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       REPORTABLE        

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL     APPEAL     NO.     1688     OF     2008   

N.V. Subba Rao          .... Appellant(s)

Versus

State, through Inspector of Police,  CBI/SPE, Visakhapatnam, A.P.       .... Respondent(s)

     WITH  

CRIMINAL     APPEAL     NO.     1700     OF     2008   

J     U     D     G     M     E     N     T   

P.Sathasivam,J.

1) These appeals are directed against the common final  

judgment and order dated 29.01.2008 passed by the High  

Court of Judicature, Andhra Pradesh at Hyderabad in  

Criminal Appeal Nos. 602 and 617 of 2001 respectively  

whereby the High Court while dismissing the appeals  

confirmed the order of conviction passed by the trial Court but  

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reduced the sentence of rigorous imprisonment (RI) of two  

years to one year.  

2) Brief facts:

(a) According to the prosecution, basing on reliable  

information, on 23.03.1995, the Inspector of Police, Special  

CBI, Visakhapatnam registered an FIR in Crime No. RC.03  

(A)/95-VSP against Shri N.V. Subba Rao (A-1), the then  

Branch Manager, Central Bank of India (in short ‘the Bank’),  

Guntur, A.P and Shri Attur Prabhakar Hegde (A-2), Proprietor  

of A.P. Enterprises, Guntur, A.P. for the commission of offence  

punishable under Section 120-B read with Section 420 IPC  

and Sections 420, 468 and 471 read with Section 468 IPC and  

Section 13(2) read with Section 13(1)(d) of the Prevention of  

Corruption Act, 1988 (in short ‘the P.C. Act.) alleging that A-1  

abused his official position as a public servant and entered  

into a criminal conspiracy with A-2 and defrauded the Bank to  

the tune of Rs. 1.168 crores by sanctioning temporary over  

drafts and term loans to various individuals sponsored by A-2.  

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(b) After completion of the investigation, the CBI, on  

08.05.2000, filed charge sheet against both the accused  

persons in the Court of the Special Judge for CBI Cases at  

Visakhapatnam which was numbered as CC No. 8 of 1998.  In  

the said charge sheet, it has been alleged that A-1 while  

functioning as Branch Manager was instructed by his  

Controlling Officers to disburse loans to the employees of  

Railways and other organisations only after obtaining an  

undertaking from their employers (borrowers) that the monthly  

installment of repayment of loan will be deducted from their  

salaries as primary security and also to obtain a mortgage on  

the plots sold to the borrowers through M/s A.P. Enterprises.  

A-1 fraudulently and dishonestly disbursed 494 loans of Rs.  

10,000/- each to various railway employees amounting to Rs.  

49,40,000/- and credited the proceeds to the account of A-2  

without obtaining the requisite undertaking from the  

employers and without proper security of monthly  

installments to be deducted from their salaries.  Out of the  

above mentioned 494 borrowers, 45 persons have been  

identified by the prosecution.   It also came to light that A-2,  

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after having received the proceeds of the above 45 borrowers,  

fraudulently and dishonestly did not get 45 plots registered in  

their names nor the borrowers get the loan amount from the  

Bank.   

(c) The Special Judge for CBI cases, Visakhapatnam, by  

judgment and order dated 30.04.2001, sentenced A-1 and A-2  

to undergo RI for a period of one year for the offence under  

Section 120-B of the Indian Penal Code, 1860 (in short ‘the  

IPC’) and to undergo RI for a period of 2 years alongwith a fine  

of Rs.5,000/-, in default, to further undergo simple  

imprisonment for 3 months for the offence punishable under  

Section 420 of the IPC. Further, A-1 was sentenced to under  

go RI for 1 year alongwith a fine of Rs.2,000/-, in default, to  

further undergo simple imprisonment for 2 months for the  

offence punishable under Section 13(1)(d) read with Section  

13(2) of the P.C. Act and also ordered that the sentences shall  

run concurrently.    

(d) Against the said conviction and sentence, A-1 and A-2  

filed Criminal Appeal Nos. 602 and 617 of 2001 respectively  

before the High Court of Andhra Pradesh at Hyderabad.  By  

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impugned judgment and order dated 29.01.2008, the High  

Court while dismissing the appeals confirmed the conviction  

passed by the trial Court but reduced the sentence of rigorous  

imprisonment (RI) of 2 years imposed under Section 420 of the  

IPC to 1 year considering the age of the accused.  

(e) Being aggrieved, A-1 and A-2 preferred these appeals by  

way of special leave and leave was granted on 20.10.2008.

