# SARDUL SINGH CA VEESHAR v. THE STATE OF BOMBAY

- **Citation:** [1958] 1 S.C.R. 161
- **Court:** Supreme Court of India
- **Decided:** 1956-11-21
- **Case number:** Criminal Appeals Nos. 53 to 56 of 1957
- **Bench:** Jagannadhadas, B. P. Sinha, Gajendragadkar Jj.)
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sardul-singh-ca-veeshar-v-the-state-of-bombay-1438
- **Pages:** 53

## Headnote

161
Evidence-Conspiracy-Criminal breach of trust-Proof of
bogus character of transactions-Intention of accused-Evidence of
criminal acts outside the period of conspiracy-Admissibility-Indian
Evide11ce Act (I of 1872), ss. 10, 14.
·
A conspiracy to commit criminal breach of trust in respect of
the funds of a company by utilising the same to purchase the
controlling block of shares of the company itself for the benefit of
the appellants was alleged to have been entered into between
December l, 1948, and January 31, 1949. It was the prosecution
case that the modus operandi was to screen the ultilisation of these·
funds by showing them as having been advanced for legitimate
purposes and invested on proper security but in fact utilising the
same for payment to the appellants. One of the main issues was
whether the loans by way of advance of the funds of the company
on January 20, 1949, were genuine transactions or bogus or makebelieve, and the question was whether the evidence relating to
the further transactions entered into outside the period of the
conspiracy jn 1949 and 1950. with a view to the screening of the
original transactions, was admissible in law.
Held : (1) In relation to the main purpose Qf the prosecution
viz., proof of the bogus character of the transactions of January,
1949, the transactions of 1949 and 1950 entered into outside the
period of conspiracy must, having regard to the ramifications, be
taken to be integrally connected and relevant to make out their
bogus character, though such evidence may necessitate reference
to and narration of the acts of the conspirators beyond the peried
of conspiracy.
(2) The conduct of each individual co-conspirator including
his acts, writings and statements irrespective of the time t1> which
it relates can be relied on by the prosecution to show the criminality of the intention of the individual accused with reference to
his proved participation in the alleged conspiracy to rebut a
probable defence · that the participation, though proved, was
innocent .. Such evidence is admissible under s. 14 of the Indian
Evidence Act.
Makin v. The Attorney General for New
South Wales L.K.
(1894) A.C. 57, relied on.
19S7
May 23.
1957
Sardul Singh
Caveeshar
v.
The State of
Bombay
162
SUPREME COURT REPORTS
[1958]
Per Jagannadhadas J.-Under s. JO of the Indian Evidence
Act the evidence of acts, statements or writings of a co-conspirator either under trial or not on trial but outside the period of
conspiracy would not be admissible against the other conspirators
in proof of the specific issue of tbe existence of the conspiracy on
the authority of Mirza Akbar v. The King Emperor, (1940) L.R.
67 I.A. 336.
CRIMINAL
APPELLATE
JURISDICTION:
Criminal
Appeals Nos. 53 to 56 of 1957.
Appeals by special leave from the judgement and
order dated November 21, 1956, of the Bombay High
Court in Criminal Appeals Nos. 861-864of1956 arising
out of the judgement and order dated June 1, 1956, of
the Court of the Additional Sessions Judge for Greater
Bombay at Bombay in Sessions Case
No. 27/111
Sessions 1955.
A. S. R.
Chari and M. S. K. Sastri, for the
appellants.
K. J. Khandalawala, Porus A. Mehta and R. H.
Dhebar, for the respondent.
1957. May 23. The Judgement of the Court was
delivered by
lagannadhadas 1,
JAGANNADHADAS J.-These are 8:ppeals by s~cial
leave by four persons, who along with one Rammklal
Keshavlal Jhaveri (since acquitted) were committed
for trial in the Court of the Sessions Judge of Greater
Bombay, on charges of conspiracy to commit criminal
breach of trust of the funds of the Jupiter General
Insurance Co. Ltd. (hereinafter referred to as the
Jupiter) and in pursuance of the said conspiracy of
having committed criminal breach of trust some of
them being directors and agents of the said company.
They were alternatively charged for commission of the
offence of criminal breach of trust by some of them as
directors and the others for abetting the commission of
the criminal breach of trust committed

## Text

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S.C.R.
SUPREME COURT REPORTS
SARDUL SINGH CA VEESHAR
v.
THE STATE OF BOMBAY
(and connected appeals)
(JAGANNADHADAS, B. P. SINHA and
GAJENDRAGADKAR JJ.)j
161
Evidence-Conspiracy-Criminal breach of trust-Proof of
bogus character of transactions-Intention of accused-Evidence of
criminal acts outside the period of conspiracy-Admissibility-Indian
Evide11ce Act (I of 1872), ss. 10, 14.
·
A conspiracy to commit criminal breach of trust in respect of
the funds of a company by utilising the same to purchase the
controlling block of shares of the company itself for the benefit of
the appellants was alleged to have been entered into between
December l, 1948, and January 31, 1949. It was the prosecution
case that the modus operandi was to screen the ultilisation of these·
funds by showing them as having been advanced for legitimate
purposes and invested on proper security but in fact utilising the
same for payment to the appellants. One of the main issues was
whether the loans by way of advance of the funds of the company
on January 20, 1949, were genuine transactions or bogus or makebelieve, and the question was whether the evidence relating to
the further transactions entered into outside the period of the
conspiracy jn 1949 and 1950. with a view to the screening of the
original transactions, was admissible in law.
