# RAM NARAIN POPLI v. CENTRAL BUREAU OF INVESTIGATION

- **Citation:** [2003] 1 S.C.R. 119
- **Court:** Supreme Court of India
- **Decided:** 2003-01-14
- **Bench:** M.B. Shah, B.N. Agrawal, Arijit Pasayat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ram-narain-popli-v-central-bureau-of-investigation-19053
- **Pages:** 194

## Headnote

Penal Code, 1860; Sections 120B rlw Ss. 403, 409, 420, 467 and 4711
Special Court (Trial of Offences relating to Transactions in Securities) Act,
1992.
Financial transactions between Govt. Company, banks and brokersIrregularities therein-CB/filed cases against/we accused under the provisions
A
B
c
of Special Court Act-Misappropriation of public funds, charges of cheating,
criminal breach of trust, criminal conspiracy and abuse of public officesSpecial Court convicted all except one of the accused -On appeal-Held, D
Agreement to commit crime is essential ingredient and overt act not necessary--
Criminal conspiracy-Direct evidence is rarely available, circumstantial
evidence proves complicity of accused in the crime-In the facts and
circumstances of the case, accused Bank employees intended to hide informaJion
about involvement of accused-broker in the financial transactions ta provide
benefit to him, which goes to prove conspiracy amongst the accused-Economic E
Offences.
Criminal breach of trust-Entrustment of property, conversion to one's
own use or use in violation of law with dishonest intention-Necessary
ingredients established by the acts and =onduct of some of the accusedHence, they are rightly convicted for offence of criminal breach of trust.
F
Forgery-Some of the accused found involved in making false Bank
Receipts and other documents with the intention to cause injury to Government
Company -Hence committed forgery.
Cheating-Some of the accused by their conduct impliedly inferred from G
the nature of transactions acted fraudulently and dishonestly to induce Govt.
company/banks in delivering valuable security/property-Hence committed the
offence of cheating.
Market practices-Approval of-Held, a wrong practice even though H
119
120
SUPReME COURT REPORTS
[2003] I S.C.R.
A prevailing, cannot be treated as approved practice-Since no public interest
is involved, such a p>"(!ictice cannot be a substitute for Statutory & Regulatory
prescriptiott:S.
Prevention of Corruption Act, 1986; Ss. 13(J)(c) r/w S. 13(2): Public
Servant-Acts of Corruption-Involvement-Held, some of the accused-public
B servants, in jurtl#!r'ance of criminal conspiracy, abused their position by
causing!alif>wing the funds of Government Company to be utilized for wrongful
gain of accused-broker-Hence provisions of Sections 13(1)(c) and 13(2)
attracted
c
Words and Phmses:
'Entru.stment' and 'Market practices'-Meaning of
Central Bureau of Investigation filed a case before the Special Court
under the provisions of Special (Trial of Offences relating to Transactions
D in Securities), Act, 1992 against accused Nos. 1 to S. Al and A2 were
officers of Maruti Udyog Ltd., a Govt. Company; A3 and A4 were bank
Officers and AS was a financial broker. According to the prosecution AS
in connivance with Al, A2, A3 and A4 involved in irregularities committed
in five financial transactions involving sale and purchase of securities
(Units of Units Trust oflndia) and reversal thereof. Several enquiries were
E made in relation to said security scam. Reserve Bank of India appointed
the Jankiraman Committee; Besides, a joint Parliamentary Committee was
also appointed to enquire into the financial irregularities. Reports of both
the Committees were placed before the Trial Court.
The main allegation was that accused No.S hatched a criminal
F conspiracy with other accused and in collusion with accused nos.3 & 4 got
deposited surplus funds of MUL into Banks and finally transferred the
same in his favour. It was also alleged that Al & A2, without lawful
authority, dealt with AS and indulged in illegal financial transaction
intentionally to provide benefits to AS. All the five accused appellants were
G charged under Sections 409, 420, 467, 471 IPC and Sections 13(l)(c) r/w
Section 13(2) of the Prevention of Corruption Act. Special Court convicted
all the accused except accused no. 2 for committing various offences under
Indian Penal Code. Hence these appeals by Al, A3, A4 and AS. CBI

## Text

_Characters 0–39,997 of 455,870. This is a partial read: ask again with offset=39997 for what follows._

RAM NARAIN POPLI
v.
CENTRAL BUREAU OF INVESTIGATION
JANUARY 14, 2003
[M.B. SHAH, B.N. AGRAWAL AND ARIJIT PASAYAT, JJ.]
Penal Code, 1860; Sections 120B rlw Ss. 403, 409, 420, 467 and 4711
Special Court (Trial of Offences relating to Transactions in Securities) Act,
1992.
Financial transactions between Govt. Company, banks and brokersIrregularities therein-CB/filed cases against/we accused under the provisions
A
B
c
of Special Court Act-Misappropriation of public funds, charges of cheating,
criminal breach of trust, criminal conspiracy and abuse of public officesSpecial Court convicted all except one of the accused -On appeal-Held, D
Agreement to commit crime is essential ingredient and overt act not necessary--
Criminal conspiracy-Direct evidence is rarely available, circumstantial
evidence proves complicity of accused in the crime-In the facts and
circumstances of the case, accused Bank employees intended to hide informaJion
about involvement of accused-broker in the financial transactions ta provide
benefit to him, which goes to prove conspiracy amongst the accused-Economic E
Offences.
