# S.V.L. MURTHY v. STATE REP. BY CBI, HYDERABAD

- **Citation:** [2009] 7 S.C.R. 784
- **Court:** Supreme Court of India
- **Decided:** 2009-05-06
- **Case number:** Criminal Appeal No. 942 of 2009
- **Bench:** S.B. Sinha, Dr. Mukundakam Sharma
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-v-l-murthy-v-state-rep-by-cbi-hyderabad-25997
- **Pages:** 33

## Headnote

Penal Code, 1860/Prevention of Corruption Act, 1988:
..
Sections 409, 415, 420, 120-B!Section 13(2) r/w 13(1)(d)
•
c - Alleged cheating of Bank - All six accused found guilty for
offences under Section 120-B, 420 /PC and three ·accused
found guilty for offence under Section 13(2) rlw 13(1) of
Prevention of Corruption Act -
Convicted - High Court
affirming the order, but acquitting one accused - On appeal,
D Held: Prosecution failed to prove conspiracy as also wrongful
gains - Impugned judgment unsustainable and set aside -
Negotiable Instruments Act, Section 138.
Constitution of India, 1950:
E
Article 136 - Special Leave jurisdiction - Ordinarily
concurrent finding of fact not interfered with - However, the
;urisdiction must be exercised whenever it is required to do so
for securing the ends of justice and to avoid injustice.
A charge sheet was filed under Sections 120-B, 420
~
F IPC r/w Section 13(1)(q) of the Prevention of Corruption
Act alleging inter alia that there was criminal conspiracy
between the accused persons to cheat the State Bank of
India.
Special Judge for CBI cases found A-1 to A-6 guilty
G for the offence under Section 120-B and 420 IPC, A-4 to A6 were found guilty for the offence under Section 13(2) r/
-+
4
w 13(1)(d) of the Prevention of Corruption Act, 1988.
Accordingly, he convicted and sentenced the accused.
H
784
S.V.L. MURTHY V STATE REP BY CBI, HYDERABAD 785
-
~
'
High Court dismissed the appeals of the accused, but A
'
acquitted A-6. Hence the appeals.
Allowing the appeals, the Court
HELD: 1.1 For the purpose of constituting an offence
of cheating, the complainant is required to show that the 8
accused had fraudulent or dishonest intention at the time
•
of making promise or representation. Even in a case
·~
where allegations are made in regard to failure on the part
of the accused to keep his promise, in absence of a
culpable intention at the time of making initial promise c
being absent, no offence under Section 420 of the Indian
Penal Code can be said to have been made out. [Para 21]
[810-F-G]
1.2 It is reiterated that one o'f the ingredients of
cheating as defined in Section 415 of the Indian Penal D
...
Code is existence of an intention of making initial promise
or existence thereof from the very beginning of formation
of contract. [Para 21] [810-H; 811-A]
Hira Lal Hari Lal Bhagwati v. CBI (2003) 5 SCC 257;
Indian Oil Corporation v. NEPC India Ltd. & Ors. (2006) 6 SCC
E
736; Vir Prakash Sharma v. Anil Kumar Agarwal (2007) 7 SCC
373; All Caroga Movers (/) Pvt. Ltd. v. Dhanesh Badarmal Jain
& Anr. 2007 (12) SCALE 391; R. Kalyani v. Janak C. Mehta &
~
Ors. 2008 (14) SCALE 85 and Sharon Michael & ors. vs. State
of Tamil Nadu & Anr. 2009 (1) SCALE 627 - relied on.
F
2. It may be that there had been certain procedural
irregularities in the transaction. However, sufficient
evidence is available on record to show that the Officers
had done so for the purpose of promoting the business
of the Bank. In relation whereto or in respect whereof, G
initiatives had been taken by P.Ws. 19 and 20. It is
.~
j..
furthermore not denied or disputed that after the cheque
discounting facility was stopped in April, 1989 by Accused
No.4, there has been a meeting at the residence of P.W;
20. In his deposition, the said witness categorically
admitted that the said meeting was arranged at the H
786
SUPREME COURT REPORTS
[2009] 7 S. C.R.
~
A instance of Accsued No.1. It is incomprehensible that a
meeting has been arranged at his residence on the day
he was on leave at the instance of Accused No.1. He must
have developed grievance against the Accused No.4 as
regards the stoppage of the said facility. If immediately
B thereafter the said facility had been restored by the
Accused No.4, a stand taken by him that it was done under
the oral instructions of the higher authorities appears to
..
be plausible. [Para 22] [813-E-.H; 814-A]
•
/
3. The prosecution 1apart from the fact that it had
c utterly failed to bring on record any evi

## Text

_Characters 0–39,858 of 58,492. This is a partial read: ask again with offset=39858 for what follows._

[2009] 7 S.C.R. 784
A
S.V.L. MURTHY
..
v
STATE REP. BY CBI, HYDERABAD
Criminal Appeal No. 942 of 2009
B
MAY 6, 2009
(S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ.)
Penal Code, 1860/Prevention of Corruption Act, 1988:
..
Sections 409, 415, 420, 120-B!Section 13(2) r/w 13(1)(d)
•
c - Alleged cheating of Bank - All six accused found guilty for
offences under Section 120-B, 420 /PC and three ·accused
found guilty for offence under Section 13(2) rlw 13(1) of
Prevention of Corruption Act -
Convicted - High Court
affirming the order, but acquitting one accused - On appeal,
D Held: Prosecution failed to prove conspiracy as also wrongful
gains - Impugned judgment unsustainable and set aside -
Negotiable Instruments Act, Section 138.