Held : (1) In relation to the main purpose Qf the prosecution
viz., proof of the bogus character of the transactions of January,
1949, the transactions of 1949 and 1950 entered into outside the
period of conspiracy must, having regard to the ramifications, be
taken to be integrally connected and relevant to make out their
bogus character, though such evidence may necessitate reference
to and narration of the acts of the conspirators beyond the peried
of conspiracy.
(2) The conduct of each individual co-conspirator including
his acts, writings and statements irrespective of the time t1> which
it relates can be relied on by the prosecution to show the criminality of the intention of the individual accused with reference to
his proved participation in the alleged conspiracy to rebut a
probable defence · that the participation, though proved, was
innocent .. Such evidence is admissible under s. 14 of the Indian
Evidence Act.
Makin v. The Attorney General for New
South Wales L.K.
(1894) A.C. 57, relied on.
19S7
May 23.
1957
Sardul Singh
Caveeshar
v.
The State of
Bombay
162
SUPREME COURT REPORTS
[1958]
Per Jagannadhadas J.-Under s. JO of the Indian Evidence
Act the evidence of acts, statements or writings of a co-conspirator either under trial or not on trial but outside the period of
conspiracy would not be admissible against the other conspirators
in proof of the specific issue of tbe existence of the conspiracy on
the authority of Mirza Akbar v. The King Emperor, (1940) L.R.
67 I.A. 336.
CRIMINAL
APPELLATE
JURISDICTION:
Criminal
Appeals Nos. 53 to 56 of 1957.
Appeals by special leave from the judgement and
order dated November 21, 1956, of the Bombay High
Court in Criminal Appeals Nos. 861-864of1956 arising
out of the judgement and order dated June 1, 1956, of
the Court of the Additional Sessions Judge for Greater
Bombay at Bombay in Sessions Case
No. 27/111
Sessions 1955.
A. S. R.
Chari and M. S. K. Sastri, for the
appellants.
K. J. Khandalawala, Porus A. Mehta and R. H.
Dhebar, for the respondent.
1957. May 23. The Judgement of the Court was
delivered by
lagannadhadas 1,
JAGANNADHADAS J.-These are 8:ppeals by s~cial
leave by four persons, who along with one Rammklal
Keshavlal Jhaveri (since acquitted) were committed
for trial in the Court of the Sessions Judge of Greater
Bombay, on charges of conspiracy to commit criminal
breach of trust of the funds of the Jupiter General
Insurance Co. Ltd. (hereinafter referred to as the
Jupiter) and in pursuance of the said conspiracy of
having committed criminal breach of trust some of
them being directors and agents of the said company.
They were alternatively charged for commission of the
offence of criminal breach of trust by some of them as
directors and the others for abetting the commission of
the criminal breach of trust committed by the directors.
The trial before the Sessions Judge was with the aid of
a jury. All of them except Jhaveri were found guilty,
appellants in Criminal Appeals Nos. 53 and 54, Sardul
Singh Caveeshar and Parmeshwar Nath Kaul, by a
majority verdict and appellants in Criminal Appeals
S.C.R.
SUPREME COURT REPORTS 163
Nos. 55 and 56, Vallabhdas Phulchand Mehta and
1957
Charucharan Guba, by an unanimous verdict. . The sardul sinsll
verdicts of the jury were accepted by the Sessions Judge
Caveeshar
who sentenced the appellants as follows:
The vs1a1e of
Appellant Sardul Singh Caveeshar to rigorous
Bombay
imprisonment for three years and a fine of Rs. 2,500. Jagan-;;;;n,adaJ J.
Appellant Parmeshwar Nath Kaul to rigorous imprisonment for five years and a fine of Rs. 5,000.
Appellant Vallabhdas Phulchand Mehta to rigorous
imprisonment for five years and a fine of Rs. 5,000.
Appellant Charucharan Guba to rigorous imprisonment for three years and a fine of Rs. 2,500.
.
The charge of conspiracy related to the period from
December l, 1948, to January 31, 1949, and comprised
in all eight persons of whom two Lala Shankarlal
Hiralal Bansal (hereinafter referred to as Lala Shankarlal) and Saubhagyachand
Umedchand
Doshi
(hereinafter referred to as
Doshi)
died before the
commencement of the trial. One Lala Ram Sharandas
alias Ramsharan Lala Haricharan Mahajan (hereinafter referred to as Mahajan) was also a party to the
conspiracy. But for some reason or other, the trial
against him was separated. The persons who were on
trial in the present case are the following.
1. Parmeshwar Nath Kaul, accused No. 1 and
appellant in Criminal Appeal No. 54 of 1957 (hereinafter referred to as Kaul).
2. Vallabhdas Phulchand Mehta, accused No. 2
and appellant in· Criminal Appeal No. 55 of 1957
(hereinafter referred to as Mehta).
3. Ramniklal Keshvlal Jhaveri, accused No. 3
and since acquitted by the Sessions Judge (hereinafter
referred to as Jhaveri).
4. Charucharan Guha, accused No. 4 and appellant in Criminal Appeal No. 56 of 1957 (hereinafter
referred to as Guha).
5. Sardul Singh Caveeshar, accused No. 5 and
appellant in Criminal Appeal No. 53 of 1957 (hereinafter referred to as Caveeshar).