Criminal breach of trust-Entrustment of property, conversion to one's
own use or use in violation of law with dishonest intention-Necessary
ingredients established by the acts and =onduct of some of the accusedHence, they are rightly convicted for offence of criminal breach of trust.
F
Forgery-Some of the accused found involved in making false Bank
Receipts and other documents with the intention to cause injury to Government
Company -Hence committed forgery.
Cheating-Some of the accused by their conduct impliedly inferred from G
the nature of transactions acted fraudulently and dishonestly to induce Govt.
company/banks in delivering valuable security/property-Hence committed the
offence of cheating.
Market practices-Approval of-Held, a wrong practice even though H
119
120
SUPReME COURT REPORTS
[2003] I S.C.R.
A prevailing, cannot be treated as approved practice-Since no public interest
is involved, such a p>"(!ictice cannot be a substitute for Statutory & Regulatory
prescriptiott:S.
Prevention of Corruption Act, 1986; Ss. 13(J)(c) r/w S. 13(2): Public
Servant-Acts of Corruption-Involvement-Held, some of the accused-public
B servants, in jurtl#!r'ance of criminal conspiracy, abused their position by
causing!alif>wing the funds of Government Company to be utilized for wrongful
gain of accused-broker-Hence provisions of Sections 13(1)(c) and 13(2)
attracted
c
Words and Phmses:
'Entru.stment' and 'Market practices'-Meaning of
Central Bureau of Investigation filed a case before the Special Court
under the provisions of Special (Trial of Offences relating to Transactions
D in Securities), Act, 1992 against accused Nos. 1 to S. Al and A2 were
officers of Maruti Udyog Ltd., a Govt. Company; A3 and A4 were bank
Officers and AS was a financial broker. According to the prosecution AS
in connivance with Al, A2, A3 and A4 involved in irregularities committed
in five financial transactions involving sale and purchase of securities
(Units of Units Trust oflndia) and reversal thereof. Several enquiries were
E made in relation to said security scam. Reserve Bank of India appointed
the Jankiraman Committee; Besides, a joint Parliamentary Committee was
also appointed to enquire into the financial irregularities. Reports of both
the Committees were placed before the Trial Court.
The main allegation was that accused No.S hatched a criminal
F conspiracy with other accused and in collusion with accused nos.3 & 4 got
deposited surplus funds of MUL into Banks and finally transferred the
same in his favour. It was also alleged that Al & A2, without lawful
authority, dealt with AS and indulged in illegal financial transaction
intentionally to provide benefits to AS. All the five accused appellants were
G charged under Sections 409, 420, 467, 471 IPC and Sections 13(l)(c) r/w
Section 13(2) of the Prevention of Corruption Act. Special Court convicted
all the accused except accused no. 2 for committing various offences under
Indian Penal Code. Hence these appeals by Al, A3, A4 and AS. CBI filed
appeal against acquittal of A2. During the pendency of appeals, AS expired
and on the petition filed by widow of AS, appeal was ordered to be
H continued.
J....
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R.N. POPLI v. C.B.l.
121
lt was contemled for the appellants that the investment/loan involved A
in live transactions was for a slmrt period and at a higher rate of interest.
The amount was paid ba~k 11n due dates; that AS did not commit any
offence or offe11ces but the prosecution was a piece of political revenge
against AS fllr di•closing certain facts to the Press against the political
leaders; that the transactions were loan transactions because rate of
interest and period was settled before exchange of money in lieu of B
Government securities; that delay in lodging of FIR indicates that
investigation was Intentionally kept alive by the CBI for undisclosed
motive; that cheques were drawn in favour of one of the Bank for
expeditious transmission of amount to AS to prevent monetory loss to him;
that there was no conspiracy to siphon off the surplus funds of MUL as C
the amount was lent on security and repaid with interest in time; that the
prosecution had tried to prove the theory of absurd conspiracy by the sole
evidence of approver PW23 without corroborating his evidence; that crossexamination of PW16 was not allowed to corroborate the evidence of
PW23; that there was no evidence to establish that Bank Receipts were
issued without Units being available with the Bank; that by allowing the D
proceeds to be credited to the account of the c.ustomer, i.e A-5, the Bank
was neither g~Uty of negligence nor of any criminality, thus no officer of
the Bank could be held liable for the same; that PW23's insistence that
A2 was present In the alleged meeting between accused leads to the
irresistible inference that deposition about the alleged meeting was totally E
concoct!'d; llrnt the charge of conspiracy was cooked up to cover first three
transaction• wMeh were prior to issuance of the RBI Circular for stopping
illegal praetices; that the alleged link between the accused and in
furtherance of conspiracy doing of overt act that by involvement in alleged
irregularities in financial transactions, was broken by the fact that 13 other
transactio11s tool; place during the same period between AS and MUL; F
that the pardon granted to approver PW23 becomes inadmissible; that
the evidence of PW23 did not disclose any conspiracy; that the conviction
cannQt be based on sole evidence of approver; that there was no evidence
against ,.\2 and no material evidence was provided justifying any
interference in acquittal appeal; that the prosecution has failed to establish G
Al misrepresenting to MUL regarding transfer of funds to one of the Bank
at the instrqctions of the other Bank; that the charge of conspiracy was
fabricated one, there was no mens rea for alleged criminal breach of trust
on the part or Al; that charges under the provision of Section 13(l)(c) of
Prevention or Corruption Act and Section 409 IPC were without any
foundation; that PW7 and PW14, Officials of a Bank, could not H
122
SUPREME COURT REPORTS
(2003] l S.C.R.
