of the total income, the  

appellant was entitled to the benefit in terms of decisions of this Court.

9. Mr. C. D. Singh, learned advocate appearing for the State supported the  

view taken by the court below.  Relying upon the decision of this court in N.  

Ramakrishnaiah (D) through LR’s Vs. State of A.P.1, it was submitted that  1  2008 (17) SCC 83

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the loans and gifts  received by the petitioner  would not  constitute  “known  

sources of income” as defined under Section 13(1) (e) of the Act.

 10.      The expression “known sources of income” in Section 13(1) (e) of the  

Act has two elements, first the income must be received from a lawful source  

and  secondly  the  receipt  of  such  income  must  have  been  intimated  in  

accordance  with  the  provisions  of  law,  rules  or  orders  for  the  time  being  

applicable  to  the  public  servant.   In   N.  Ramakrishnaiah (Supra),  while  

dealing with said expression, it was observed:-

“…For the public servant, whatever return he gets of  his  service,  will  be the primary item of  his  income.  Other income which can conceivably be income qua  the public servant will be in the regular receipt from  (1) his property, or (b) his investment.”

The categories so enumerated are illustrative.  Receipt by way of share  

in the partition of ancestral property or bequest under a will or advances from  

close relations would come within the expression “known sources of income”  

provided the second condition stands fulfilled that is to say, such receipts were  

duly intimated to the authorities as prescribed.   

11. We have gone through Rules 14, 17 and 19 of the Rules.  Rule 14 lays  

down that a government servant on occasions such as weddings, anniversaries  

or religious functions may accept gifts up to certain limit, if he makes a report  

of such fact to the Government within a period of one month.  Sub Rules (4)  

and (5) provide inter alia, that in any other case, the government servant shall

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not  accept  any gift  without  the sanction of  the  Government  and if  the gift  

exceeds Rs. 2000, except through an account payee cheque. Rule 17 deals with  

investment,  lending and borrowing and provides inter  alia that  Government  

Servant may give to, or accept from a relation or a personal friend, a purely  

temporary loan. Rule 19 lays down that the government servant must intimate  

the details of property inherited or acquired by the Govt. Servant.  There is no  

absolute embargo or prohibition in the Rules and all that is required is sanction  

or permission from the Government.

12.  In the instant case, every single amount received by the appellant has  

been  proved  on  record  through  the  testimony of  the  witnesses  and  is  also  

supported by contemporaneous documents and intimations to the Government.  

It is not the case that the receipts so projected were bogus or was part of a  

calculated device.   The fact that these amounts were actually received from the  

sources  so  named is  not  in  dispute.   Furthermore,  these  amounts  are  well  

reflected  in  the  Income  Tax  Returns  filed  by  the  appellant.   In  similar  

circumstances, the acquisitions being reflected in Income Tax Returns weighed  

with this court in granting relief to the public servant. In M. Krishana  Reddy  

Vs. State2.  It was observed in Para 14 :-

“…..Therefore, on the face of these unassailable documents  i.e. the wealth tax and income tax returns, we hold that the  appellant is entitled to have a deduction of Rs.56,240/- from  the disproportionate  assets of Rs.2,37,842/-.”

2  1992(4) SCC 49

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Similarly  in  D.S.P Chennai  Vs.  K.  Ibasagarain3,  the  fact  that  the  

money was treated in the hands of the wife of the public servant and that she  

was assessed by the Income Tax Department was taken note of while accepting  

the explanation given by the public servant.

13. If the amounts in question, which were duly intimated and are reflected  

in the Income Tax Return are thus deducted, the alleged disproportionate assets  

stand reduced to Rs. 37,605, which is less than 10 % of the income of the  

Appellant.  In  Krishnanand  Vs.  State  of  Madhya  Pradesh4 and  in  M.  

Krishna Reddy (Supra), this court had granted benefit to the public servants in  

similar circumstances.  We respectfully follow said decisions.

14.   In our view there is no violation of Section 13(1)(e) read with Section  

13(2) of the Act.  We, therefore, set aside the judgment and order in appeal and  

acquit  the  appellant  of  the  charges  leveled  against  him.    The  appeal  thus  

succeeds and is allowed.  The appellant is already on bail.   The bail bonds  

shall stand discharged.  

                                                             ………………………..J. (Dipak Misra)

………………………..J. (Uday Umesh Lalit)

New Delhi, 3  2006 (1) SCC 420 4  1977 (1) SCC 816

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March 23, 2015

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ITEM NO.1D               COURT NO.12               SECTION IIA                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS

Criminal Appeal  No(s).  782/2011 KEDARI LAL                                           Appellant(s)                                 VERSUS STATE OF M.P.                                        Respondent(s)

Date : 23/03/2015 This appeal was called on for pronouncement of  judgment today.

For Appellant(s) Mr. Sidharth Luthra, Sr. Adv. Ms. Sopriya Uneja, Adv. Ms. Shradha Karol, Adv. Mr. Vipin Kumar Saxena, Adv. Mr. Rajeev K. Sinha, Adv.

                  Mr. Anoop Kr. Srivastav, Adv.                       For Respondent(s)  Mr. C. D. Singh, Adv.

Mr. Darpan Bhuyan, Adv.                       

Hon'ble  Mr.  Justice  Uday  Umesh  Lalit  pronounced  the  non- reportable judgment of the Bench comprising Hon'ble Mr. Justice  Dipak Misra and His Lordship.  

The appeal is allowed.  The appellant is already on bail.  The  bail bonds shall stand discharged in terms of the signed non- reportable judgment.

(R.NATARAJAN)        (SNEH LATA SHARMA)  Court Master       Court Master

(Signed non-reportable judgment is placed on the file)