Lala Shankarlal, who was residing at No. 16, Bara
Khamba Road, New Delhi, was the managing director
1957
Sardiil Singh
CaFeeshar
••
1'/re State of
Bombay
laganna.iJradas J.
164
SUPREME COURT REPORTS
[1958]
of the Tropical Insurance Co. Ltd., New Delhi (hereinafter referred to as the Tropical). He was also a
director of the Punjab Central Bank. He had also
floated and was controlling a company called the Delhi
Swadesi Co-operative Stores (hereinafter referred to as
the Delhi Stores). He was also a leader of the
Forward Bloc in the year 1948.
Accused No. 1, Ka~, is a barrister and was in Lahore
till the partition of the country. Jn December, 1948,
he was in Delhi.
Accused No. 2 Mehta, at all material times was the
manager of the Bombay Office (General) of the Tropical.
Mahajan, at all material times was the secretary of
the Tropical. He was also a director-in-charge of the
Delhi Stores.
Accused No. 3, Jhaveri, was a Bombay solicitor and
at all material times was carrying on his profession as
a solicitor in Bombay.
Doshi was till his death, a solicitor in Bombay and
was carrying on his profession as such.
Accused No. 4, Guha, was in December, 1948, an
accountant of the Tropical.
Accused No. 5, Caveeshar, was the mana'ging director of the Peoples Insurance Co. He was also the
managing director of the New Hindustan Bank. He
was for some time a member of the All India Congress
Committee. He was also a leading member of the
Forward Bloc.
The case for the prosecution is that Lala Shankarlal
who was the brain behind the conspiracy and who at
the time was the managing director and had the
control of the Tropical, which by then was financially
in a tottering condition, planned along with his confederates to obtain the control of the Jupiter, which at
the time was in a sound financial position, by acquiring
the controlling block of shares of the Jupiter and
utilising the funds of the Jupiter itself for the acquisition of such shares.
By the date of the conspiracy the Jupiter had investments of the face value of Rs. two crores. It had
S.C.R.
SUPREME COURT REPORTS
165
issued 1,24,966 ordinary shares of Rs. 100 each of
1951
which Rs. 15 per share was called up. It had also
sardut Singh
issued cumulative preference shares. Rai Bahadur
caveeshar
Girdharilal Bajaj (hereinafter referred to as Bajaj) and
The Siate of
Tulsiprasad
Khaitan
(hereinafter referred to as
Bombay
Khaitan) were at the time i.e., in 1948, in control of Jagannadhadm J.
the Jupiter. These persons owned through the New
Prahlad Mills Ltd., the controlling block of shares of
the Jupiter i.e., about 63,000 shares of the Jupiter
between themselves and their nominees. After negotiations, conducted first through certain persons called
Mayadas and Chopra and then, through one Naurangrai,
a bargain was settled with Khaitan for the purchase
of this controlling block of shares at Rs. 53 per share
for a sum of Rs. 33,39,000. Out of this amount a sum
of Rs. 5,39,000 was to be paid over to Bajaj
and
Khaitan directly in cash and only Rs. 28,00,000 would
be shown as the price for the purchase of the shares.
The arrangement was that on receipt of the cash of
Rs. 5,39,000 the management of the Jupiter was to be
handed over to Lala Shankarlal and his group and
that the balance of the money due of Rs. 28 · lakhs was
to be paid over to Khaitan on or before January 20,
1949. In default of such payment within the prescribed
time, Lala Shankarlal, representing the Tropical, should
pay to Khaitan a· sum of Rs. 5 lakhs as damages for
breach. In pursuance of this agreement Rs. 4,85,000
were paid over to Bajaj on or about December 29,1948,
and a formal agreement dated December 29, 1948, was
entered into, incorporating the above terms. On that
very day Bajaj and other directors of Khaitan group
held a meeting and allotted 1,250 shares straightaway
to Lala Shankarlal and four of his nominees viz., Kaul,
Mehta, Jhaveri and Doshi, each 250 shares, as qualifying shares for each. They confirmed the transfer of
these shares by a resolution and co-opted Lala
Shankarlal, Kaul, Mehta, Jhaveri and Doshi as directors and themselves resigned their respective
offices
as directors. Thereafter Khaitan resigned his position
as managing director of the Jupiter and at the same
meeting, Lala Shankarlal was appointed in his place
. as the managing director of the. Jupiter.
1957
Sardul Sb1zh
Caveeshar
v.
Tile State of
Bombay
Jaga1111adl1adas J.
166
SUPREME COURT REPORTS
[1958]
The transfer of 61,750 shares for the sum of
Rs. 28,15,000 to be paid to Bajaj and Khaitan before
January 20, 1949, was brought about in the following
way. At the meeting of some of the new directors of
the Jupiter dated January 11, 1949, it was decided to
sell the Jupiter's securities of the face value of Rs. 15
lakhs at the market rate and to obtain an overdraft
accommodation for Rs. 14 lakhs with the Punjab
National Bank on the pledge of the Government securities of the Jupiter. At the same meeting a loan of
Rs. 25,15,000 purported to have been granted to
Caveeshar by way of an equitable mortgage on an
alleged application by him dated January 4, 1949,
relating to his properties at Delhi sought to be given
as security on the basis of an alleged valuation report
of a firm of surveyors. There was another alleged
resolution authorising the director for purchase of plots
of Delhi Stores for Rs. 2,60,000. It may be mentioned
that this Delhi Stores was under the control of Lala
Shankarlal and, according to the prosecution, was a
defunct organisation at the time. The plan envisaged
by these resolutions was that cash was to be taken out
from the Jupiter partly by sale of securities and partly
by pledge of securities and that money was to be shown
as having been a loan to Caveeshar on the security of
his Delhi properties and a further amount as having
been invested for the purchase of plots of the Delhi
Stores. Lala Shankarlal was to receive these amounts
on behalf of Caveeshar and the Delhi Stores, and pay
over the cash that would thus come into his hands to
Bajaj and Khaitan as per the agreement.