A differentiate whether Bank Receipts and letters pertain to the alleged
" transactions involving accused Bank officers and accused client broker;
that and prosecution has failed to examine material witnesses; that there
was no evidence to prove that A4 handled the cheque of one of the Banks
though PW16 accepted the cheque and forwarded it for encashment in
favour of accused AS; that A4 was not in any way party to any fraud;
B that the prosecution witnesses themselves deposed that cheques were
deposited in the account of the Bank and not in the account of AS; that
the RBI Circular nowhere prohibits the Banks to act on behalf of their
clients; that sine there was no illegality on the part of A3 in the transfer
of funds of MUL to AS and there was no evidence of any actual loss caused
C to anybody or of intention of causing loss to anybody; that A3 was not
connected with the 5th transaction as at the relevant time he was
transferred to another branch; that A3 was erroneously charged for
forging the Bank Receipts on the wrong assumption that the Bank did not
hold the units for which the BRs were issued.
D
It was submitted for the respondent that these transactions were a
facade for a wrong transaction which could not be entered into by MUL
in favour of AS; that in view of the guidelines issued by RBI, MUL could
not give loan to AS for diverting the funds to MUL; that Al got issued
cheques for payment by one Bank in favour of another Bank which in turn
E transferred to the account of AS; that since the cheques for payment had
not been delivered to the representative of UCO Bank, the transaction was
not between MUL and UCO Bank; that since cheques were issued in
favour of Grindlays Bank for transferring the amount to UCO Bank, it
was not loan transaction between MUL and AS; that A3 was having no
authority to sell or purchase units with the Bank; and that since A3 was
F. having no authority to issue BRs/documents, he forged these documents
to provide benefits to AS.
G
Disposing of the appeals, the Court
HELD (By the Court):
(1) Criminal Appeal filed by the State against A2 is dismissed.
(2) Crimimtl Appeal filed by A4 is allowed and he is acquitted
of all the offences alleged against him.
(3) Criminal Appeal filed by Al, A3 and deceased AS are partly
H
allowed. Conviction of Al, A3 and AS by the Special Court
-r-·
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R.N. POPLI v. C.B.I.
123
is confirmed. Sentence of Al and A3 is reduced to the period A
already undergone.
Per Pasaya!, J. (for himself and Agrawal, J.) :
1.1. From the statement of account of UCO Bank, Bombay it is clear
that there was no debit entry showing that the UCO Bank, Bombay has B
charged any commission for the transaction of certain units of UTI and
there is also nothing to show that UCO Bank had charged any commission
from A-5. From internal vouchers, it is clear that though names of Bank
of America and UCO Bank have been indicated, there was no involvement
of UCO Bank either in passing or receivlni: funds in its own account. On c
the contrary, evidence shows that in tlie Orsi instance money was paid by
A-5 through its bankers to MUL. There was nothing to show that the
· payment was made to MUL through Bank of America under the
instructions of UCO Bank, Bombay. Similarly, at the stage of reversal,
the amount paid by MUL directly came to be credited in the account of
A-5 first in the Grindlays Bank, Delhi, then in the Grindlays Bank, D
Bombay and finally in the UCO Bank, Bombay. In all these three stages,
the amount went directly to the account of A-5. There was no involvement
of UCO Bank in financial aspects of the transaction, if the Bank, as claimed
by A-5, at all acted for him as routing Bank in the transaction. There is
nothing to show that such payment was made under the instructions of
UCO Bank, Bombay. (286-C, D, E, F]
E
1.2. In the 2nd transaction, the BR authorised and signed by A3 and
Issued by UCO Bank recites that UCO Bank having receiyed from MUL
the concerned sum, being the cost of certain units of UTI, the security will
be delivered when ready in exchange "by this receipt" is duly discharged. F
It clearly indicates that UCO Bank had undertaken to MUL to deliver
security as and when the Units were ready in exchange for the BR. There
is also endorsement made in the BR reading as "discharged" with a rubber
stamp of MUL which is proved to be made by accused No. l as proved by
PW-3, an officer of MUL. This endorsement shows UCO Bank having G
discharged its obligations to MUL under the said BR. Credit advice issued
by UCO Bank Is in the handwriting of A-3. Although, In the narration of
credit voucher it was mentioned that certain units related to MUL, there
is no written record in that regard. Exbt. 128, which is the advice of
Grindlays Bank, does not justify the narration as appearing in the credit
voucher. The material on record clearly justifies a conclusion that the H
124
SUPREME COURT REPORTS
[2003) I S.C.R.