3) Heard Mr. Mukul Gupta, learned senior counsel for A-1  

and Mr. Y. Raja Gopala Rao, learned counsel for A-2 and Mr.  

Sidharth Luthra, learned Additional Solicitor General for the  

respondent-CBI  

4) For convenience, hereinafter, we will refer the appellant  

in Criminal Appeal No. 1688 of 2008 as A-1 and the appellant  

in Criminal Appeal No. 1700 of 2008 as A-2.

Discussion:

5) A-1 joined the service of Central Bank of India in the year  

1953 and served as the Branch Manager, Guntur during the  

period 1989-1991.  At the relevant time, A-2 was the  

proprietor of M/s A.P. Enterprises, Guntur.  According to the  

prosecution, A-1 being a public servant and Branch Manager  

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of the Central Bank of India, Guntur, entered into a criminal  

conspiracy with A-2 in order to defraud the Bank.  Pursuant  

to the same, A-2 floated a Scheme mooted by him in the year  

1990 and a formal proposal was sent to the Bank for approval  

of the same on 14.09.1990.  This proposal was to be backed  

by A-2 by arranging Foreign Currency Non-Resident (FCNR)  

Deposits for the Bank and in return for the sanction of loans  

to the employees of central and state government for purchase  

of house sites through M/s A.P. Enterprises and A-2 also  

offered to (a) procure approval from the competent authorities  

responsible for disbursing salaries to the employees/borrowers  

to ensure that the amount so lent would be deducted from  

their salary and (b) equitable mortgage of the proposed land to  

be executed.  Based on these conditions, the amount of loan to  

individual purchasers for purchase of land would be  

transferred to A-2.

6) It is further seen that the proposal of September, 1990  

was forwarded by A-1 to the Zonal Office proposing the  

Scheme for 109 borrowers containing a mechanism whereby a  

sum of Rs. 10,000/- to 25,000/- would be lent by the Bank to  

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the Central Government employees (South Central Railway) to  

purchase plots of land (approx. 200 sq. yards) from A-2 which  

is evident from Exh. P-3.  It is also the case of the prosecution  

that A-1, in furtherance of criminal conspiracy, dishonestly  

disbursed the loan and credited the proceeds of the loan to the  

account of A-2.  Further, A-2 failed to register the plots in the  

name of almost 50% of the purchasers/borrowers despite  

having received the proceeds and thereby causing wrongful  

loss to the Bank as well as to the purchasers.  Though the  

loan transaction relate to several persons, the charge in the  

case on hand is limited to 45 railway employees/borrowers  

wherein it was alleged that there was no transfer of land,  

hence, no equitable mortgage was created, putting the bank to  

a loss of Rs. 4,50,000/-.

7) It is the defence of A-1 that the initial proposal made by  

him was approved by the higher authorities, hence, there  

could not be any criminal action since the approval by the  

appropriate authority absolves him of all the  

liabilities/responsibilities in disbursement of monies of which  

he was the custodian on behalf of the Bank.  It is also his  

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claim that whether failure to prosecute higher officials is  

justifiable and also whether his acts which were done with the  

prior approval of the higher authorities will constitute a  

criminal offence.  According to him, at the most, it may  

amount to dereliction of duty.  It is also his stand that, in any  

event, the Bank authorities themselves agreed to provide a  

loan to the extent of 40% of the deposits mobilized by A-2 in  

the form of FCNR.   

8) It is highlighted by A-2 that as per the understanding,  

FCNR Deposits were provided to the Bank to the tune of Rs. 8  

crores for a period of 3 years on which the Bank earned  

enormous interest.  It is also highlighted that at the relevant  

time, the Bank had no deposits at all and the interest they  

have to be paid which is in banking terms called as “call  

money” was up to 70% to 75%.  It was further projected that  

when the Bank was in need of money that too in the form of  

FCNR because of financial crisis, it was A-2 who took a lot of  

pains and provided such deposits to the tune of more than Rs.  

8 crores.  It is also highlighted by A-2 that after the sanction of  

the loans, the loanees, who were all central government  

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employees were selected by the Bank officials after verifying  

their genuineness, salary certificates or otherwise etc.   