This
appears-according to the prosecution case-to have
been actually done in the following way. The safe
custody account of the entire holdings of the securities
of the Jupiter with the Bank of India was closed by a
resolution of the new directors of the Jupiter dated
January 11, 1949, and these securities were taken over
into the personal custody of Mehta. Thereafter securities of the value of Rs. 30 lakhs were offered for sale
through a broker who ultimately could sell only shares
of the value of Rs. 15 lakhs. For the remaining Rs. 15
lakhs an overdraft was raised with the Punjab
S.C.R.
SUPREMECOURT REPORTS
167
National Bank on the application of Lala Shankarlal
1957
and on the pledge of some of the Government securities
sardul Singh
of the Jupiter. The
sale
of securities
realised
Caveeshar
Rs. 13,99,768 and on the pledge of securities a sum of
The ~tate of
Rs. 14,21,812 was obtained, making up
a total of
Bombay
Rs. 28,21,580. Rs. 28,15,000 out of it was shown as Jacannadhadas J.
having been received by the Bank of India and cridited
in the cash-credit account of the New Prahlad Mills
Ltd. It is thus that Khaitan received the balance of
the money due under the agreement of December 29,
1948 ..
To prove this case a considerable body of prosecution evidence was given consisting of quite a large
number of details. It is necessary to set out the salient
features thereof in broad outline as alleged and sought
to. be prove~ by the. prosecution. This may .be dealt
with convemently with reference to three penods, the
first comprising the period of conspiracy as mentioned
in the charge i.e., December 1, 1948, to January 31,
1949, the second, relating to the period from February
1, 1949, to the end of December, 1949, and the third,
the period covering the year 1950.
First period : December 1, 1948 to January 31 1949.
The negotiati9ns for the purchase of the controlling
block of shares of the Jupiter were carried on from
about December 10, 1948. From 10th to 20th the
negotiations were through one Mayadas, introduced to
Lala Shankarlal by one Chopra. Mayadas was given
a letter of authority on December 15, 1948, by Lala
Shankarlal, as the managing director of the Tropical,
authorising him to buy for the Tropical the controlling
block of shares of the Jupiter at the maximum rate
of Rs. 49 per share with the promise of brokerage of
Rs. 40,000 on completion of the transaction. Chopra
also was acting with Mayadas as broker. These persons were dropped and the further negotiations from the
20th onwards were carried on through one Naurangrai
known to Lala Shankarlal for about40 years. Through
him the purchase of the controlling block of shares
numbering 63,000 was agreed to be purchased at Rs. 53
per share. The total purchase value was Rs. 33,39,000.
Khaitan asked for advance payment of Rs. 5,39.000 in
168
SUPREME COURT REPORTS
[1958]
!957
cash and intimated that agreement would be made mensardul Singh
tioning only Rs. 28 lakhs as the purchase price. NauCaYeeshar
rangrai was
placed in possession of funds of
The s1~1e of
Rs. 5,39,000 on his executing a pro-note dated December
Bombay
23, 1948, (Ex. Z-4) for the said amount in favour of the
.:agam1adhadas J. Tropical by two cheques signed by Lala Shankarlal, one
for Rs. one lakh on December 22, 1948 (Ex. Z-!) and
another for Rs. 4,39,000, dated December 23, 1948, (Ex.
Z-3). These amounts were deposited by Naurangrai in
his bank account with the Bikanir Bank at Delhi. On
December 26, Lala Shankarlal and Naurangrai and
Khaitan met at Bombay and further
details were
discussed on the 26th and 27th. Khaitan insisted on
previous payment of Rs. 5,39,000.
Lala Shankarlal
asked for the list of securities and shares, the valuation
report and the balance sheet of the Jupiter. Naurangrai returned back to Delhi, drew Rs. 5 lakhs by way
of cash from his bank account and paid therefrom a
sum of Rs. 4,85,000 to Bajaj at Ghaziabad. He came
back to Bombay and informed Khaitan of the same.
Thereupon the agreement, Ex. Z-171, was executed on
December 29, 1948. The agreement was to the following effect. The Tropical was to pay the balance of
Rs. 28,54,000 on or before January 20, 1949, and on
such payment the Jupiter's shares numbering 63,000
were to be delivered over. The shareholder directors
belonging to the Khaitan group should resign and
nominees of the Tropical should be appointed as directors in their 'place. If the Tropical failed to pay
within the stipulated time, a sum of Rs. 5 lakhs by
way of damages was to be paid to Khaitan group
and if the Khaitan group failed to carry out their
obligations· damages of Rs. 2 lakhs were to be paid.