A amount involved came from the account of A-5 and was paid to MUL.
There was no involvement whatsoever of UCO Bank though the stand of
MUL is that the transaction was between it and UCO Bank. As is the case
with the first transaction, the situation is somewhat similar so far as
transaction no. 3 is concerned. 1287-F, G, H; 288-A, B, C, DJ
B
1.3. In the fourth transaction MUL was dealing with UCO Bank and
there was no question of A-5 dealing with MUL on principal-to-principal
basis. In the minutes of Sub-Committee of MUL for the investment, the
f.-
committee had earlier approved the proposals as contained in the Agenda
Note, where the investment in the security in question was to be made with
C Grindlays Bank. But later on, the same was changed and it was resolved
to be made with UCO Bank, Bombay as proposed by A-1. Significantly,
there was no written proposal either from UCO Bank or Grindlays Bank
which has been received and placed before the Committee of MUL. The
Committee had given its approval to the proposal for investment with UCO
Bank. In respect of the other transaction, there was no direct involvement
D of UCO Bank and it was A-5 creating a facade to give a picture to MUL
as if the transaction was between it and UCO Bank. 1288-G, H; 289-A)
1.4. In transaction No.S, there was no letter issued by UCO Bank,
Bombay and proposal to MUL was similar to earlier transactions. The
E most significant aspect is that there was also no Bank Receipt (BR) issued
by UCO Bank, Bombay favouring MUL in respect of this transaction.
Notwithstanding these, the security was put through, the MUL parted with
money which went into the account of A-S in the same manner as in the
case of trans~tions 2 to 4. Another important aspect is that the monies/
funds were in fact credited eventually in the account of A-S with UCO
F Bank, Bombay. The debit and credit vouchers of the Bank amply prove
this. 1289-C, F]
2.1. A-1 concealed the receipt signed by PW-23 on the letterhead of
A-S cancelling the receipt of certain units from MUL. It is hard to believe
that A-1 did not know that the ultimate beneficiary was A-S. A-1 delivered
G pay order for the second transaction to PW-16. It has to be noted that
for the first time in this Court A-5 has taken the stand that the relevant
transactions were iii the nature of loan transaction between A-S and MUL.
A-1 used to place the proposal before the Board and obtained approvals
for the investments in question. A decision was taken by MUL for investing
H its funds with PSU. That clearly indicates that investments could only be
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R.N. POPL! v. C.8.1.
125
in PSU's bonds. [289-F, G]
A
2.2. The plea that there was instruction by UCO Bank to issue pay
order in favour of Grindlays Bank is clearly untenable because if the UCO
Bank intended that in its transaction the pay orders were to be issued to
Grindlays Bank, the same could not have been without any direction from
UCO Bank. In respect of fourth and fifth transactions, pay orders B
continued to be issued to Grindlays Bank even though admittedly there
was no instruction from UCO Bank. In the fifth transaction, Al released
funds of MUL even in the absence of an authority letter or a security in
the form of Bank Receipt from UCO Bank. Payments made at the stage
of reversal by MUL were directly made to A-5. There was no authorization C
to purchase any securities from any brokers. There was no mention about
the intention that monies will be given on loan to any broker. Each
transaction, as reflected, was considered to be a placement of funds with
PSUs and there was no scope of any placement of surplus funds with
private person. It is unbelievable that A-1 did not know about the
involvement of A-5 when the receipt in respect of certain units was kept D
in the records of MUL. (291-A, B, C, DJ
2.3. In all the transactions the role of A-3 is very significant.
Investment of the first transaction indicates that the same was written on
the letterhead of UCO Bank and was signed by A-3 with reference to
certain units. So far as reverse entries are concerned, a letter was E
addressed by the UCO Bank, Bombay to MUL requesting MUL to remit
funds through ANZ Grindlays Bank. Transaction No.2-BR is in the
handwriting of A-3 and is signed by him. Carbon copy of credit voucher
of UCO Bank is in the handwriting of A-3 and also bears his signature. It
indicates that the amount was intended for A-5 being the amount of F
security, namely, units sold to MUL. Similarly Exbt. 151(1) shows that
A-3 signed on the debit voucher in the name of A-5 for certain amount.
]291-E, F, G]
2.4. One significant factor as deposed by PW-7 is that none of the
UCO Bank Managers were authorized to deal with securities. If there was G
any genuine transaction.for sale of security, the deal could have been
concluded by the Head Office of the Bank. Accused No.3 wrote letters and
made a representation that he has entered into transactions for the Bank.
A-3 was not authorized to write a letter unless he is permitted to do so
from the Head Office. A-3, therefore, did not have the authority to deal
with the Bank or to any arrangement. PWs. 14 and 21 deposed that only H
126
SUPREME COURT REPORTS
(2003] I S.C.R.
