# AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST ECO. OFFENCE

- **Citation:** [2013] 9 S.C.R. 457
- **Court:** Supreme Court of India
- **Decided:** 2013-09-17
- **Case number:** Criminal Appeal No. 1454 of 2013
- **Bench:** P. Sathasivam, Jagdish Singh Khehar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ajoy-acharya-v-state-bureau-of-inv-against-eco-offence-29294
- **Pages:** 40

## Headnote

Code of Civil Procedure, 1973:
s. 197 read with s.239 CrPC and s.19 of P.C. Act -
Previous sanction for prosecution of public servant -
Appellant, an /AS, holding offices of Industries Commissioner
A
B
c
in State Government and a nominee Director of MPS/DC -
Misuse of position by appellant while discharging his 0
responsibilities as a nominee Director of MPS/DC -
Prosecution of - Held: The Governor under Clause 89 of
Memorandum and Articles of Association of MPS/DC has
absolute discretion to nominate anyone suitable as per his
wisdom, as nominee Director of MPS/DC and is also vested
E
with absolute discretion to remove a nominee Director -
Participation of appellant in the meeting of the Board of
Directors of MPS/DC was not on account of his holding the
office of Industries Commissioner, Government of Madhya
Pradesh, nor was it on account of his being a member of /AS
cadre - Therefore, sanction if required, ought to have been
obtained from the Governor of the State - However, since
appellant was not holding the public office which he is alleged
F
to have abused, when the first charge sheet was filed, there
was no need to obtain any sanction before proceeding to
prosecute him for the offences f111eged against him.
G
s.197 - Previous sanction for prosecution of public
servant - Held: Sanction is essential only if, at the time of
457
H
458
SUPREME COURT REPORTS
(2013] 9 S.C.R.
A taking cognizance, accused was still holding the public office
which he allegedly abused.
s. 197 - Previous sanction for prosecution of public
servant - Plurality of offices held by public servant - Held: If
8 an accused holds a plurality of offices, 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.
s. 197 - Previous sanction for prosecution of public
C servant - Public servant, a nominee Director of MPSDIC -
Plea that such nominee Director was not incharge of conduct
of business of MPSD/C nor was he responsible for its day to
day activities - Held: Accusation implicating the appellant, is
directly attributable to him as nominee Director of MPS/DC
D -
His culpability lies in the mischief of passing the resolution
in question -
Implementation of said resolution is the
consequential effect of the said mischief.
By a resolution dated 19.4.1995, the Board of
E Directors of the Madhya Pradesh State Industrial
Development Corporation (MPSIDC) authorized its
Managing Director, to extend short term loans including
inter-corporate deposits (ICDs) out of the surplus funds
with the MPSIDC, on suitable terms and conditions. It was
alleged that the resolution dated 19.4.1995 was passed
F in disregard of an earlier decision· taken in the Cabinet
Review Meeting held on 28.1.1994, and the resolution
dated 31.1.1994 passed by Board of Directors of MPSIDC,
that the MPSIDC would not extend financial assistance
to industries. The petitioner, a member of the IAS cadre,
G while holding the charge of the office of Industries
Commissioner, Government of Madhya Pradesh, 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
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
459
ECO. OFFENCE
Industries, Government of India, whereupon, he ceased
A
to be on the Board of Directors of the MPSIDC. He had
admittedly attended both the meetings held on 28.1.1994
and 31.1.1994. The first charge sheet dated 22.9.2007 was
filed in Special Case no. 7 of 2007, and the Special Judge
took cognizance thereof. The petitioner filed a petition u/
B
s 239 of the CrPC as well as, s.19 of the Prevention of
Corruption Act, 1988 seeking his discharge on the
ground, that prosecution had been initiated against him
without seeking sanction of the competent authority. The
petition was dismissed by the Special Judge on 11.4.2008 c
and the criminal revision preferred by him was dismissed
by the High Court.
In the ins

## Text

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[2013] 9 S.C.R. 457
AJOY ACHARYA
v.
STATE BUREAU OF INV. AGAINST ECO. OFFENCE
(Criminal Appeal No. 1454 of 2013 etc.)
SEPTEMBER 17, 2013.
[P. SATHASIVAM, CJI AND JAGDISH
SINGH KHEHAR, J.)