Constitution of India, 1950:
E
Article 136 - Special Leave jurisdiction - Ordinarily
concurrent finding of fact not interfered with - However, the
;urisdiction must be exercised whenever it is required to do so
for securing the ends of justice and to avoid injustice.
A charge sheet was filed under Sections 120-B, 420
~
F IPC r/w Section 13(1)(q) of the Prevention of Corruption
Act alleging inter alia that there was criminal conspiracy
between the accused persons to cheat the State Bank of
India.
Special Judge for CBI cases found A-1 to A-6 guilty
G for the offence under Section 120-B and 420 IPC, A-4 to A6 were found guilty for the offence under Section 13(2) r/
-+
4
w 13(1)(d) of the Prevention of Corruption Act, 1988.
Accordingly, he convicted and sentenced the accused.
H
784
S.V.L. MURTHY V STATE REP BY CBI, HYDERABAD 785
-
~
'
High Court dismissed the appeals of the accused, but A
'
acquitted A-6. Hence the appeals.
Allowing the appeals, the Court
HELD: 1.1 For the purpose of constituting an offence
of cheating, the complainant is required to show that the 8
accused had fraudulent or dishonest intention at the time
•
of making promise or representation. Even in a case
·~
where allegations are made in regard to failure on the part
of the accused to keep his promise, in absence of a
culpable intention at the time of making initial promise c
being absent, no offence under Section 420 of the Indian
Penal Code can be said to have been made out. [Para 21]
[810-F-G]
1.2 It is reiterated that one o'f the ingredients of
cheating as defined in Section 415 of the Indian Penal D
...
Code is existence of an intention of making initial promise
or existence thereof from the very beginning of formation
of contract. [Para 21] [810-H; 811-A]
Hira Lal Hari Lal Bhagwati v. CBI (2003) 5 SCC 257;
Indian Oil Corporation v. NEPC India Ltd. & Ors. (2006) 6 SCC
E
736; Vir Prakash Sharma v. Anil Kumar Agarwal (2007) 7 SCC
373; All Caroga Movers (/) Pvt. Ltd. v. Dhanesh Badarmal Jain
& Anr. 2007 (12) SCALE 391; R. Kalyani v. Janak C. Mehta &
~
Ors. 2008 (14) SCALE 85 and Sharon Michael & ors. vs. State
of Tamil Nadu & Anr. 2009 (1) SCALE 627 - relied on.
F
2. It may be that there had been certain procedural
irregularities in the transaction. However, sufficient
evidence is available on record to show that the Officers
had done so for the purpose of promoting the business
of the Bank. In relation whereto or in respect whereof, G
initiatives had been taken by P.Ws. 19 and 20. It is
.~
j..
furthermore not denied or disputed that after the cheque
discounting facility was stopped in April, 1989 by Accused
No.4, there has been a meeting at the residence of P.W;
20. In his deposition, the said witness categorically
admitted that the said meeting was arranged at the H
786
SUPREME COURT REPORTS
[2009] 7 S. C.R.
~
A instance of Accsued No.1. It is incomprehensible that a
meeting has been arranged at his residence on the day
he was on leave at the instance of Accused No.1. He must
have developed grievance against the Accused No.4 as
regards the stoppage of the said facility. If immediately
B thereafter the said facility had been restored by the
Accused No.4, a stand taken by him that it was done under
the oral instructions of the higher authorities appears to
..
be plausible. [Para 22] [813-E-.H; 814-A]
•
/
3. The prosecution 1apart from the fact that it had
c utterly failed to bring on record any evidenc~ of
conspiracy must also be held to have failed to bring on
record any evidence of wrongful gain so as to attract the
provisions of the Prevention of Corruption Act, 1988 or
otherwise. [Para 23] [814-A-B]
D
. 4. The findings arrived at by the Special Judge as
~
also the High Court pro.ved the ingredients of offence
under Section 409 of the· IPC. The accused persons,
however, have not been charged for commission of the
E said offence. Conspiracy by and between the Bank
officials and the Accused Nos. 1 to 3 has been stated to
be for commission of the offence of cheating for the
purpose of arriving at a finding that there has been a
conspiracy so as to cheat the Bank. It was necessary for
F
the prosecution to establish that there. had been a meeting
of mind at the time when the facility had been granted.
Such meeting of mind on the part of the accused persons
has not been proved. Furthermore, the prosecution case
even if given face value and taken to be correct in its
entirety does not lead to a finding that even Accused Nos.
G 1 to 3 had any wrongful intention at the time when the
contract was initiated. [Para 24] [814-C-F]
~ •
5. It is one thing to say that there has been an abuse
of a prevalent banking practice for the purpose of causing
H wrongful loss to the Bank and causing wrongful gain to
S.VL. MURTHY V. STATE REP. BY CBI, HYDERABAD 787
-<
others but it is another thing to say that by reason A
thereof, the ingredients of cheating are attracted.[Para 27]
[814-H; 815-A]
6. It would bear repetition to state that accused
persons have not been charged under Seclion 409 of the
IPC; even the Accused Nos. 1 to 3 have not been charged 8
for entering into a conspiracy with Accused Nos. 4, 5 and'6
'I
in respect of commission of offences under the Prevention
of Corruption Act. It is in the aforementioned situation, this
~
Court is of the opinion that the judgment of conviction
. and sentence cannot be upheld. [Paras 28, 29] [815-8-0) c
Lala Ram & Ors. vs. State of UP (1990) 2 SCC 113 -
relied on.