A the Head Office can instruct on behalf of the Bank. A-3 fraudulently signed
documents showing different designations to misrepresent something which
in reality was not there. In reality he was the Assistant Manager. These
are clearly conducts of deceit and dishonest intention. On the basis of the
letters and BRs. MUL parted with its funds which went to the account of
B A-5. [292-D, F, GJ
2.5. Grindlays and UCO Bank never received money in their own·
right. They only collected the cheque for A-5, although the cheque in each
case was non-negotiable payee cheque in favour of Grindlays Bank without
any instructions from MUL. UCO Bank did not sell or agree to sell, as
C A-3 had no authority either to sell or commit UCO Bank to any sale of
security on behalf of the Bank, even if it is accepted that the Bank had
purchased the security, it had become the property of Bank, and the
securities dealt with as an agent is not to be reflected in the books of the
Bank yet such recording is appropriate. In the instant case, the sale or
repurchase has not been passed through the Bank's books. The stand that
D Bank had received a commission is inconsistent with the stand that there
was a sale and repurchase involved in the transaction. In such a
transaction, the difference in price is the profit and not a commission. For
the 5th transaction neither there was a letter from the UCO Bank nor a
BR which amply demonstrate that no security was delivered. Though in
E respect of transactions 2, 3 and 4 certain securities were placed with A-3
by A-5, that really is of no assistance to A-5. If any security is received,
the Bank ought to have made some payment and if the Bank has not paid
to retain the security, it would have been required to deliver the securities
based on the BR and/or its letters. The Banker's cheque issued by Canara
Bank on MUL's account was received by Grindlay's Bank and credited
F to the account of A-5, and remitted to the Bombay Branch of Grindlay's
Bank. There was an instruction from Grindlays Bank to credit the amount
in the account of A-5 in respect of Banker's cheques of UCO Bank. Thus,
UCO Bank did not receive any money in the transaction.
(293-A, B, C, D, E, F)
G
2.7. For the first time before this Court A-5 took a stand that there
was a transaction between him and the UCO Bank. Hence A-5 was the
recipient of the money and he had derived benefit of it. (293-G)
2.8. Pay Orders of Canara Bank were collected by PW 16. These
were deposited as though he was the payee. It is clear from the descriptions
H in the pay-in slips, letters written by his agent/employees to Grindlays
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R.N. POPLI v. C.B.I.
127
Bank giving clear instructions to remit the proceedings of Pay Orders to A
bis account. Receipts given by A-S in respect of the first transaction of
certain units of UTI were in the records of MUL. It is clear from the
resolutions and the minutes of discussion that MUL had not approved the
role or involvement of AS and it was not known to the Board that the
transactions were in reality with AS. The subterfuge adopted was to
conceal actual state of affairs and to present a totally distorted picture. B
(293-H; 294-A-BJ
2.9. A Bank cannot act as a broker under the Banking Act. It is not
one of tbe permitted acts. There is also not a question of paying of any
commission on purchase/sale of transactions. Hence, the transactions are C
not transparent. (294-HJ
2.10. MUL does not appear to have noticed about the role of the
brokers. The decisions in question did not refer to A-5, but to UCO Bank,
however, the beneficiary is A-S. The pay-in slips were filled up by PW-16
which indicate that the payment was made to A-S and in fact there was D
authorization from MUL in this regard. In Exhibit 38, A-3 has signed as
"Accountant". The document uses the expression "cost". Though the
receipt was from A-S, it was indicated as if it was from MUL. All the
relevant vouchers show as if the sale of units was to Grindlays' Bank.
Transactions show that payment was made to Grindlays Bank and not to
UCO Bank and there was no question of MUL issuing the cheque to E
Grindlays Bank. It would have been to UCO Bank, Grindlays Bank made
the payment and UCO Bank had nothing to do with MUL. The draft was
in the name of UCO Bank. In essence, UCO Bank has not received any
money from MUL. There was direction given by Grindlays Bank, New
Delhi. All the vouchers that have been produced show that same are put F
through Grindlays Bank. The vouchers of MUL clearly show as if the
transaction was between MUL and UCO Bank. (29S-A, B, C, DJ
2.11. The evidence on record clearly shows that PW 23 was not only
known to MUL but represented accused No.S and in particular to accused
No.I. Exbt. 58 is the letter of the UCO Bank, Bombay wherein MUL had G
been instructed to deliver certain units to PW 3 whose specimen signature
was attested by accused No. 3. Delivery of the said securities was effected
to PW 23 by MUL and the receipt was passed by PW 23. The
acknowledgment is on the printed stationery i.e. letter head of A-S. In
respect of each of the transactions 2 to S, the pay orders issued by MUL
through its Bankers, Canara Bank towards the consideration of the H
128
SUPREME COURT REPORTS
[2003] I S.C.R.