9) It is seen that A-2 has purchased 60 acres of land at  

Gorentla Village, near Guntur and other places which fact was  

known to the employees and approximately 463 plots were  

registered in the name of respective loanees/borrowers.  It is  

the stand of A-2 that the said loanees handed over the  

Registered Sale Deeds to the Bank for creating equitable  

mortgages.  A-2 further contended that he could not execute  

any further registered sale deeds due to non release of 40% of  

the loan amount against the FCNR Deposits arranged by him  

to the Bank as agreed.  It is also highlighted by A-2 that all the  

plots were approved by the authorities and there were no  

encumbrance on the house sites procured by him.  The Bank  

also took security from the employees not only in the form of  

Registered Sale Deeds, but also from two employees, who have  

signed the relevant documents, as lands are being sold at the  

rate prevailing during the year 2000.  Inasmuch as the Bank  

itself got the decree for the entire loan amount including  

interest, A-2 never cheated the Bank or anybody in this regard  

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and he had no intention to cheat the bank or the purchasers  

of the plots who had availed the loans from the Bank.

10) It is further seen that on receipt of a proposal for  

sanctioning of loans from A-2 and opening an account in his  

name at Naaz Centre, Guntur Branch, A-1 on 08.12.1990 has  

sent a letter to the Regional Office, Vijayawada recommending  

the proposal of M/s A.P. Enterprises wherein the following  

facilities were sought for, viz., (a) sanction of Over Draft facility  

of Rs. 12 lakhs; (b) sanctioning of term loans to the  

prospective buyers of plots to the extent of 40% of the FCNR  

Deposits to be made as assured by A-2.  The proposal was  

recommended stating that the loans were fully secured against  

collateral security and temporary over draft facility secured  

against equitable mortgage of the landed property by the  

guarantors.  The Financial Report dated 08.12.1990 along  

with the proposal was prepared by A-1.  On the basis of the  

proposal, when certain clarifications were sought for by the  

Zonal Officer, A-1 sent a letter dated 22.12.1990 to the Zonal  

Office stating: (i) the value of the land was Rs. 90,000/- per  

acre; (ii) take home salary of the employees was Rs. 1,000 and  

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2,500/- at Guntur and Visakhapatnam respectively and (iii)  

letters of undertaking has already been obtained from  

government employees.  Finally, on 22.12.1990, a letter was  

sent to the Chief Managing Director, Central Office, Mumbai  

for the consideration of A-2’s proposal.  It is seen from the  

prosecution evidence that the proposal was forwarded on the  

recommendation of the Branch Manager (A-1) mainly on the  

basis of the availability of FCNR Deposits.  However, Exh. P-

139 shows that on 09.01.1991, a letter was issued by Central  

Office to the Zonal Office of the Bank with reference to the  

letter dated 22.12.1990 stating that the proposal is declined  

due to funds constraint.  Subsequently, i.e., on 07.02.1991,  

sanction for term loans varying between Rs. 10,000/-to  

25,000/- each to 1,000 beneficiaries subject to the additional  

terms and conditions was granted.  As per the additional  

terms and conditions, a letter of undertaking from every  

government employees has to be obtained.  

11) It is pointed out by the prosecution that on 30.04.1991,  

A-1 had written a letter to the Railway Senior Divisional  

Personnel Officer to deduct monthly installments from the  

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salary of employees who have availed the loans and remit the  

same to the Bank which is evident from Exh. P-1.  In reply to  

the above, vide letter dated 30.04.1991, the Senior Divisional  

Personnel Officer had stated that there is no provision to  

recover any amount without the employee’s consent and that  

salary may be credited to the Bank if desired by the employee,  

provided a bank account is opened in his name and a consent  

is received from the employee.  A perusal of the above shows  

that the condition of sanction of loan even as per the view of  

the Zonal Office on which A-1 relied was not met before the  

disbursement of amounts.   

12) The prosecution, in support of the charges leveled  

against A-1 and A-2, have examined in all 55 witnesses,  

however, the defence did not lead any evidence.  E.R.  

Somayajulu, Branch Manager was examined as PW-1, P.  

Sreenivasulu, Senior Personnel Officer, S.C. Railway was  

examined as PW-2, K. V. Subba Rao, the Manager, Central  

Bank of India, Regional Office was examined as PW-3, K.A.L.N.  

Sharma, Manager, RMV Extension Branch, Bangalore was  

examined as PW-4, Namburi Madhavi, Typist and Accountant  

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of A-2 was examined as PW-5, S.K. Galeeb, Broker was  

examined as PW-6, Gunti Subba Rao, another Broker was  

examined as PW-7, Vulchi Venkayamma, Landlady of PW-5  

was examined as PW-8, P. Sesha Rao, the Manager, Central  

Bank of India was examined as PW-9, the Railway Employees  

were examined as PWs. 10-46 and PWs. 48-52, one Mr. R.  