7. It is one thing to say that ordinarily a concurrent
finding of fact shall not be interfered with by this Court in D
exercise of its jurisdiction under Article 136 of the Constitution of India but it is another thing to say' that despite
opining that accused are entitled to acguittal, a judgment
of conviction passed against them should be upheld. In
,.
fact, the jurisdiction of this Court must be exercised
wherever it is required to do so for securing the ends of E
justice and to avoid injustice.[Para 30] [815-H; 816-A-B)
Case Law Reference
~
(2003) 5 sec _257
relied on
Para 21
c2oos) 6 sec 736
relied on
Para 21
F
c2001) 1 sec 373 ,
relied on
Para 21
2007 (12) SCALE 391
relied on
Para 21
'
'
2008 (14) SCALE 85
relied on
Para 21
G
'
'
2009 (1) SCALE 627
relied on
Para 21
...
....
(1990) 2 sec 113
relied on
Para 30
~
CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
No. 942 of 2009
H
788
SUPREME COURT REPORTS
[2009) 7 S.C.R.
A
From the Judgement and Order dated 17.07 .2007 of the
...
Hon'ble High Court of Judicature, Andhra Pradesh at Hyderabad
in Criminal Appeal No. 125 of 1998.
WITH
B
Criminal Appeal No. 945 of 2009
Criminal Appeal Nos. 943~944 of 2009
K.T.S. Tulsi, M. N. Krishnamani, Ravindra Shrivastava,
.,
Radha Rani, Hari Kumar, Kuna! Verma, Krishna Kumar, Supriya
-~
c Jain, Anup Jain, C. Batra, D. Mahesh Babu, Gaurava Bhagava,
Raj Kamal, Rishi Malhotra, K.V. Mohan, with them for the
Appellant.
R. Datta, ASG, Rajni, P. Narasimha, B. Krishna Prasad,
with them for the Respondent.
D
The Judgement of the Court was delivered by
~
S.B. SINHA, J.
1. Leave granted.
E
2. These appeals arising out of a common judgment and
order dated 17.07.2007 passed by the High Court of Andhra
Pradesh at Hyderabad were taken up for hearing together and
are being disposed of by this common judgment.
•
3. Accused No. 4 - S.V.L. Murthy was the Branch Manager
;.
F . of Begum Bazar Branch of State Bank of India (for short, "SBI").
Accused No. 1 - Venugopal Loya was proprietor of some
business concerns, namely, Mis Shobhachand Shivijiram ("SS"),
Mis Sreeji Industries ("SI") and Mis Harikrishan Roopchand
("HR"). Whereas SS and HR used to deal in wholesale trade in
G grains and spices, SI was a plastic manufacturing concern.
Accused No. 2 - Gopaldas Dharak was a partner of Mis Gayatri
-1
.._
Traders ("GT"). He used to operate current account in the same
Branch. Accused No. 3 - Radheshyam Dharak, partner of GT,
an Accountant working in the firms of Accused No.1. Accused
•
H No. 5 - P. Jayakumar was the Accountant in the Begam Bazar
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 789
[S.B SINHA, J.]
-(
Branch of the State Bank of India. Accused No. 6 - Y. Narahari
A
Murthy was the Charge Branch Manager.
4. SS was established in the year 1860. It opened current
account with Begum Bazar Branch of the State Bank of India on
or about 5.12.1979. Accused No. 1 opened Current Account
B
with SBI on behalf of SI in his capacity as a Managing Partner
on or about 10.5.1988. He was granted cheque discounting
'
facility. For the said purpose, he deposited his title deeds on or
~
about 6.9.1988
5. Srinivasa Rao (P.W. 22), the then Branch Manager of c
the SBI by a letter dated 10.1.1989 addressed to the Regional
Manager sought for his advice as to whether levy of 5 paise per
thousand per day instead of 10 paise as commission should
be relaxed. Indisputably, collateral securities were furnished by
the appellants for availing cheque discounting facility.
D
6. Accused No. 4 - S.V.L. Murthy, however, stopped this
discounting facility with SS. inter alia on the premise that three
bills purchased by the Bank and sent to Salem Branch for
collection had been returned unpaid. So far as the bill limit due
in account of SS was concerned, the same stood at E
Rs.20, 18,240/- out of which Accused No. 1 is said to have made
payment of Rs.5,00,314/- for returned bills with interest within 2
hrs. It is stated that on or about 7.4.1989, a meeting was held at
the residence of the Regional Manager (P.W. 20 -
V.
Ramamurthy). Accused No. 1 is alleged to have complained
F
that Accused No. 4 had stopped discounting of cheques to him
whereupon Regional Manager (P.W. 20) allegedly instructed
Accused No. 4 to continue the practice of discounting cheques
to Accused No. fon the premise that he was a reputed customer
of the Bank. Pursuant thereto, the discounting facility was made G
available with Acc'used No.1 upon obtaining sufficient collateral
j.
security, i.e., title deeds of moveable and immoveable properties
of Accused .No.1 worth Rs.1.09 lacs.
7. The Bank allegedly sanctioned discounting facility to
the extent of Rs.30 lacs on the basis of collateral securities
H
790
SUPREME COURT REPORTS
[2009] 7 S.C.R.
A furnished on or about 15.4.1989. However, ten cheques
aggregating to Rs.29,86,219/- were discounted and sent for
clearing by Bank, which were returned unpaid from clearing
house. Appellants contended that they were sent for clearing
without proper stamping/endorsement; they did not reach
B drawer bank at all. Indisputably, however, the Regional Office
issued instructions for stopping cheque discounting facility
without notice. It is stated that the appellants paid a sum of
Rs.29,90,941 /-,which covered the discounting amount together
with interest on or about 25.4.1989. The Bank seized officeC cum-godown and stocks of SS at about 11.45 a.m. on the same
day. On or about 26.4.1989, 26 account payee cheques were
presented in various banks across the counter which should
have been presented through clearing. However,
Rs.1,28,63,441/- was said to have remained outstanding.