A security was handed over to PW 16 under instructions· of A-l or A-2. This
amply establishes that PW 23 was not a total stranger or unknown to
accused 1 and 2 as claimed. His association with accused S also Is clearly
borne out. It is unbelievable that to a stranger, PW 23, valuable securities
of crores of rupees and pay orders were delivered by MUL for which
B receipts were issued on the letterhead of A-5. The evidence also shows that
letters and the BRs issues by the UCO Bank, Bombay in the transactions
addressed to MUL were first received in the office of A-S and were then
passed on to MUL. (295-E, F, G, H; 296-A, DJ
An attempt was made to as if there was no broker involved. Accounts
C were to be presented in such a manner that the role of A-5 would remain
hidden.
2.12. So far as the Sth transaction is concerned, there is no letter or
the BR. Though accused No.5 was the mastermind in reality, it reflects
the involvement of several persons to present legitimacy while in reality
D that was not so. Letters authored by A-3 made a clear representation to
MUL as if it was transacting with UCO Bank. [296-EJ
3.1. The essence of criminal conspiracy is an agreement to do an
illegal act and such an agreement can be proved either by direct evidence
or by circumstantial evidence or by both, and it is a matter of common
E experience that direct evidence to prove conspiracy is rarely available.
Therefore, the circumstances proved before, during and after the
occurrence have to be considered to decide about the complicity of the
accused. [299-C)
F
Halsbury's Laws of England (4th Ed. Vol.11, page 44, page 58),
referred to.
3.2. It is not always possible to give affirmative evidence about the
date of the formation of the criminal conspiracy, about the persons who
took part in it, about the object, which the objectors set before themselves
and about the manner in which the object of conspiracy is to be carried
G out, all this is necessarily a matter of inference. [301-C, DJ
3.3. The provisions of Section 120A and 120B IPC have brought the
>-- -
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law of conspiracy in India in line with the English Law by making the
.. L
overt act unessential when the conspiracy is to commit any punishable
offence. [301-E)
H
Regina v. Murphy, (1837) 173 ER S02, referred to.
R.N. POPLI v. C.B.I.
129
Russell on Crime (12th Ed. Vol. /, P.202) and "Criminal law" by A
Glanville Williams (Second Ed P. 382), referred jo.
3.4. Where the conspiracy alleged is with regard to commission of
a serious crime of the nature as contemplated in Section 1208 read with
the proviso to sub-section (2) of Section 120A IPC, then in that event mere
proof of an agreement between the accused for commission of such a crime B
alone is enough to bring about a conviction under Section 1208 and the
-" • ,.L
proof of any overt act by the accused or by any one of them would not be
necessary. Sections 120-A and 120-8 IPC have brought the law of
conspiracy in India in line with English law by making an overt act
inessential when the conspiracy is to commit any punishable offence. In a C
case where criminal conspiracy is alleged, the Court must inquire whether
..
the two persons are independently pursuing the same end or they have
come together to pursue the unlawful object. The former does not render
- -<
them conspirators but the latter does. For the offence of conspiracy some
kind of physical manifestation of agreement is required to be established.
The express agreement need not be proved. The evidence as to the D
transmission of thoughts sharing the unlawful act is not sufficient. A
conspiracy is a continuing offence which continues to subsist till it is
. .-"-
executed or rescinded or frustrated by choice of necessity. During its
subsistence whenever any one of the conspirators does an act or series of
acts, he would be held guilty under Section 120-8 of the Indian Penal Code. E
[302-F, G, HJ
S.C. Bahri v. State of Bihar, AIR (1994) SC 2420; E.K. Chandrasenan,
v. State of Kera/a, AIR (1995) SC 1066; Kehar Singh and Ors. v. The State
(Delhi Administration), AIR (1988) SC (1883), P. (1954); Ajay Agarwal v.
Union of India & Ors. JT (1993) 3 SC 203; Yash Pal Mittalv. State of Punjab, F
[1977) 4 SCC 540 and State of Maharashtra v. Som Nath Thapa, [1996) 4
..__
sec 659, relied on.
3.5. It would be extremely difficult to find direct evidence in case of
criminal conspiracy. The circumstances and surrounding factors have to
be taken note of. In the instant case, the accused 1, 2 and 5 have submitted G
that the role of PW-5 as described is that he did not want to be directly
shown in the picture. In fact, A-1 wanted that MUL did not want to involve
__ J.
brokers and did not want to deal with them. This itself a fatal blow to the
stand taken by the accused that there was no prohibition of acting through
brokers and the intention was that dealing would be directly with the Bank
and not through any broker or intermediary. Use of the expression H
130
SUPREME COURT REPORTS
[2003] I S.C.R.
A "through" is indicative of the fact that emphasis was on securities being
not purchased in the open market, but "through" named PSU. These PSUs
>r
. ·'
were admittedly not brokers. They were either Banks or financial
institutions. Evidence clearly shows that A-S wanted that he will not
directly come to the picture, and would not appear in the books of accounts
...
B
of MUL; but he would stand to gain by way of commission and brokerage
from the Bank. The statement of A-1 that he would look into any good
proposals if A-S does not come to the picture shows that the actual state
-kh
of affairs was intended to be hidden from the MUL authorities and a totally
I
distorted picture was sought to be given. These are factors which clearly
proves conspiracy. (306-E, G, H; 307-A)
c
State of Kera/a v. P. Sugathan & Anr., [2000) 8 SCC 203, relied on.