Laxmana Rao, Assistant General Manager, Regional Office was  

examined as PW-47, T.M. Kumar, ex-Army Company Hawaldar  

worked with A-2 was examined as PW-53, P.S. Nair, Inspector  

of Police was examined as PW-54 and S.B. Shankar, Inspector  

of Police was examined as PW-55.   

13) Now, let us consider the incriminating circumstances  

against A-1 and A-2.   

Undertaking letters:

As per the additional terms and conditions for sanction of  

loans to government employees, a letter of undertaking from  

every government employee has to be obtained. In the case on  

hand, as per the evidence of P. Sesha Rao (PW-9) –  the  

Manager, Central Bank of India, for a total of 957 borrowers,  

only 122 undertaking letters had been obtained.  PW-1,  

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Branch Manager, Central Bank of India, in his evidence has  

stated that loans can be sanctioned only after obtaining  

undertaking letters of the employer or the disbursement officer  

of the employee.  He stated in his examination that out of 957  

loanee employees there were only 122 undertaking letters from  

the employers.  It is also brought to our notice that Shri  

K.A.L.N. Sharma (PW-4), who at the relevant time worked as  

Accountant in Guntur Branch has proved Exh.97 which  

shows that A-1 falsely recorded that letter of undertaking from  

government employees has already been obtained.  In addition  

to the same, the contents of the document (Exh. 97) have also  

been proved by Shri R. Laxmana Rao (PW-47), Assistant  

General Manager, Regional Office.   

14) The prosecution has also highlighted the correspondence  

between A-1 as the Branch Manager and the Senior Divisional  

Personnel Officer, Railways which was proved by P.  

Sreenivasulu (PW-2), Senior Personnel Officer, South Central  

Railway which establishes that there is no provision to recover  

the loan amount without the employees consent and salary  

can be credited to the bank if desired by the employee  

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provided bank account is opened and consent is received from  

the employee  It is demonstrated before us that there is no  

authorization for deduction of salary and A-1 had no authority  

to accept term loan applications after April 30, 1991.  

However, applications were accepted and monies were  

disbursed even after April 30, 1991 vide Exh.P-55, Exh.P-60,  

Exh.P-62, Exh.P-63, Exh.P-64, Exh.P-67, Exh.P-69, Exh.P-71,  

Exh.P-72, Exh.P-76, Exh.P-79, Exhs. P-83 to P-95.  

15) In respect of 45 borrowers identified by the prosecution,  

there is no certificate of authorization on record given by the  

Senior Divisional Personnel Officer (DPO) to deduct the salary  

and remit the same to the bank.  Even though A-1 claims that  

all the transactions were genuine, onus shifts on him to show  

that he had complied with all the requirements/conditions.  In  

fact, A-1 knows all the procedures and released the amounts  

to the credit of A-2 without fulfilling the  

requirements/conditions.  We have already stated that A-1  

was the custodian of the Branch and he has to take the entire  

responsibility.  

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16) It is the claim of A-1 that all the loans had been  

sanctioned only after obtaining undertaking letters of the  

employers/disbursement officers of the employees.  The above  

assertion is found to be wrong in view of the evidence of PWs 1  

and 9.  It is also demonstrated before us that certain  

undertaking letters obtained by A-1 reveal that they were not  

obtained from the competent authorities.  The documents, viz.,  

Exhs. P-110-137 have been proved by PW-2, Senior DPO,  

Railways, who asserted in his examination in chief that only  

the Senior D.P.O. is the competent authority to give  

authorization to any bank for remittance of loan instalments  

from salaries of employees.  In other words, if any officer  

subordinate to Senior D.P.O. issues any authorization, it  

would not bind South Central Railways.  A perusal of Ex.P-113  

shows that the undertaking letter in the instant case has been  

obtained from the Chief Traction Foreman, S.C. Railways, who  

is not the competent authority to deduct the salary from the  

employees account.   

17) Learned Additional Solicitor General -Mr. Sidharth  

Luthra took us through the evidence of railway employees,viz.,  

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PWs 10-46 and 48-52 wherein they admitted that they have  

not given any undertaking for deduction of salary in lieu of the  

loan for the purpose of purchase of house plots.  It is  

also highlighted that A-1 in his statement under Section 313  

of the Code of Criminal Procedure, 1973 (in short ‘the Code’)  

has accepted that Exhs. P-53 to 95 are the respective loan  

applications of 43 loanees out of 957 loanees and were signed  

by him.  He also stated that he obtained undertaking letters  

from all the loanees on the registration of sale deeds for the  

plots in their names.  When such is the position, the  

statement made by A-1 that he had obtained undertaking  

letters from all the loanees is factually incorrect.  As a matter  

of fact, the trial Court and the High Court, after verification of  

the oral and documentary evidence, has noted that only 122  

undertaking letters have been obtained out of 957 loanees.  