Code of Civil Procedure, 1973:
s. 197 read with s.239 CrPC and s.19 of P.C. Act -
Previous sanction for prosecution of public servant -
Appellant, an /AS, holding offices of Industries Commissioner
A
B
c
in State Government and a nominee Director of MPS/DC -
Misuse of position by appellant while discharging his 0
responsibilities as a nominee Director of MPS/DC -
Prosecution of - Held: The Governor under Clause 89 of
Memorandum and Articles of Association of MPS/DC has
absolute discretion to nominate anyone suitable as per his
wisdom, as nominee Director of MPS/DC and is also vested
E
with absolute discretion to remove a nominee Director -
Participation of appellant in the meeting of the Board of
Directors of MPS/DC was not on account of his holding the
office of Industries Commissioner, Government of Madhya
Pradesh, nor was it on account of his being a member of /AS
cadre - Therefore, sanction if required, ought to have been
obtained from the Governor of the State - However, since
appellant was not holding the public office which he is alleged
F
to have abused, when the first charge sheet was filed, there
was no need to obtain any sanction before proceeding to
prosecute him for the offences f111eged against him.
G
s.197 - Previous sanction for prosecution of public
servant - Held: Sanction is essential only if, at the time of
457
H
458
SUPREME COURT REPORTS
(2013] 9 S.C.R.
A taking cognizance, accused was still holding the public office
which he allegedly abused.
s. 197 - Previous sanction for prosecution of public
servant - Plurality of offices held by public servant - Held: If
8 an accused holds a plurality of offices, 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.
s. 197 - Previous sanction for prosecution of public
C servant - Public servant, a nominee Director of MPSDIC -
Plea that such nominee Director was not incharge of conduct
of business of MPSD/C nor was he responsible for its day to
day activities - Held: Accusation implicating the appellant, is
directly attributable to him as nominee Director of MPS/DC
D -
His culpability lies in the mischief of passing the resolution
in question -
Implementation of said resolution is the
consequential effect of the said mischief.
By a resolution dated 19.4.1995, the Board of
E Directors of the Madhya Pradesh State Industrial
Development Corporation (MPSIDC) authorized its
Managing Director, to extend short term loans including
inter-corporate deposits (ICDs) out of the surplus funds
with the MPSIDC, on suitable terms and conditions. It was
alleged that the resolution dated 19.4.1995 was passed
F in disregard of an earlier decision· taken in the Cabinet
Review Meeting held on 28.1.1994, and the resolution
dated 31.1.1994 passed by Board of Directors of MPSIDC,
that the MPSIDC would not extend financial assistance
to industries. The petitioner, a member of the IAS cadre,
G while holding the charge of the office of Industries
Commissioner, Government of Madhya Pradesh, 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
H
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
459
ECO. OFFENCE
Industries, Government of India, whereupon, he ceased
A
to be on the Board of Directors of the MPSIDC. He had
admittedly attended both the meetings held on 28.1.1994
and 31.1.1994. The first charge sheet dated 22.9.2007 was
filed in Special Case no. 7 of 2007, and the Special Judge
took cognizance thereof. The petitioner filed a petition u/
B
s 239 of the CrPC as well as, s.19 of the Prevention of
Corruption Act, 1988 seeking his discharge on the
ground, that prosecution had been initiated against him
without seeking sanction of the competent authority. The
petition was dismissed by the Special Judge on 11.4.2008 c
and the criminal revision preferred by him was dismissed
by the High Court.
In the instant appeal filed by the appellant, the issue
for consideration was: whether the participation of the
appellant in the meetings, in question was based on his
D
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.
Dismissing the appeals, the Court
E
F
HELD: 1.1. The appellant's nomination as Director
with the MPSIDC emerges from clause 89(2) of the
Memorandum and Articles of Association of the MPSIDc:·
The Governor under clause 89 has the absolute
discretion to nominate anyone suitable as per his
wisdom, as nominee Director to the MPSIDC. The
Governor, under sub-clause (4) of Clause 89 is also
vested with the absolute discretion to remove a nominee
Director. It was only on account of the nomination of the
appellant as director of the MPSIDC that he assumed the
G
responsibility and the power to deal with the affairs of the
MPSIDC and to participate in the controversial ·meeting
where the MPSIDC passed its resolution dated 19.4.1995.