D
8. Accused No. 1 is stated to have made payment of
Rs.38,84,000/- through pay order on or about 27.4.1989. On
the said date, liability is said to have stood at Rs.89,79,441/-.
Indisputably, Accused No. 4 proceeded on leave from
19.4.1989 and handed over the charge of his office to Mr. Y.
E Narahari Murthy (Accused No. 6). Accused No. 1 furthermore
applied for grant of overdraft facility to the limit of Rs.90 lacs
against collateral security. It was granted. Sufficient securities
were also furnished. The Regional Manager was informed by .
> T
'
the Branch that Accused No. 1 has promised to pay a sum of
><
F
Rs.15 lacs within a week. However, a suit was filed in the court
of 4th Additional Judge, City Civil Court at Hyderabad being
CSOS No. 827 of 1989 for recovery of a sum of Rs. 90, 19, 789.11
with interest on or about 10.5.1989. On or about 10.5.1989,
City Civil Court passed interim direction ordering attachment
G before judgment.
9. On 21.6.1989, a criminal complaint was lodged by the
-i
...
Bank before the Ill Metropolitan Magistrate at Hyderabad under
Sections 120B, 420, 467, 471 of Indian Penal Code (IPC) and
H under Section 138 of the Negotiable Instrument Act inter alia
-
S.V.L. MURTHY V. STATE. REP. BY CBI, HYDERABAD 791
[S.B. SINHA, J.]
_......
~
alleging that cheques issued to SI were fraudulently discounted A
"'
and amounts were drawn between 14.2.1989 and 1.5.1989.
'
It is not in dispute that in the said complaint no allegation
was made against the officers of the Bank. On or about
17. 7.1989, the Metropolitan Magistrate directed the Central
B
Bureau of Investigation (CBI) to investigate into the case pursuant
whereto a First Information Report was lodged under Sections
"
120B, 420 of IPC read with Section 13(1)(d) of the Prevention
..
of Corruption Act on or about 5.9.1989.
~
10. We may, however, place on. record that P.W 22 - c
Srinivasa Rao took over charge as Branch Manager on the oral
instructions of P.W. 20 - V. Ramamurthy, on or about 28.4.1989.
Indisputably, disciplinary proceedings were initiated against
the Accused No. 4, Accused No. 5 as also P.W. 20.
In the said disciplinary proceedings, they were placed D
under suspension. They were, however, reinstated in service.
Whereas P.W. 20 was censured, Accused No. 4 was inflicted
with a punishment of stoppage of five increments. Some minor
· punishments was also imposed on the Accused No: 5.
E
Indisputably, a vigilance enquiry was conducted on or about
---...
26.4.1989 at Begum Bazaar Branch of the SBI wherein a report
"'
dated 1_8.1.1990 was submitted indicating that there has been
a technical vrolation on the part of the Bank Officer, inter alia,
F
arriving atthe following conclusions:
"iv. S.V.L. Murthy, who had succeeded Shri Vijaya Kumar
has apparently also passed on pecuniary advantage to
Shri Loya and his group of concerns,
By continuing the irregular practice of purchasing G
~
a ..
~
· local cheques and that too for large amounts. It was
his period the liability on account of local cheque
purchased touched one crore wark in March 1989.
b.
By not collecting the applicable interest as laid down,
H
792
SUPREME COURT REPORTS
[2009] 7 S.C.R.
A
he had caused considerable loss of income to the
)-
Bank.
.
C.
He also did not report the LOIT facility being extended
to the firms to the Controlling Authority directly. He
B
· had, however, made a reference to the Controlling
Authority in January 1989.
d.
Although, it came to his knowledge that the firms are
indulging in irregular and objectionable transactions,
•
he did not adequately safeguard the Bank's interests
_.
c
nor initiated location as is necessary to avoid loss to
the Bank.
e.
He did not ensure that the local cheques purchased
were promptly presented in clearing and payment
obtained. Similarly, he did not ensure prompt recovery
D
on return of cheques in clearing."
Both his predecessor as also successor in office were
found guilty of some negligence on their part. Some laxity on
the part of office of the Controlling Authority was also pointed
E out.
12. A charge sheet was filed on or about 8.9.1993 under
Sections 120B, 420 IPC read with Section 13(1)(d) of the
Prevention of Corruption Act, 1988 alleging inter alia that there
was criminal conspiracy between the accused persons during
~
F 1988-89 to cheat SBI.
13. On or about 7.2.1994, learned Special Judge for CBI
Cases, Hyderabad framed charges against the accused
persons under Sections 120B, 420 IPC read with Section 138
of the Negotiable Instruments Act. However, Accused Nos. 4 to
G 6 were additionally charged with Section 13(1 )(2) of the
Prevention of Corruption Act.
..
-+
14. Before the learned Special Judge, a large number of
witnesses were examined. They included P.W. 1 - Sh. R. Vijay
H Kumar, Branch Manager, State Bank of India, Karimnagar
S.VL. MURTHY V. STATE REP. BY CBI, HYDERABAD 793
[S.B. SINHA, J]
Branch, who was holding the post of Manager, in the Begum
A
Bazaar of the State Bank of India, Hyderabad from 31.8.1987
<
to 9.8.1988, i.e., prior to Accused No.4. P.W. 19 -
S.V.
Panchapakesan, Dy. General Manager, SBI Capital Market
Bombay, who worked as Administrative Officer Advances in the
Regional Office and P.W. 20 - V. Ramamurthy, the Additional
B
Manager-cum-Deputy General Manager of the Regional Offices.
•
15. Learned Special Judge for CBI Cases, Hyderabad by
i
reason of judgment and order 28.8.1998, held:
"84. The prosecution has fail~d to establish the Charge
U/s 138 of N.I. Act against A 1 to A3. Hence I found c
tr.em not guilty for the offence U/s 138 of N.I. Act
against A 1 to A3.