4.1. Repayment itself is not an indication of lack of dishonest
intention. It so happens that with a view to create confidence the
)- -
repayments are made so that for the future transactions the money can
D be dishonestly misappropriated. This is a part of the scheme and the
factum of repayment cannot be considered in isolation. The repayment
can be a factor to be considered while awarding sentence, but cannot be
a ground for proving innocence of the accused. (307-B)
...
4.2. To constitute an offence of criminal breach of trust, there must
--l...
E be an entrustment, there must be misappropriation or conversion to one's
own use, or use in violation of a legal direction or of any legal contract;
and the misappropriation or conversion or disposal must be with a
dishonest intention, when a person allows others to misappropriate the
money entrusted to him that amounts to a criminal appropriation of trust
F as defined by Section 405. The Section relatable to property is in a positive
part and a negative part. The positive part deals with criminal
...
misappropriation or conversion of the property and the negative part
)..
consists of dishonestly using or disposing of the property in violation of
any direction and of law or any contract touching the discharge of trust.
(307-G, HJ
G
4.3. The term 'entrustment' is not necessarily a term of law. It may
have different implication in different context. In its most general
signification all it imports is the handing over possession for some purpose
J..._
which may not imply the conferring of any proprietary right at all. When
H
a person misappropriates to his own use the property that does not belong
to him, the misappropriation is dishonest even though there was an
,,,, • _!..
--<
.,
-..
,J,
"-·
..
R.N. POPLI v. C.B.I.
131
intention to restore it at some future point of time. [309-C, DI
Jaswantrai Manila/ Akhaney v. The State of Bombay, AIR (1956) SC
• 575 and Jaikrishnadas Manohardas Desai and Anr. v. State of Bombay, AIR
(1960) SC 889, relied on.
4.4. In order to constitute an offence of forgery the documents must
be made dishonestly or fraudulently. But dishonest or fraudulent are not
tautological. Fraudulent does not imply the deprivation of property or an
element of injury. In order to be fraudulent, there must be some advantage
on the one side with a corresponding loss on the other, Every forgery
postulates a false document either in whole or in part, however, small.
[310-A, Bl
4.5. The accused persons have tried to take shelter behind what they
have described as "market practices". Such practices even if existing,
cannot take the place of statutory and regulatory function. There is no
public interest involved in such practices and they cannot be a substitute
for compliance with the regulatory or statutory prescriptions. An attempt
was made to show that there was subsequent disapproval of the market
practices; at the point of time when the transactions took place there was
no embargo. Nothing plausible was found in these explanations. A practice
even if was prevailing, if wrong, is not to be approved. The subsequent
clarifications do not in any way put seal the approval of the practices
adopted on the past on the other band it contemns it. 1310-D-E-FI
4.6. When the factual background highlighted is considered in the
light of the various provisions, it is clear that the offences under the Indian
Penal Code alleged, have been established against the accused persons. The
Special Judge was justified in convicting Al, A3 and AS, [310-GI
5, In view of the finding by the trial Court that A-1 in furtherance
of criminal conspiracy, in his capacity as public servant abused his position
by causing and/or allowing MUL's funds to be utilized for the wrongful
gain of A-5, provisions of Section 13(l)(c) read with Section 13(2) are
clearly applicable. Similar is the position vis-a-vis A-3. [310-HI
6. The offences in these cases were not of the conventional or
traditional type. The ultimate objective was to use public money in a
carefully planned manner for personal use with no right to do it Funds of
the public bodies were utilized as if they were private funds. There was no
legitimacy in the transactions. Huge funds running into hundreds of crores
A
B
c
D
E
F
G
H
132
SUPREME COURT REPORTS
[2003) I S.C.R.
A of MUL, a Government Company, were diverted and all the concerned
accused persons A-1, A-3 and A-5 played dubious roles in these illegitimate
transactions. Their acts had serious repercussions on the economic system
of the country, and the magnitude of financial impact involved in the
present appeal is only tip of the iceberg. There were several connected cases
and some of the prosecution witnesses in the present case are stated to be
B accused in those cases. That itself explains the thread of self-perservance
running through their testimony. Therefore, the need to pierce the facadial
smoke screen to unravel the truth to lift the veil so that the apparent, which
is not real, can be avoided. The proverbial red herrings are to be ignored,
c
to find out the guilt of the accused. [311-A-B-C-D]
State of Gujarat v. Mohan/al Jitamalji Porwal & Anr., AIR (1987) 1321,
relied on.