The above factual details show that A-1 failed to obtain  

undertaking letters and misrepresented about the same to the  

higher authorities of the Bank.  We have already noted and it  

was also brought to our notice that obtaining of the  

undertaking letters was one of the important pre-requisite for  

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sanctioning of the loans.  The claim of A-1 that it is only mere  

dereliction of duty cannot be accepted but as rightly argued by  

the counsel for the CBI, it was a dishonest representation with  

intention to cheat causing wrongful loss to the bank and the  

borrowers/purchasers of the plot and obtaining the  

undertaking letters was one of the pre-condition for  

sanctioning of loans, which A-1 has not fulfilled.

Pre-inspection:

18) PW-1, in his examination has asserted that as per the  

Manual of Instructions of the Central Bank of India, a pre-

inspection report is necessary for disbursement of any loan.  

He also asserted that inspection of immovable property is  

necessary before disbursement.  While elaborating the same in  

his evidence, he highlighted that it is necessary to verify the  

title deeds and these have to be obtained by the Branch  

Manager as security for the loan by way of the equitable  

mortgage.  In addition to the evidence of PW-1, the  

prosecution has pressed into service, the evidence of PW-3.  In  

his examination, PW-3 has stated that as per the instructions  

of A-1, he verified the names of the persons shown in the list  

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given by A-1 with muster rolls available at South Central  

Railway, Guntur Section.  

19) It is relevant to note the evidence of PWs 6 and 7, who  

were the brokers of the house plots, who have stated in their  

examination in chief that the lands in question were rain fed  

lands before forming into plots.  To strengthen the above  

evidence, PW-53 who is an employee of A-2, has stated that  

before demarcation into house plots, there were ginger and  

chilly crops being raised by A-2.  It is further seen from his  

evidence that at one point of time when bank officials visited  

the plots on complaints being received by them for non-

allotment of the same, A-2 destroyed the crops on the land  

and placed survey stones.  This factual information shows that  

the land which was sold to the Bank and the borrowers was (a)  

agricultural land; (b) land for which permission was never  

granted; and (c) rain fed lands and the conduct of destroying  

the crops to mislead officials leads to dishonest intention.  

20) Some of the employees who availed loans deposed before  

the Court that they have not even visited the office of A-1 and  

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they have signed the term loan applications on the railway  

platform or at the office of A-2.  

21) From the above materials in the form of evidence, it is  

clear that pre-inspection, which is a mandatory requirement  

according to the Manual of Instructions of the Central Bank of  

India, was not carried out by A-1.  A-1 being a Branch  

Manager cannot delegate the responsibility of pre-inspection  

and reports thereon to anyone and he was permitted to  

sanction loans and disburse the amounts only after his  

satisfaction.  About the relationship of A-1 and A-2, PW-5 an  

employee of A-2 stated in her deposition that A-1 visited the  

office of A-2 many a times.  In fact, this has been admitted by  

A-1 in his 313 statement that he visited the office of A-2  

though for inspection only.  

22)  It is useful to refer that similar statements were made by  

A-2 that A-1 has not obtained security for the loans disbursed  

by him.  With respect to the above, PW-3 in his examination  

has stated that loans were sanctioned by A-1 of Rs.10,000/- to  

each borrower for a total 957 employees  Ex. P 53-95 which  

are 43 loan applications out of 957 loanees were proved by  

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PW-4.  In his evidence, PW-4 has asserted that A-1 sanctioned  

each of the applications of Rs.10,000/- and he duly signed the  

same to that effect.  PW-9 in his evidence stated that out of  

957 only 463 plots were allotted and registered and handed  

over by obtaining equitable mortgage.  It is further seen from  

his evidence that the remaining 494 plots were not registered  

and, therefore, no collateral security for recovery was created.  

We have already mentioned that the prosecution has identified  

45 loanees out of 494 in whose cases A-1 failed to obtain  

equitable mortgage.  In this regard, it is useful to refer the  

statement made by A-1 under Section 313 of the Code wherein  

he admitted that he was obtaining equitable mortgage and as  

no sale deeds were present for 494 loanees, hence, getting  

equitable mortgage does not arise.  He also explained that A-2  

did not get the sale deeds on account of the default of the  

Bank in not financing 40% of the FCNR deposits.