85. Admittedly A4 to A6 are the employees working in
Begumbazar branch at Hyderabad and they are D
i
public servants. They abused their positions as public
servants. They purchased local cheques which are
totally irregular and against the establishment norms
of the bank and therefore they have committed an
offence of criminal misconduct. A4 to A6 purchased
local cheques upto Rs.90 lakhs. There cannot be
E
any evidence that A4 to A6 had pecuniary advantage
i
due to their misconduct but due to their misconduct
/
~
they obtained benefit to A 1 to A3. Hence I found A4
_,
to A6 guilty for the offence U/s 13(2) r/w 13(1 )(d) of
,j
P.C. Act, 1988.
F
86.
In the result, A 1 to A6 are found guilty for the offence
U/s 120-B, A 1 to A6 are found guilty for the offence
U/s 420 l.P.C. A4 to A6 are found guilty for the offence
U/s 13(2) r/w 13(1)(d) of P.C. Act, 1988."
He convicted and sentenced the accused persons as G
>
!--
under:
"A 1 is convicted and sentenced to suffer R.I. for THREE
YEARS and to pay a fine of Rs.10,000/-. In default S.I. for
ONE YEAR for offence UIS 420 IPC.
H
t
794
SUPREME COURT REPORTS
[2009] 7 S.C.R
A
A1 is sentenced to suffer RI. for THREE YEARS and to
-
pay a fine of Rs.10,000/-. In default S.I. for ONE YEAR for
offence U/s 120-B IPC.
A2 is sentenced to suffer R.I. for THREE YEARS and to
B
pay a fine of Rs.5000/- for offence- U/S. 120-B IPC. In
default S.I. for ONE YEAR.
A2 is sentenced to suffer R.I. for THREE YEARS and to
pay a fine of Rs.5000/-. In default S.I. for ONE YEAR for
•
offence U/S. 420 IPC.
..
c
A3 is convicted and sentenced to suffer RI. for THREE
YEARS and to pay a fine of Rs.5000/- In default S.I. for
ONE YEAR for offence U/s. 120-B l.P.C.
A3 is convicted and sentenced to suffer R.I. for THREE
D
YEARS and to pay a fine of Rs. 5000/-. In default S.I. for
ONE YEAR for offence U/s. 420 l.P.C.
_..
A4 to A6 are convicted and sentenced to suffer R.I. for
THREE YEARS each and to pay a fine of Rs.5000/-each.
In default S.I. for ONE YEAR for offence U/s. 120-B l.P.C.
E
-
A4 to A6 are convicted and sentenced to suffer R.I. for
THREE YEARS each and to pay a fine of Rs.5000/- each.
In default S.I. for ONE YEAR for offence U/s 420 l.P.C.
A4 to A6 are convicted and sentenced to suffer R.I. for
"
..
F
TWO YEARS for offence U/s. 13(2) r/w 13(1)(d) of P.C.
'
Act, 1988 and to pay a fine of Rs.5000/- each. In default,
S.I. for SIX MONTHS each.
A 1 to A3 are not found guilty for offence U/s. 138 of
Negotiable Instruments Act and they are acquitted for the
G
same offence.
All the sentences of imprisonment shall run concurrently.
-1 '·
Accused are entitled to set off for the remand period if any."
16. Feeling aggrieved and dissatisfied with the aforesaid
H judgment, appellants preferred appeals.
S.V.L. MURTHY V STATE REP. BY CBI, HYDERABAD 795
[S.B. SINHA, J.]
The High Court by reason of the impugned judgment in
A
-
dismissing the appeals of the appellant, held:
"57. Learned counsel appearing for the accused
contended in chorus that the practice of discounting
cheques was in existence even prior to A4 taking charge
B
as the Branch Manager of Begum Bazar Branch, State
"
Bank of India, Hyderabad and the said practice was a
part of accepted norms. I do not find any substance in
'
their contention. A practice even if it was prevailing, if
wrong, is not to be approved. The subsequent clarifications
_,
do not in any way put seal of approval on the practices c
.,..
adopted in the past, on the other hand it condemns it.
'
58. When the factual background highlighted is
'
considered in the light of the various provisions, it is clear
that the alleged offences under Sections 120-B and 420 D
~
IPC against A 1 toA5 and under Section 13(1 )(c) r/w. i 3(2)
"'.'/
of the Prevention of Corruption Act, 198 against A4 and
A5 are clearly established."
However, accused No. 6 was acquitted.
17. Mr. K.T.S. Tulsi, learned Senior Counsel appearing on
E
behalf of Accused Nos. 1 to 3 would contend:
...
i.
Accused Nos. 1 to 3 having not been charged for
~
conspiracy with the Bank officials under the
Prevention of Corruption Act, the impugned judgment
F
is wholly unsustainable.
ii.
One of the principal ingredients of cheating as
envisaged U[lder Sections 415 of the IPC being
dishonest intention at the inception of contract being
wholly absent, appellants could not have been G
...
r
convicted under Section 420 of the IPC .
iii.
Admittedly, the Bank had not suffered any financial
loss and in fact having received interest to the extent
of Rs.44 lakhs from the appellants, the imp~gned H
796
SUPREME COURT REPORTS
[2009] 7 S.C.R.
A
judgment holding t.hat they had entered into a criminal
)
· conspiracy for cheating the Bank must be held to be
,_
wholly untenable.
18. Mr. Ravindra Shrivastava, learned Senior Counsel
B
appearing on behalf of Accused No.4 would urge:
i.