Subsequent to this agreement it was ascertained that
Khaitan had agreed to pay Naurangrai a commission
of Rs. 39,000. Lala Shankarlal undertook to pay the
same and to that extent the amount payable
by
January 20; was understood to be reduced. Therefore, the sum payable under the agreement with the
above adjustment was Rs. 28,15,000. The agreement
was signed both by Khaitan on behalf of the
New
Prahlad Mills Ltd., which owned the controlling block
S.C.R.
SUPRE1\.1E COURT REPORTS
169
of shares of the Jupiter and Lala Shankarlal on behalf
1957
of the Tropical. On the very same date a meeting of
Sardul Singh
the then Board of directors of the Jupiter was called.
Caveeshar
At this meeting 1,250 shares were transferred in the
The s~1e of
names of Lala Shankarlal, Kaul, Mehta, Jhaveri and
Bombay
Doshi, 250 shares for each, in order to qualify them Jagannadhadas J.
for becoming directors. Transfer of these shares was
confirmed by resolution. It is the prosecution case
that for these transfers no money was paid by the
transferees concerned. At that meeting the various
persons who constituted the previous directors tendered
their resignations in successive stages. At each stage
the resignations were accepted by the rest of the preexisting directors and new directors of Lala Shankerlal's group were co-opted. In the net result the entire
Khaitan group of. directors made way for the new
Lala Shankarlal group of directors and Lala Shankarlal
became the managing director. Thereafter there was
the first meeting of the new directorate of the Jupiter
on January 4; 1949. On that date Kaul was appointed
director-in-charge. A new Life sub-committee consisting of Mehta, Jhaveri and Doshi was appointed as also
a new finance sub~committee consisting of Lala Shankarlal, Kaul and Mehta, to review the investment
position of the company and to invest the company's
moneys upon such securities, shares and stocks, in such
manner as the committee thought fit.
A power of
attorney was granted to Lala Shankarlal as the managing director. Kaul and Mehta were authorised individually to operate upon all the banking accounts in the
name of the company with all the banks. Three pdlicyholder directors as also the general manager, Joel,
resigned and their resignations were accepted. This
was followed by another meeting of the new directorate
on January 11. At that meeting the Board passed a
number of resolutions about some of which there is
considerable controversy and with reference to which
there is the evidence of one Subramaniam for the
prosecution. One of the undisputed resolutions of that
meeting was to withdraw a letter written by the previous general-manager, Joel, dated January 3, 1949.
By that letter (Ex. Z-30), Joel had written to the Bank
170
SUPREME COURT REPORTS
[1958]
1957
of India, Safe Custody Department, instructing the
Sard111 s,;1gh
bank that till further advice, they should not transfer
Cavee:~•r
any of the securities held by the bank on behalf of the
The s1a1e of
company. On January 11, 1949, a copy of this resoluBombay
tion was sent to the bank under the signature of Mehta
Jagannadhadas 1. for their information. By another letter of the same
date sent by the sub-manager, one Baxi, (Ex.Z-32) the
bank was instructed to close the safe custody account
and to hand over the entire holdings of the securities
of the Jupiter to Mehta. Accordingly all the securities
were brought into the office of the Jupiter and kept in
a steel cupboard. Two of the disputed resolutions of
January 11, were resolutions Nos. 7 and 8, one for sale
of securities of the Jupiter of the face value of Rs. 15
lakhs at the market rate, and the other for an overdraft
account of Rs. 14 lakhs with the Punjab National Bank
on pledge of the Government securities of the Jupiter.
After the entire shares and securities were withdrawn
from the safe custody of the bank, Kaul contacted one
Jagirdar, a sub-broker working in the firm
of
Messers. Harkisondas Laxmidas, share brokers, and
authorised them by Jetter (Ex. Z-36) dated January 13,
1949, to sell three per cent conversion Joan 1946 of the
face value of Rs. 30 Jakhs at the best market rate. The
brokers sold on the 13th and 14th securities of the face
value of Rs. 15 lakhs and told Kaul that the market
was dropping and that further sale of those securities
was not feasible.
The sale of securities of the face
value of Rs. 15 lakhs realised a sum of Rs. 13,99,788.
Kaul, on behalf of the Jupiter, opened a current
account on January 13, in the Punjab National Bank,
Bombay. On the 15th, Kaul, on behalf of the Jupiter,
sent two letters, one to the Punjab National Bank and
another to the Bank of India, stating that they were
forwarding per bearer Government securities of the
face value of Rs. 14 lakhs and Rs. 1 fakh respectively
and instructed those banks to deliver them to
Messers. Harkisondas Laxmidas against payment and
the proceeds to be credited to the account of the company. The above sale proceeds were accordingly paid
into the respective banks and the securiti
were
delivered overto the respective parties on January 17
S.C.R.