23) A perusal of the evidence of PWs 1 and 9 clearly shows  

that pre-inspection report is necessary and out of 957 loanees  

only 463 plots were registered and handed over to the  

respective employees by obtaining the equitable mortgage.  

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Insofar as 494 loanees in whose names plots were not  

registered, no collateral security for recovery of loans was  

created in favour of the bank.  

No Bank Accounts opened for the loanees:

24) The evidence of PW-3 shows that for all the 957 loanees,  

no Savings Bank accounts were opened at the bank except for  

few.  It is brought to our notice that the letter (Exh. P-2) from  

Senior D.P.O Railways to A-1 shows that only after employees  

consent to the amount being deducted, it can be credited to  

the bank provided that a bank account is opened for the  

respective employee.  It is the responsibility of A-1 and in fact  

he did not ensure that bank accounts were opened for the  

employees which would ensure crediting of installments into  

the bank account.  In view of the materials available, the  

prosecution has rightly established that A-1 has willfully  

evaded his duty of opening bank accounts leaving the Bank  

without any recourse to receive monthly installments.  

25) PW-4, who was working as an Accountant in the Central  

Bank of India during the period from August, 1988 to  

November,1991,   has deposed that all the applications for  

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advance and their letters and term loan agreements including  

sanction and disbursement covered by debit vouchers (Exhs.  

P-5 and P-6) were processed in a single day and the proceeds  

were credited to the account of A-2 by credit vouchers on the  

same day which fact is evident from Exhs. P-7 and P-8.  

Proceeds of loan credited to the account of A-2

26) It is the claim of A-1 that the amount of loan for  

purchase of immovable property was credited to the account of  

vendor, namely, A-2 since all the 45 witnesses had authorised  

A-1 and the prosecution has not examined any other person  

other than those 45 persons to prove that no authority was  

given to A-1.  PW-3, officer of Central Bank of India, in his  

examination has deposed that the amounts sanctioned by the  

Bank to various employees for the purchase of house site were  

credited to the account of A-2.  PW-9, in his evidence, has  

stated that the amounts of loans for purchase of house sites  

sanctioned to 957 employees by Central Bank of India, Guntur  

were all credited to the O.D. account of A-2.  The above  

statement of officer of the Bank is also strengthened by the  

evidence of Namburi Madhavi - PW-5, Typist and Accountant  

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of A-2 at the relevant time, who has stated in her statement  

that M/s A.P. Enterprises received in all Rs.97,50,000/- from  

Central Bank of India, Guntur Branch to their credit through  

transfer by debiting from the loan accounts.  This aspect has  

been accepted by A-1 in his statement under Section 313 of  

the Code.  It is pointed out by the prosecution that though the  

entire amount has been credited to the account of A-2, the  

security for 494 plots has not been obtained.  The stand of A-2  

that his failure to allot 494 plots was because of the default of  

the Bank in not releasing 40% of FCNR deposit is not  

acceptable as the materials placed by the prosecution shows  

that he has received the entire amount of 957 loan proceeds,  

though the present case is limited to 45 loanees identified by  

the prosecution.

27) The materials placed by the prosecution clearly establish  

that A-2 received monies from the Bank corresponding to the  

loans supposedly drawn by the Railway employees.  These  

amounts were intended for the purpose of purchase of plots.  

However, it is shown to us that these amounts were  

transferred to the account of A-2 by a multitude of cheques to  

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other persons and businesses.  In this regard, it is relevant to  

note that PW-3, who was the Manager of Central Bank of  

India, Bangalore, in his deposition has stated that the account  

copy of A-2 shows withdrawal of amounts against cheques.  A-

2 issued several cheques which were for cash in his own name  

and several other persons including telegraph transfer.  In  

respect of above claim, the prosecution has marked several  

documents, viz., Exhs P-10 to P-47.

Decrees obtained:

28) Though it is claimed by A-1 that several decrees have  

been obtained, it is evident from the evidence of PW-9 that  

suits were decreed against 956 loanees, out of which 494  

decrees are simple money decrees and 462 decrees are  

mortgage decrees.  Further, it makes it clear that 126 loanees  

created equitable mortgage and expressed willingness for sale  

of plots and credit of the proceeds to their respective loan  

accounts, which was approved by the Regional office.  It is  

further seen that 30 borrowers sold their plots towards  

discharge of their loan accounts and only one loanee  

liquidated the loan.  The prosecution established that the  

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bank suffered a loss of interest, despite suits filed were  

decreed for non-payment of the decretal amounts.  In such a  

situation, it is relevant to mention a decision of this Court in  

K.G. Premshanker vs. Inspector of Police & Anr. (2002) 8  

SCC 87 and R. Venkatkrishnan vs. CBI (2009) 11 SCC 737)  

wherein it was held that the claim in the suit cannot override  

the criminal prosecution.