Bill discounting facility which is accepted as a normal
banking practice wherefor even Reserve Bank of
¥
India had issued guidelines, the High Court
-~
committed a serious error in passing the impugned
c
judgment.
ii.
Accused No. 4 having merely followed the practice
for the purpose of said banking practice and acted
for the promotion of the business of the Bank by
granting discounting facility to Accused Nos. 1 to 3
D
which had been initiated by his predecessor, namely,
P.W. 1, it will be incorrect to contend that the appellant
...
had any wrongful intention or had any mens rea to
commit the offence.
E
iii.
Accused No. 4 having himself stopped discounting
of cheque facility to Accused No.1 in April 1989, the
courts below acted illegally in opining that he was .a
party to the alleged conspiracy.
iv.
No evidence having been brought on record whether
..
•
F
oral or documentary to establish that Accused No. 4
had acted for th.e purpose of obtaining any wrongful
gain for himself, the provisions of the Preventi9n of
Corruption Act have no application.
v.
Accused No.4 being the Branch Manager of the Bank
G
for a short time, i.e., from April 1988 to 18.4.1989
and the similar facility having been granted to the
"l
....
other accused persons even by Accused No. 6 who
have since been acquitted, the prosecution must be
held to have failed in proving his case.
H
.. -
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 797
[S.B. SINHA, J.]
~
19. Mr. K.V. Mohan, learned counsel appearing on behalf A
of the Accused No. 5 would urge:
, ..
i.
As an Accountant, the job of the accused was merely
to make necessary entries in the books of accounts
and in view of the practice prevailing that the entry
8
into the customers' account should be made only
after return of the cheque, IBIT (Inter Branch Items in
..
TransitA/c) and LIT (Local Items in Transit) Registers
J
were being maintained, in view of the evidence of
P.W. 2 that whatever was in practice having been
'
followed, it is incorrect to contend that the Accused c
'
No.5 was a party to the conspiracy ..
_....
ii.
The learned special judge as also the High Court
-·
having relied upon the letter purported to have been
issued by the Accused No. 4 to Accused Nos. 5 and
D
6 that the practice should not be discontinued, the
appellant cannot be treated differently vis-a-vis the
Accused No. 6 as he had been acquitted.
,,
20. Mr. 8. Datta, learned Additional Solicitor General
appearing on behalf of CBI, on the other hand, would submit
E
,
i.
The offences against the appellants having been
found to have been proved by two courts, this Court
-
in exercise of its jurisdiction under Article 136 of the
•
Constitution of India should not interfere therewith.
F
ii. · -As from a perusal of the judgment and order passed
by the learned Special"Judge as also the High Court,
it would be evident that the appellants had entered
into a conspiracy to cause wrongful loss to the Bank
and to cause wrongful gain for themselves by using G
the public fund for their own benefit, th'ere is absolutely
:?
;·
no reason why the ·impugned judgment should be
interfered with.
iii.
Accused No. 4 and Accused No.5 being the Officers
·of the Bank, they had domain over the public fund
H
• I
798
SUPREME COURT REPORTS
(2009] 7 S.C.R.
and in that view of the matter, the courts below have
)
-.,
A
rightly found them guilty for commission of offences.
21. We have noticed hereinbefore the charges leveled
against the appellants. So far as the principal accused, namely,
B
Accused Nos. 1 to 3 are concerned, they having not been
charged for entering into a criminal conspiracy with the Bank
officials for commission of offences under the Prevention of
Corruption Act, it was necessary only to see as to whether a
•
case of cheating has been made out.
~
,-
c
The fact that Accused No. 1 had a long standing business
<'---
relationship with the Bank is not in dispute. The Officers of the
·1Bank particularly P.W. 2, P.W.19 and P.W.20 in their deposition
~·
clearly stated that the banking practice allows grant of such
discounting facility. In fact, the Reserve Bank of India Circular
.....
D whereupon reliance has been placed by the courts below clearly
points out existence of such a practice. The Reserve Bank of
India, however, laid down certain guidelines with a view to
safeguarding the interest of the Bank.
It is also not in dispute that for the said purpose, a Circular
E has also been issued.
The proposal of the Branch to grant such discounting facility
to Accused Nos. 1 to 3 had not been accepted in its entirety. An
ad hoc limit of Rs.35 lakhs has been fixed.
-
~
F
P.W. 1 - R. Vijaykumar, in his evidence categorically
admitted that the bill discounting facility had started during his
tenure as Branch Manager. It is, furthermore, accepted that said
facility was extended to Accused Nos. 1 to 3 having regard to
the business potentiality they had. He furthermore accepted that
G the weekly statements used to be prepared and placed before
the higher authorities who had al~o not objected to grant thereof.
~
The said witness, in fact, in his deposition stated that the
••
Regional Manager wanted Accused No.1 to carry on all his
business only through this branch. In his cross- examination on
H behalf of A 1 to A3, he stated:
•
SVL. MURTHY V. STATE REP. BY CBI, HYDERABAD 799
[S.B. SINHA, J.]
"I know A 1 since 1988. I know Harinarayana Kakani, who A
is the father of A 1. It is to my knowledge that they were
operating firms which are reputed. Before forwarding any ..
proposal for sanctioning limits, the branch will make
appraisal of the creditworthiness of the party. I have sent
the proposals in favour of the firms of A 1. The credit limit B
for the firms of A 1 were duly sanctioned by the Regional
Office. The credit limits were sanctioned by the Regional
office in favour of M/s Sobhachand Shivaji Ram. A1 was
representing Shobhachand Shivaji Ram.
Hefurthermore stated:
. "Whatever limits were utilized by the firm Shobhachand
Shivaji Ram have permanent sanction. All the cheques
that were presented during my tenure, were duly honoured.
c
To my knowledge the firms Shri Jee Industries and 0
,. ·
Shobhachand Shivaji Ram Industries were having
substantial deposit potentials and were also resources."