7. Cases involving offences which corrode the economic stability are
to be dealt with sternly. U is, however, noticed that A-5 has died during
D the pendency of the appeal, A-1 and A-3 were small flies who appear to
have been caught in the web of A-S's machinations. Apparent reason for
their involvement is greed and avarice. There may be substance in the plea
that higher ups of MUL and Banks can not certainly be unaware of the
goings on, and have not been proceeded with and given clean chit. Though
this is certainly a matter of concern, yet that cannot be a ground for taking
E a sympathetic view of A-1 and A-3's conduct. Considering the fact that
the occurrence took place a decade back, and the trial has spread over a
few years, and the death of A-5, custodial sentence for the period already
undergone would meet the ends of the justice. While fixing the quantum
of sentence, the fact that the amounts have been paid back was duly
F considered. [311-H; 312-A, B, CJ
Per Shah, J. (Partly dissenting):
1.1. The SCAM Act was promulgated with a view to recover public
monies lost by certain banks and financial institutions in securities where
such losses arose as a result of such transactions. On the eontrary where
G there were no losses at all, the institution of the Special Court was wholly
unnecessary and the Special Court was not to try such transactions even
if they amounted to·some technical offences. If these two propositions are
correct, then there is simply no justification for the instant prosecution.
[155-D]
H
1.2. The MUL resolution for investment of surplus funds inter a/ia
R.N. POPLI v. C.B.I.
133
provides that it was open to MUL to invest the surplus funds in the units A
"" . of Unit Trust of India through scheduled banks or directly to fetch higher
rate of interest than what is available on loaning of funds to PSUs without
invoking any risk as to return of the principal and/or yield. It is also
provided that Board has permitted the sub-committee which comprises
of Chairman-cum-Managing Director and Director (Finance) to invest B
surplus funds of the Company in the purchase of units of UTI either
. .. l.
through scheduled banks or directly. All the five transactions took place
after the sub-committee passed appropriate resolutions. In one of the
resolutions, it has been specifically mentioned that MUL may place funds
'with UCO Bank' in units for a period of five days as per the request from
UCO Bank. The change of wording in the last resolution clearly indicates c
that funds were placed with UCO Bank for investment in units for a period
of five days in anticipation of higher yield. In previous three cases, if in
--;
reality the funds were placed with UCO Bank then the phrase 'through
-
UCO Bank' would not have been used. This change of phrase reveals that
the nature of transactions was known to the Directors and that units were D
to be purchased for a limited period through UCO Bank.
(220-G, H; 221-A-B; 228-F, G, H; 229-A]
'--
1.4. The various resolutions issued by. MUL (Maruti Udyog Ltd.)
...
reveal that proposals for investment of funds in units through UCO Bank
for a specified period with the expected yield were received and it was E
resolved that MUL may place funds in units "through UCO Bank" as per
the proposal. In the resolutions, the period of as well as expected yield
was also mentioned which would indicate that as a matter of fact nature
of such transaction was nothing but loan. Purpose of having UTI units
was to secure repayment of loan. (228-E; 229-B(
1.5. During the last week of December, 1990 and in the month of F
A.
January, 1991, the receipt of payments by MUL was relatively less and it
was required either to borrow funds or withdraw money from PSUs.
•·
However, in the documentation, the borrowings were required to be shown
as sale of investments. This would indicate that whatever may be the
documentation of purchase or sale of UTI units, the same would not reflect G
the true and real nature of transaction. (229-C, E]
l_
1.6. There is nothing on record to indicate that Chairman-cumManaging Director and Director (Finance), MUL who have passed the
resolutions for investment of funds, did not know that disputed investment
of the funds were meant for A-5 but they were not examined by the H
134
SUPREME COURT REPORTS
[2003] I S.C.R.
A prosecution for reasons best known to them. [229-G, HI
1.7. It is difficult to imagine that Superintendent of Police, CBI would
not be aware of the li:vidence Act which stipulates that he cannot depose
on behalf of two responsible persons of MUL i.e. the Chairman and
Managing Director of MUL and Director (Finance) of MUL. Whether they
B were aware of the fact that investment of the MUL funds to A-5 through
UCO Bank tould have been deposed only by them and not by Investigating
Officer. [230-CI
2..1. The Report of Joint Parliamentary Committee clearly
C established that Al or A2 were not having any dominion over the MUL
funds. The assertions by the MUL before the JPC would certainly me~n
that Al or A2 have not done anything dishonestly with the intention of
causing wrongful gain to AS or wrongful loss to MUL or that Chairman
and Managing Director or the Director (Finance) were not knowing about
such transactions through UCO Bank. (235-D, E]
D
2.2. On the basis of evidence, it is also established that -
(1) Resolutions used the phrase "through UCO Bank" whenever
'
necessary. It also used the words 'with UCO Bank' or '.with
Bank' whichever is the Bank as per the nature of the
E
transaction.
(2) Documents maintained by MUL do not reveal true state of
affairs.
(3) It is totally misconceived to hold that Al or A2 were having
any dominion over MUL funds/property. funds were to be
F
invested as per the decision of the Sub-Committee consisting
of Chairman-cum-Managing Director and the Director
(Finance).
(4) Resolutions passed by the Sub-Committee were approved by
the Board.
G
(5) MUL has clarified that the funds were invested as a
commercial transaction for getting optimum yield and MUL
has not suffered any loss in the said transactions.
(6) Pending CBI inquiry, MUL considered that Al or A2 have
not committed any wrong and they were promoted
H
subsequently.
+
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R.N.