Payments made to A-1 by A-2:

29) Regarding payments made to A-1 by A-2, PW-5-  

Accountant & Typist of A-2, deposed before the Court that  

Exh. P-104 contains information of particulars recorded as per  

directions of A-2.  A perusal of the same shows the details  

regarding various payments made by A-2 to A-1 on different  

dates and in different names.  It shows that on 06.03.1991, a  

sum of Rs.25,000/- was paid by way of cash to N. Subba Rao  

(A-1).  Again on 07.04.1991, another sum of Rs.25,000.- was  

paid by cash to the same person.  On 14.05.1991, a sum of  

Rs. 35,000/- was paid by way of cash to N.S. Rao and again  

on 28.05.1991, a sum of Rs.20,000/- was paid by way of cash  

to N.S. Rao (Both N. Subba Rao and N.S. Rao denotes the  

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same person, i.e. A-1).  PW-5 has also stated that she was  

asked by A-2 to preserve the document (Ex. P-104) which was  

accordingly preserved by her at her house.  The statement of  

PW-5 coupled with the entries in Ex. P-104 makes it clear that  

A-1 is liable to be prosecuted under Section 13(1)(d) read with  

Section 13(2) of the P.C. Act and is rightly convicted by the  

Courts below.

30) Regarding the value of the land, it is seen that A-1  

without any enquiry, allowed A-2 to represent higher value  

which was subsequently discovered by the evidence of PW-6 to  

be Rs.35,000/- to Rs.50,000/- which is much lesser to the  

value of Rs.90,000/- as quoted.  On the other hand, the  

evidence of PW-6 - broker of house plots, in his chief-

examination has also stated that the value of lands is  

Rs.35,000/- to Rs. 50,000/- per acre.  A-2, in his statement  

under Section 313 of the Code has stated that the value of the  

land is Rs.80,000/- to Rs.90,000/-  per acre and not  

Rs.35,000/- to Rs.50,000/- per acre.  The above details also  

establish the joint role played by A-1 and A-2 and their  

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connivance.  It also establishes the active collusion of A-1 and  

A-2 in cheating the bank and the borrowers.   

31) Though A-2 has claimed that as requested by the  

authorities of the Central Bank of India, he has provided  

FCNR deposits to the Bank, in fact, provided FCNR deposits to  

a tune of more than Rs. 8 crores for a period of 3 years for  

which the Bank earned enormous interests.  In view of the fact  

that the land was not approved by the authorities concerned,  

neither transferred in the name of the loanees nor mortgaged  

in favour of the Bank though entire sanctioned loan amount  

had been credited to his account, we are satisfied that the  

evidence led in by the prosecution establishes the active  

collusion of A-1 and A-2 in cheating the bank and the  

borrowers.  Further, it cannot be claimed by A-2 that he has  

no fraudulent and dishonest intention to cheat the bank.  In  

view of the statement by A-1 under Section 313 of the Code  

that he remitted the amount of all the loanees into the account  

of A-2 and of the fact that A-2 has admitted the same, i.e., he  

received the amount @ Rs. 10,000/- and not making the  

house plots ready to the remaining employees for the purpose  

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of allocation and execution of the sale deed approached the  

Bank for release of the loan amounts with the connivance of  

A-1 which, as rightly pointed out, show that both were having  

the intention to cheat the bank at every stage.   

32) By relying on the decision of this Court in M. Narsinga  

Rao vs. State of A.P., (2001) 1 SCC 691, learned counsel for  

A-1 contended that the entire case against A-1 is based on  

presumptions and in none of the three charges there is a  

scope for presumption.  It is settled principle that for the  

purpose of reaching one conclusion, the Court can rely on a  

factual presumption.  In the case on hand, from those proved  

facts, the Court can legitimately draw a presumption that in  

connivance with A-2, A-1 caused monetary loss to the Bank by  

sanctioning loans without following the established procedure  

which we have discussed in the earlier part of our order.

33) Learned counsel for A-1 relied on another decision of  T.  

Subramanian vs. State of T.N., (2006) 1 SCC 401,  wherein  

it was held that the accused is not required to establish his  

defence by proving beyond reasonable doubt as the  

prosecution can establish the same by preponderance of  

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probability.  In the case on hand, we have already noted that  

the prosecution has established its charges beyond reasonable  

doubt by placing acceptable materials.