He in his cross-examination on behalf of A4 to A6 stated: -
''The practice in .our Begum Bazar Bf.anch SBI was to
E
debit LOIT account, the amount of local cheques ·
purchased. Auditing was done during my tenure and no
objection was taken for debiting to LOITaccount by the
auditor. It is true that when a local cheque was returned
unpaid for want of sufficient fund, then <?nly such cheques
will be debited the account of the party. If the cheques is
F
returned with an endorsement 'effects not cleared, present
again', it will not be debited to the account of the party.
xxx
xxx
xxx -
I know that our Regional Manager and A.O. (Advances) G ·
was impressing A 1 to confine all the business dealings of
·all the firms to SBI Begum Bazar .. A 1 agreed with a
stipulation that all his credit requirements must be met by
the branch. I was in receipt of a letter from A1 requesting'
for sanction of ad hoc limits to Shri Jee Industries. Regional
H
,,...
800
SUPREME COURT REPORTS
[2009] 7 S.C.R..
A
office never objected to negotiations of local cheques in
~
favour of Shri Jee Industries. I do not remember whether
I presented cheques with a delay of three or four days in
clearance. From February 1986 to August 1987 there was
no permanent Branch Manager to Begum Bazar Branch."
B
P.W. 19 - R.V. Panchapakesan - who worked as an
Administrative Officer (Advances) in the Regional Office, in his
deposition, stated as under:
•
"It is true the transaction is of civil nature and we can
~
c
approach the civil courts for recovery of the liability from
A 1. It is not true to suggest that we intentionally taken up
the criminal forum also in prosecuting A 1 in order to harass
him becaus~ the cheques were bounced there is criminal
liability of A 1 hence we have complaint. The bank also
D
filed civil suit against A 1.
I do not admit the suggestion that A1 VG.Loya had not
"'
committed any fraud in the bank. It is not true to suggest
that I gave false statement before CBI in order to save my
skin."
E
He, in. his cross-examination by A4 to A6, stated:
"At the instructions of D.G.M. I was looking after deposit
mobilization and market promotion.
No written instruction were given to me.
A
F
It is true even before A4 S.V.L. Murthy took charge as
Bank Manager, Begumbazar branch, I am acquainted with
A1 V.G. Loya.
I do not remember whether myself or our R.M. have
G
approached Sri V.G. Loya seeking deposits to him.
It is ~rue after ascertaining the worthiness of parties Sri
,\
r
VG Loya (A 1) we have sanctioned the limits.
I do not know A4. S.V.L. Murthy addressing a letter dt.
H
24.3.89 hearing No: F/20-75 to the Regnl. Office
'
..
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD
801
[S.S. SINHA, J.]
expressing some suspicion about the bills discounted on
A
behalf of Sobachand Sivajiram, as I was not working as
A.O. at that time.
)()()(
)()()(
)()()(
I learnt that the then Branch Manager i.e. A4 SVL Murthy B
has stopped discounting any bills on the a/c Sobaqhand
Sivajiram before the receipt of my confidential dt. 10.4.89 .
As A.O. Advances I agree that A4 SVL Murthy has taken
a correct stand of not discounting the bills pertaining to
Sobachand Sivajiram Indus.
C
I do agree that the bank has not suffered any loss on bills
returned as the amount has been recovered from the party.
)()()(
)()()(
)()()(
D
The R.M. has to visit the branch periodically and it is his
duty to scrutinize the ledgers of th_e Bank branch A.O.
advances I do not go for such inspection.
It is not true to suggest that the discounting of local, cheques
is a part of lending activity of the bank.
E
Discounting bills falls under lending activity.
, It is true during the customers relations meeting A 1 and
..,
other customers have complained to R.M. about delay in
relations of cheques by the Begumbazar branch and our F
R.M. advised replying customers that the delays can be
avoided if the clearing cheques are presented by the
branch to the services branch on the same day.
)()()(
)()()(
)()()(
I remember the original Jimit proposed for Rs.85 lakhs
and the ad hoc limit (in principal limit) was Rs.35 lakhs.
The party requires ad hoc limits in urgency pending
sanction of regular limit.
)()()(
)()()(
)()()(
G
H
802
A
B
SUPREME COURT REPORTS
[2009] 7 S. C.R.
The weekly abstracts of branches cannot be scrutinized
by A.O. branch they go to A.O. General Manager. The
weekly abstracts contain expenses of bills discounted and
balance of bills discounted.
The Electronic Data processing (BOP) of local head office
"
. generates weekly outputs from the weekly abstracts from
the banks giving figures of deposits and advances. These
are received by A.O. advances for enabling scrutiny of
branch figures of advances and their variations."
c
From the aforementioned statements, it is evident that all
transactions were being carried on in a transparent manner
having regard to the prevalent practice. In fact, as noticed
hereinbefore, Shri Vijay Kumar not only started granting the said
facility to the principal accused, some amount of laxity on his
0 part was also found.
E
F
G
H
P.W. 20 - V. Ramamurthy in his deposition, stated:
"I took charge as Dvnl. Manager Region 1 during the
August 1987 when I visited Begumbazar branch the then
branch manager PW1 Vijaykumar took.me to A1 Loya's
house and introduced him as bank customer. We have
sanctioned loan limits to A 1 Sri V.G. Loya in the name of
the company Mis Shobachand Shivajirao and A 1 was the
Managing Partner of the company, the connection of that
loan A 1 visited my office.
..