It is significant to note that clause 89 does not
H
460
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A 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 does not require a nominee director to be drawn out
B of members of the IAS cadre. In this view of the matter, it
cannot be said 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 his nomination as a Director in six other
C companies, or on account of his being a member of the
IAS cadre. [para 12] [471-D-E; 473-A-D]
1.2. 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
D 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
are irrelevant for purposes of obtaining sanction .. Further,
sanction is essential only if, at the time of taking
E cognizance, the accused was still holding the public
office which he allegedly abused. [para 14] [486-D-F]
R.S. Naik vs. A.R. Antulay, 1984 (2) SCR 495 = (1984)
2 SCC 183; and Prakash Singh Badal vs. State of Punjab,
F 2006 (1 Ol Suppl. SCR 197 = (2007) 1 sec 1, relied on. ·
. 1.3. In the facts and circumstances of the instant
case, sanction if required, ought to have been obtained
from the' Governor of the State of Madhya Pradesh, as the
appellant is stated to have misused his position while
G discharging his responsibilities as a nominee Director of
the MPSIDC. It is clear 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
H Commissioner, Government of Madhya Pradesh, or the
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
461
ECO.· OFFENCE
subsequent office held by him as Joint Secretary,
A
Department of Heavy Industries, Government of India.
Accordingly, 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
B
appellant, was certainly not required. [para 14] [486-F-H;
487-A-B]
1.4. Besides, the appellant remained a nominee
Director of the MPSIDC from 1993 to 1998. The first
charge sheet in the m,tter was filed on 24.9.2007, i.e.,
C
after 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 this view of
the matter, since the appellant was not holding the public
office which he is alleged to have abused, when the first D
charge sheet was filed, there was no need to obtain any
sanction before proceeding to prosecute the appellant,
for the offe'nces alleged against him. [para 15] [487-G-H;
488-A-B]
State of Madhya Pradesh vs. Sheet/a Sahai & Ors .. 2009
(12 ) SCR 1048 = (2009) 8 SCC 617 - distinguished
E
2.1. As regards the plea that sanction to prosecute
another similarly situated co-accused had been obtained,
suffice it to say that parity in law can be claimed only in
F
respect of action rightfully executed. And not otherwise.
Since sanction was not required in the case of the
appellant, it cannot be said 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.
G
[para 17] [489-D, E-G]
Soma Chakravarty vs. State through CBI, 2007 (6)
SCR 324 = (2007) 5 SCC 403- held inapplicable.
2.2. So far as the plea that the appellant was not
H
,.
462
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A incharge of the conduct of business of the MPSIDC is
concerned, it is significant to note that the appellant is not
being blamed for the implementation of the resolution of
the Bo~rd of Directors of the MPSIDC dated 19.4.1995.
The charge against the appellant is based on the fact that
B he allowed the Board of Directors of the MPSIDC to pass
the resolution dated 19.4.1995, inspite of the earlier
decisions of the Cabinet Review Coinmittee (in meeting
dated 18.1.1994) and the consequential resolution of the
Board of Directors (dated 31.1.1994). In the facts of the
c case, the accusation implicating the appellant, is directly
attributable to him as nominee Director of the MPSIDC.
His culpability 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
0 mischief. [para 19) [493-A, C-D; 494-A-C]
National Small Industries Corporation Ltd. vs. Harmeet
Singh Paintal & Anr. 2010 (2) SCR 805 = (2010) 3 . SCC 330
- held inapplicable.
E
3. The trial court is directed to expedite the trial, on a
F
G
H
weekly basis, keeping in mind, that the charge sheet in the
matter was filed as far back as in 2007. [para 22) [496-D]
C. K. Jaffer Sharief vs. State (through CBI), (2013) 1 SCC
205- cited.
Case Law Reference:
1984 (2) SCR 495
relied on
2006 (10) Suppl. SCR 197 relied on
para 13
para 13
2009 (12) SCR 1048
2007 (6) SCR 324
2010 (2) SCR 805
(2013) 1 sec 20s
distinguished
para 16
held inapplicable Para 17
held inapplicable para 18
cited
Para 20
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
463
ECO. OFFENCE
CRIMINAL AP PELLA TE JURISDICTION : Criminal Appeal
A
No. 1454 of 2013.
From the Judgment & Order dated 29.08.2011 of the High
Court of Madhya Pradesh at Jabalpur in Criminal Revision No.
1422 of 2008.
WITH
C.A. No. 1455 of 2013
B
L.N. Rao, lndu Malhotra, Amit Prasad, Kush Chatur Vedi,
Vivek Jain, Malvika Kapila, J.P. Malviya, Ruchika Pathak, c
Vikas Mehta for the Appellant.
C.D. Singh, Sunny Choudhary for the Respondent.
The Judgment of the Court was delivered by
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
D
E
F
to as the 'PC Act'). The allegations 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)
G
authorized its Managing Director, to extend short term loans
(including I CD'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
H
464
SUPREME COURT REPORTS
[2013] 9 S.C.R.