SUPREME COURT REPORTS
171
It is the prosecution case that meanwhile Lala Shan1957
karlal approached the Punjab
National Bank,
sardul Singh
Kashmere Gate Branch, Delhi, on January 17, 1949,
Caveeshar
for the purpose of raising a loan on Government pro"'
The ~tate of
missory notes. He opened a cash-credit account on
Bombay
.the pledge of securities of the face value of Rs. l 5 Jagannadhadas J,
lakhs and passed a promissory note in favour of the
bank for the said amount. A loan of Rs. 14 lakhs was
then granted and a demand draft dated January 17,
for that amount in favour of the Jupiter on the Punjab
National Bank, Currimjee House Branch, Bombay,
was issued. A list of securities pledged with the bank
for the purpose has been put in evidence. The demand
draft was brought to Bombay and credited into the
account of the Jupiter in the Currimjee House Bradch
of the Punjab National Bank at Bombay on January
18. Thus by the sale and the pledge of the Jupiter's
own securities, a sum of Rs. 27,99,768 was raised and
kept available for use. On January 19, Mehta wrote
to the Punjab National Bank, Currimjee House
Branch, Bombay, to pay a sum of Rs. 28,15,000 to the
Bank of India where the New Prahlad Mills Ltd.,
(Khaitan) had got 61,394 Jupiter's shares lying in cashcredit account and to take delivery of those shares on
behalf of the Tropical and to debit Rs. 28,15,000 from
the Tropical account with them. On the same date,
Mehta, wrote also to the Bank of India, requesting it
to deliver 61,394 shares of the Jupiter to the Punjab
National Bank, Currimjee House Branch, Bombay,
with relevant transfer deed against
payment
of
Rs. 28,15,000
with reference to Khaitan's earlier
instructions to the Bank by his letter dated January
3, 1949 (Ex.Z-44). On the 19th, Mehta issued a cheque
for Rs. 75,000 on the Indian Bank, Tropical account
and deposited the same in the Punjab National Bank,
Currimjee House Branch, Bombay, Jupiter account.
This cheque was credited into that account on the 20th.
On the same day, i.e. 19th, Mehta wrote a letter to
the Punjab National Bank, Illaco House Branch,
Bombay, in which the Jupiter had its account
to
transfer the account into the Punjab National Bank,
Currimjee House Branch, where, on the 13th, Kaul
1957
Sardu/ Singh
Caveeshar
••
The State of
Bombay
Jagannadhadas J,
172
SUPREME
COURT
REPORTS
[1958]
opened a current account for the Jupiter. Now with
this deposit the money to the credit of the Jupiter in
the Punjab National Bank, Currimjee House Branch
was. Rs. 28,74,768. According to the prosecution it
was in reality out of this amount that
Khaitan
was ultimately paid on January 20, by a cheque for
Rs. 28,15,000 as against the transfer of the stipulated
number of shares. It is the prosecution case that this
payment was camouflaged by certain apparent intermediate transactions. The prosecution case relating
to this may now be stated.
From January 18 to 20, 1949, five cheques were
issued on the Jupiter account in the Punjab National
Bank which were all deposited into the account of the
Tropical in the Punjab National Bank as follows:
1. A cheque for Rs. 2,55,050, dated January 18,
1949, signed by Kaul on behalf of the Jupiter in favour
of the Delhi Stores and endorsed in favour of the
Tropical by Guha, purporting to the director of the
Delhi Stores, which according to the prosecution, he
was not. This was again endorsed by Mehta on behalf
of the Tropical in order to put it into the Tropical
account.
2. Two cheques dated January 19,
1949, for
Rs. 14,36,000 and Rs. 1 ,42,450, on the Jupiter account
of the Punjab National Bank in favour of the Tropical
or order. These cheques are alleged to be written by
Guha and signed by Kaul on behalf of the Jupiter,
and endorsed on the reverse by Mehta on behalf of the
Tropical for deposit in the Tropical account of the
Punjab National Bank.
3. Two cheques
dated January 20, 1949,
for
Rs. 8,96,000 and Rs, 36,000, on the Jupiter account of
the Punjab National Bank in favour of the Tropical or
bearer. Both the cheques were written by Guha and
signed by Kaul on behalf of the Jupiter.
All these five cheques were deposited into the Tropical
account of the Punjab National Bank by a pay-in-slip
dated January 20, 1949, alleged to be in the handwriting of Guba and signed by him on the 19th. The total
of these cheques comes to Rs. 27,65,700.
As a result of
S.C.R.
SUPREME
COURT
REPORTS
173
the previous instructions given on January 19, by
1957
Mehta, to the Punjab National Bank, the Bank paid
Sardul SinRh
on January 20, a sum of Rs. 28,15,000, from
the
Caveeshar
Tropical account to the Bank of India and took deliTheSt~teof
very of 61,394 shares of the Jupiter from the Bank of
Bombay
India and the Punjab National Bank then held those Jaga11nadhadas.J.
shares for the Tropical in the Tropical account and
Khaitan was paid on the last date stipulated. It would
appear that including the 1,250 qualifying shares previously transferred, the shares transferred by Khaitan
fell short of the 63,000 shares, by 356 shares, but the
deficit appears to have been made up very shortly
thereafter.
Now, according to the prosecution, this payment of
the Jupiter's money for the purchase of the Jupiter's
shares was by means of ex f acie payment from funds
of the Tropical in the Punjab National Bank which
were brought up to the requisite level by the deposit of
five cheques as specified above in relation to a scheme
of camouflaged payment to be gathered from certain
resolutions of the new directorate of the Jupiter as they
now appear from its resolutions of January 11 and 20,
1949 and later confirmed on January 22.
By resolution No. 5, as it now appears, a loan of Rs. 25,15,000
was granted to Caveeshar on his application dated
January 4~ and the valuation report of N. C. Kothari
of Messers. Master Sa the and Bhuta, surveyors. This
loan was on the
equitable mortgage of Caveeshar's
properties in Delhi, the conditions being, a marketable
tile, period of loan three years, and other usual
clauses in mortgage deeds. The resolution authorised
Kaul to advance the above Joan on the said terms and
get all necessary documents executed and registered at
Delhi during the course of next eleven months. Resolution No. 6 authorised the purchase of certain plots
in Delhi said to belong to Delhi Stores for a sum of
Rs. 2,60,000.