Part of the limits was sanctioned by me for Shobchand
Shivajiram and part of limits was sanctioned by Dy. General
Manager. The D.D. purchased documentary bills is for
Rs.20 lakhs and D.D. purchased for bill discounting facility
is for Rs.5 lakhs. Cash Credit hundi typed limit of Rs.20
lakhs was sanctioned by the D.GM., Sri Seshasahj. The
sanctioned was communicated to the branch.
xxx
xxx
xxx
After processing the proposals we found out quite a few
-~
..
-'-
"

804
A
B
c
D
E
SUPREME COURT REPORTS
[2009] 7 S.C.R.
branch has discontinued purchase of bills and he wanted
this ban to be lifted. Sri Panchapakesan questioned Loya
about the genuineness of the bills he could not give
satisfactory answers. We told Shri Loya, A 1, that unless
the full-scale investigation into this matter is over we cannot
resume purchase of bills in this account. This disturbed
Shri Loya, A 1. We requested A4 to visit Sailam or Madurai,
if necessary, and enquire into the matter to find out whether
any movement of any goods in regard to these bills and
submit a report to us. I resumed duty on 17.4.1989.
xxx
xxx
xxx
The branch of the bank used to send periodical abstract
to Regional Office Ex. P. 623 to 666 are the weekly abstract
sent by Begumbazar Branch to Regional Office. The
purpose of weekly abstract is to furnish information to
Regional Office for communicating RBI about time liabilities
of the bank branch as the bank is to maintain certain
· reserves as per RBI Rules. The weekly abstract reflects
total of various transaction such as advances, deposits
etc. They won't reflect the details. The abstract will not
come to Regional Manager the Desk Officer shall sent
statement in routine course.
He in his cross examination on behalf of A4 to A6, stated:
"It is a fact as a Regional Manager, it is my duty to control
advances, deposits and other miscellaneous transaction
F
including house keeping of the branch.
-
G
H
Discounting of cheques fall under advances of portfolio of
the branch.
It is a fact our Bank Manager initiated departmental enquiry
against me pertaining to the Begumbazar transaction in
respect of Sriji Industries.
It is a fact in this transaction I was issued a charge sheet,
I submitted my explanation and on that basis the bank
management given me punishment of 'Censure'.
xxx
xxx
xxx
,
,,
...
-
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 805
[S.B. SINHA, J]
It is a fact that A 1 V.G. Loya is a resourceful and potential A
customer in attracting deposits and introducing new cliental
to the branch.
A 1 Loya might have given some deposits to Begumbazar
Branch.
I might have asked for deposits A 1 Loya and he might
have promised me to secure NRI deposits upto 25 Lakhs.
I cannot exactly recall at this length of time.
xxx
xxx
xxx
B
Before sanctioning limits to A 1 Loya under the Ale. C
Shobchand Shivajiram, I took into consideration of the
Branch Manager's Report about credit worthiness, integrity
of A1.
When the such credit facilities provided for A 1 Loya the D
Branch Manager was Sri R. Vijayakumar (PW1 ).
It is a fact that the precautions taken by A4 as Branch
Manager'while discounting the bills (purchasing bills) as
narrated under Ex. P.670 are proper and sufficient.
xxx
)()()(
)()()(
It is a fact Ex.D.11 letter A4 SVL Murthy mentioned that Sri
V.G. Loya has been, presenting demand /usance bills for
purchase/discounting supported by Lorry Receipts which
E
are originating from a place called Jaora (M.P.).· The
F
consignments are booked from Jaora and sent to different
destinations etc. The relevant portion is marked as Ex.
D.11 (a). It was also mentioned by A4that "I am of the view
that this practice is fraught with risks and not in the interest
of the Bank, this is also against the terms of sanction of
bill limits". The relevant portion is marked as Ex. D. 11(b} G
in (EX. D.11)
xxx
xxx
)()()(
It is a fact the bank has earned appropriate interest on this
transaction.
H
'-,,
806
SUPREME COURT REPORTS
[2009] 7 S.C.R.
A
Such income arrived byway of interest by the bank will be
reflected in the banks monthly performance report.
8
c
D
E
F
G
H.
I had no occasion to ask the Branch Manager how it
happened to get such huge income by way of interest.
At no point of time I have gone through the weekly
statements of Begumbazar branch sent during the period
of A4 SVL Murthy. The witness adds that "I cannot say I
have not seen the weekly statement, there may be
occasions for me to go through the weekly statements, if
they are placed before me by my staff.
It is a fact the weekly abstract is statutory return and very
important return and it is submitted as per the guidelines
of RBI.
It is true the weekly statement abstract will give the entire
picture about performance of the branch.
xxx
xxx
)()()(
I learnt subsequently that there was purchase of local
cheques Begumbazar branch even prior to assumption of
office as Branch Manager A4 SVL Murthy. The
predecessor of A4 is one R. Vijaykumar (P.W.1)
-
To my knowledge even the said R. Vijaykumar when he .
discounted cheques for A 1 to the tune of Rs.15 to 20
laktis he has not obtained any sanction or permission
from Regional Office.
)()()(
)()()(
)()()(
Whenever there were customer relations programmes
conducted by the branch, the minutes of the programe will
be sent to Regional Office.
Ex. D. 39 is such Xerox copy of such minutes for the
·quarter ending March 89 dt. 17.3.89.
It is true in Ex. D.39 it was reported by A4that LOIC facility
-
S.V.L. MURTHY V. STATE REP. BY CBI, HYDERABAD 807
[S.B. SINHA, J.]
-i
was extended to 21.3.89 on local cheques purchases.
A
The witness volunteers "The customer relationship will be
-
held with a purpose of bringing customer together and
also cultivating, so the minutes will be sent to inform
Regional Office that branches doing in Customer Relations
Meetings. The comment with regard to LOIT facility
B
customer etc.