34) By drawing our attention to a decision of this Court in  

State Bank of Hyderabad & Anr. Vs. P. Kata Rao, (2008)  

15 SCC 657, learned counsel for A-1 submitted that on the  

same facts both civil and criminal actions are not permissible.  

According to him, since A-1 has already been dismissed from  

service, criminal prosecution is not warranted on the same set  

of facts.  We have gone through the factual details in the above  

decision.  The case relates to initiation of departmental  

enquiry after acquittal in criminal prosecution.  It is not in  

dispute that on the same set of facts, the delinquent shall not  

be proceeded in a departmental proceeding and in a criminal  

case simultaneously.  When there was an honourable acquittal  

of the employee during the pendency of the proceedings  

challenging the dismissal, the same requires to be taken note  

of.  However, each cause must be determined on its own facts.  

On going through the factual details in the said decision, we  

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are of the opinion that the same is not helpful to the case of A-

1.

35) Relying on another decision of this Court in State of  

Madhya Pradesh vs. Sheetla Sahai & Ors., (2009) 8 SCC  

617, learned counsel for A-1 submitted that the prosecution  

has not established conspiracy among the accused.  Criminal  

conspiracy has been defined under Section 120-A of IPC.  It is  

an independent offence, hence, the prosecution for the  

purpose of bringing the charge of criminal conspiracy read  

with the provisions of the P.C. Act was required to establish  

the offence by applying the same legal principles which are  

otherwise applicable for the purpose of bringing a criminal  

misconduct on the part of the accused.  In order to establish  

the guilt what is necessary is to show the meeting of minds of  

two or more persons for doing or causing to be done an illegal  

act or an act by illegal means.  Conspiracy is hatched in  

secrecy and for proving the said offence substantial direct  

evidence may not be possible to be obtained.  An offence of  

criminal conspiracy can also be proved by circumstantial  

evidence.

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36) We have already referred to the evidence led in by the  

prosecution, particularly, the evidence of Typist of A-2 which  

shows several meetings between A-1 and A-2, acceptance of  

money by A-1 from A-2 on many occasions, transfer of  

sanctioned loans to the credit of the account of A-2 etc.

37) Insofar as the charge under Section 13(1)(d) read with  

Section 13(2) of the P.C. Act is concerned, the ingredients of  

that offence are, viz., (a) that the accused should be a public  

servant; (b) that he should use some corrupt or illegal means  

or otherwise abuse his position as a public servant; (c) he  

should not have obtained a valuable thing or pecuniary  

advantage; and  (d) for himself or any other person and we  

have already noted the materials placed by the prosecution to  

substantiate for the above-said offence.

38) It is also contended that there are proved irregularities or  

deficiencies in conducting investigation, hence, the conviction  

ought to be set aside.  It is held by this Court in a number of  

decisions including in the case of Kashinath Mondal vs.  

State of West Bengal, (2012) 7 SCC 699 that irregularities or  

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deficiencies in conducting investigation by the prosecution is  

not always fatal to the prosecution case. It was held that if  

there is sufficient evidence to establish the substratum of the  

prosecution case then irregularities which occur due to  

remissness of the investigating agency, which do not affect the  

substratum of the prosecution case, should not weigh with the  

Court.

39) Finally, it was pointed out by learned counsel for A-1 that  

the statement or answers to the questions under Section 313  

of the Code cannot be the basis for conviction of the accused.  

We have already noted that the prosecution has not only relied  

on the answers given by the accused but also placed  

acceptable oral and documentary evidence to substantiate the  

charge.  We hold that the statement under Section 313 of the  

Code can be relevant consideration for the courts to examine,  

particularly, when the prosecution has been able to establish  

the chain of events.   

40) Based on the acceptable materials placed by the  

prosecution, the trial Court and the High Court rightly  

recorded their findings and convicted A-1 and A-2 for the  

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offence punishable under Section 120B and 420 of IPC and  

further A-1 under Section 13(1)(d) read with Section 13(2) of  

the P.C. Act.  In view of the concurrent findings recorded by  

both the courts based on acceptable evidence in the form of  

oral and documentary evidence, we are of the opinion that it is  

not a fit case where we should exercise discretionary  

jurisdiction under Article 136 of the Constitution of India,  

consequently, both the appeals fail and are accordingly  

dismissed.

...…………….…………………………J.            (P. SATHASIVAM)                                  

..…....…………………………………J.    (RANJAN GOGOI)  

NEW DELHI; DECEMBER 3, 2012.  

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