A was passed in disregard of an earlier decision taken in the
Cab,lnet 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
B also included the insinuation, that after the decision of the
Cabinet Review Committee dated 28.1.1994, the Board of
Directors (of the MPS I DC) 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
C 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
0 prohibited extension of financial assistance to industries), the
· Board of Directors' resolution dated 19.4.1995, au~horized 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, that the above
controversial Board resolution dated 19.4.1995 was passed. in
E 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
F 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
G 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 reso_lution of the Board of Directors
, dated 19.4.1995, despite the fact that they were aware of the
H Cabinet Review Meeting decision dated 28.1.1994, as well.as,
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
465
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
the earlier resolution of the Board of Directors of the MPSIDC
A
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
B
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
C
large number of 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
D
MPSIDC, against whom allegations were levelled, is being
delineated below:
(i)
Rajender Kumar Singh
(ii)
Ajoy Acharya
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.
He was a member of the
IAS cadre, belonging to the
1976 batch. While holding
E
F
the charge of the office of
Industries Commissioner,
G
Government of Madhya
Pradesh,
he
was
nominated as a Director of
the MPSIDC in 1993. He
continued as such till
H
A
B
c
D
E
F
466
SUPREME COURT REPORTS
(2013] 9 S.C.R.
(iii)
J.M. Ramamurthy
(iv)
Munadutt Pillai Rajan
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.
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.
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
ofthe MPSIDC.
5. The first charge sheet was filed on 24.9.2007. The
allegations against the petitioner herein, Ajoy Acharya, were as
G 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
H
discontinuance of project financing/providing
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
467
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.)
financial assistance was taken, and thus, the instant
A
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
B
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
C
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
D
any financial assistance to industries out of the
surplus funds available with the MPSIDC.
(d)
(e)
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.
The petitioner facilitated the passing of the
aforesaid allegedly illegal Board Resolution, which
became the foundation for all illegal ICD's.
E
F
(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
G
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, Bhop_al,
took cognizance thereof. It is the contention of the petitioner Ajoy
H
468
SUPREME COURT REPORTS
(2013] 9 S.C.R.
A 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 prosecution against him. Under the belief, that
prior sanction was a pre-requisite under Section 19 of the PC
B 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 CrP.C (as
well as, Section 19 of the PC Act) seeking discharge on the
ground, that prosecution had been initiated against him without
c 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
D 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
E 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
F 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
G 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 appellant was not
sustainable in law, since sanction of the competent authority
H was not obtained before cognizance in the matter was taken.
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
469
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
The particulars of the allegations levelled against the appellant
A
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
B
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, c
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
D
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
E
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
F
relevant for deciding the present 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
G
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
H
470
SUPREME COURT REPORTS
(2013) 9 S.C.R.
A 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
B 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
C 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.
D 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 remained the same. Insofar as his being
E 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
F 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
G 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
H of the Board of the MPSIDC, was a fallout/sequel of his
AJOY ACHARYA v. STATE BUREAU ·oF INV. AGAINST
471
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
appointment as Industries Commissioner, Government of
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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
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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
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taken in his capacity as a member of the IAS cadre.
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 D
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
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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
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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
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canvassed on beh~lf 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
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SUPREME COURT REPORTS
[2013] 9 S.C.R.
A
MPSIDC) emerges from clause 89(2) of the Memorandum and
Articles of Association of the MPSIDC. Clause 89
aforementioned is being extracted hereunder:
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"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
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
473
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
retirement, removal, resignation, death or otherwise
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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
8
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
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matter of course, must be nominated as Director of the
MPSIDC. Likewise, clause 89 aforementioned, does not
require a nominee 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
D
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
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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,
F
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.
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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
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SUPREME COURT REPORTS
[2013] 9 S.C.R.
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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
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.
)()()(
)()()(
)()()(
)()()(
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
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
475
ECO. OFFENCE [JAGDISH SINGH KHEHAR, J.]
status is conferred enjoys the power of office or power
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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
B
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 c
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
0
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
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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)
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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
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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
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476
SUPREME COURT REPORTS
[2013] 9 S.C.R.
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
AJOY ACHARYA v. STATE BUREAU OF INV. AGAINST
477
ECO. OFFENCE [JAGPISH SINGH KHEHAR, J.]
authority would be in a position to know what was the
A
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
B
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 sought which would indicate a hierarchy and c
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
0
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
E
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
F
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
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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.