On January 20, there was
another
meeting of the new directorate of the Jupiter at which
the minutes of the meeting of January, 11, were read
and adopted.
Resolution No. 10 thereof confirmed the
payment of Rs. 25,10,650 to Caveeshar on equitable·
1957
Sardul Singh
Caveeshar
v.
The State of
Bombay
./ :igannadhadas J.
174
SUPREME
COURT
REPORTS
[1958]
mortgage of his properties as per the previous resolution No. 5 of January 11.
Resolution No. 11 thereof
confirmed the purchase of plots from the Delhi Stores
and the payment of Rs. 2,55,050 therefor. Resolution
No. 9 confirmed the sale of the Jupiter's securities of
the face value of Rs. 15 lakhs and resolution No. 12
confirmed the pledge of the Jupitor's securities of the
face value of Rs. I 5 lakhs for cash credit account with
the Punjab National Bank for Rs. 14 Jakhs.
Now, on January 22, 1949, there purported to be,
according to the prosecution case, a meeting of the
Board of directors of the Tropical including
Lala
Shankarlal. Resolution No. 11 thereof confirmed the
purchase of 63,000 shares of the Jupiter on behalf of
the Tropical for Rs. 28,15,000.
Resolution No. 12
thereof confirmed the transfer of 48,399 shares out of
the above 6~,000 shares to the Delhi Stores as agreed
to by then.
By resolution No. 13, sale of the headoffice building of the Tropical and certain plots of land
belonging to the Tropical to Caveeshar at Rs. 23,50,000
and Rs. 6,50,000 respectively as per agreement with
Caveeshar by the managing director, Lala Shankarlal,
on December 23, 1948, was confirmed. By resolution
No. 14, plots of land and building in Chandni Chowk
Delhi, sold by the managing director, Lala Shankarlal,
at a cost of Rs. 2,60,000 to the Delhi Stores, was
approved and confirmed. It is alleged that the resolutions of the Jupiter at the meetings dated 11th and
20th above noticed and of the Tropical dated the 22nd
disclosed the scheme of camouflaging which has been
resorted to, to screen the fact that the payment for the
purchase of the Jupiter's shares was directly out of the
Jupiter's amount.
This, according to the prosecution, indicates in its
broad outline the manipulations resorted to for the
above purposes. There is also evidence Jet in on behalf
of the prosecution of a number of relevant details such
as the presence or absence of the requisite entries and
papers in the various books of account and other
records of the concerned organisations, the Jupiter, the
Tropical and the Delhi Stores. Evidence has also been
given to show which of the accused was directly a
S.C.R.
SUPREME COURT REPORTS
175
party to which of the various steps. Direct evidence
1957
of some of the ex-employees of the Jupiter, in partiSardul Singh
cular of one Subramaniam and of another Rege, has,
Caveeshar
according to the prosecution, considerable bearing on
Thesiateof
the events that happened during this period, which
Bombay
would, if accepted, go to indicate the devious
and Jagannadhada3 J.
dishonest basis of the above alleged manipulations. In
addition to the above it would appear that some of the
shareholders who came to know about these transactions sent notices through solicitors to the new
directorate of the Jupiter and to some of the accused
persons, in particular Lala Shankarlal and Kaul,
individually warning them against the illegal
and
improper dealings with the funds of the company. It
is also in evidence that two of the solicitors, Sethia and
Joshi, filed a suit against the new directors on January
19, 1949, for an injunction restraining the directors
from disposing of the Jupiter's securities so as to
enable the Tropical to have the finances
for
the
purchase of the controlling block of the Jupiter's
shares. It is the suggestion of the defence that these
notices were followed up by institution of a suit at the
instance of Khaitan himself and that ultimately after
the money was paid on the 20th within the time, they
were dropped. Evidence has also been given for the
prosecution about the financial condition and property
holdings of the Tropical, of the Delhi Stores, as also of
Caveeshar to show that none of them were in any such
position as to justify the various transactions put
through in their names. In particular, evidence has
been given that Caveeshar had no such property as
could possibly justify a loan of about Rs. 25 lakhs on
his security and that the alleged valuation report was
non-existent or bogus. Evidence was also given that
the Delhi Stores was a defunct company whose only
assets were (1) 39,750 shares of the Tropical of the
book value of Rs. 10 per share which had no market
quotation, (2) other shares of book value of Rs. 16,879,
and (3) cash in the bank of Rs. 133-14-6, and (4) book
debts of Rs. 93,40,414. As against these debts' it is
said that the Delhi Stores had liability to sundry
creditors to the extent of Rs. 1,40,259-3-8. The above,
M2SC-II-2
1957
Sardul Singh
Caveeshar
v.
The State of
Bombay
Jagannadhadas J.
176
SUPREME COURT REPORTS
[1958]
in broad outline, is the nature of the evidence relating
to the first period.
Second period: February I, 1949, to the end of
December, 1949.
Now, we may take up the evidence relating to the
second period commencing from February, J 949, to the
end of December, 1949. The background relating to
this period, according to the prosecution is, that Lala
Shankarlal and his other co-conspirators were fully
aware of the necessity of showing the transactions of
January, 1949, as no longer outstanding as early as
possible, so as to escape direct scrutiny thereinto by
the end of the calendar year and it is said that therefore they made some further manipulations with a
view to show the moneys advanced to Caveeshar and
the Delhi Stores as having been returned before the
end of the year. The events which Jed up to this may
now be noticed. On May 25, 1949, there was a meeting
of the new directorate of the Jupiter at which Lala
Shankarlal informed the directors that Caveeshar was
repaying his loan of Rs. 25 lakhs and odd and out of
that amount a sum of Rs. 14 lakhs might be invested
in purchasing40,000 shares ofthe Tropical and Rs. 11
lakhs on the equitable mortgage of the Tropical's headoffice building. Ultimately, however, this contemplated loan of Rs. 11 lakhs to the Tropical on the equitable
mortgage of its head-office building did not materialise
for one reason or other. Thereafter, according to the
prosecution, there were brought into existence, five
transactions, from May 25 to December 31, 1949,
which have been referred to in the evidence as follows:
Rs.
1. Raghavji loan (5-11-1949) which
resulted in repayment of
.
4,00,000
2. Fresh Caveeshar loan (5-11-1949)
which resulted in repayment of . .
5,30,000
3. Misri Devi loan (20-12-1949) which
resulted in repayment of . .
1,00,000
4. Purchase
of
54,000
Tropical
shares (25-5-1949 to 20-12-1949) which
resulted in repayment of . .
14,00,000
S.C.R.
SUPREME COURT REPORTS
177
. 1957
Sardul Sing!,
· Cavee~har
5. Transfer of Caveeshar
from the
Tropical. to Jupiter account of balance
(31-12-1949) which resulted in repayment
of
.r.
80,650
The State oj
----.
-
Bombay
Total
25, 10,650
Jaga1111adhadas
In order to appreciate these transactions, it is
necessary to set out a few more details. Raghavji's son,
Chandrakant, was a member of the Forward Bloc, of
which Lala Shankarlal was
one
of the leaders.
Chandrakant had close political associations with Lala
Shankarlal. Raghavji was a gentleman about 80 years
old and a resident of Cutch and had a few properties at
that place. According to the prosecution, Chandrakant
was persuaded to permit his father's name to be used
for the purpose of advaneing some moneys on the footing of an equitable mortgage by deposit of title deeds
of his father's property in Cutch. At a meeting of the
Jupiter's directorate dated November 5, 1949, a loan
for Rs. 5 lakhs on the equitable mortgage of Raghavji's
properties was sanctioned subject to valuation report
and certain . terms and conditions specified therein.
Notwithstanding that the loan was to be advanced on
proper valuation report and other terms, it is the
prosecution case and evidence, that this sum of Rs. 5
lakhs was disbursed as follows:
Rs. 3 lakhs in cash
from the Jupiter's funds and Rs. 2 lakhs as having
been received back from Caveeshar and paid over in
cash to Raghavji. The payment of these Rs. 2 lakhs
was really by book adjustment showing Rs. 2 Iakhs
as having been paid by the Tropical to Caveeshar out
of the moneys of Caveeshar with the Tropical and this
amount as having been paid into the Jupiter's account
by Cavceshar and paid again out of it to Raghavji.
Out of the other Rs. 3 lakhs taken in cash from the
Jupiter, Rs. 2 lakhs it is said was not paid to Chandrakant but 1vas shown as having been paid by Cavee~nar
into the Jupiter's account in reduction of the debt
owing from him to the Jupiter. The net result of these
adjustments was that Rs. 4 lakhs out of the Caveeshar
loan with the Jupiter was shown as reduced. What
1957
Sardul Singh
Caveeshar
v.
The State of
Bombay
Jagannadhada!/.
178
SUPREME COURT REPORTS
[1958]
became of the other Rs. one lakh is not quite clear.
The next transaction is Caveeshar's fresh loan. At the
same meeting of the Board of directors of the Jupiter
dated November 5, 1949, where as Raghavji's loan for
Rs.5 lakhs was sanctioned, a further loan of Rs.5,30,000
was authorised to be advanced to Caveeshar against
pledge of shares of the People's Insurance Co., the
period of repayment being mentioned as two years.
This transaction merely meant a
book adjustment
reducing the loan outstanding against Caveeshar and
a fresh loan to that extent on a different security. This
transaction fiirther reduced the original indebtedness
of Caveeshar to the Jupiter by this amount. The third
item is the Misri Devi loan. At a meeting of the
Board of directors of the Jupiter dated December 20,
1949, an application for loan of Rs. 5 lakhs from Misri
Devi shown as the daughter of Lala Dwarka Das
(though she was also the wife of Lala Shankarlal) was
said to have been considered and a loan in her favour
for Rs. 5 lakhs on the security of her property in New
Delhi was sanctioned subject to marketable title, period
of three years, and other usual clauses. In anticipation
of having to advance this loan a sum of Rs. 2 lakhs
appears to have been sent on November 22, 1949, by
Kaul, from the Jupiter's account in the Punjab
National Bank, Bombay, to its account at Delhi. Again
on December 27, 1949, Kaul appears to have sent a
further sum of Rs. 2 lakhs from the Jupiter's account
in the Punjab National Bank, Bombay, to its account
at Delhi, by telegraphic transfer. Towards this loan
a cheque on the Jupiter's account with the Punjab
National Bank at Delhi for Rs. 4 lakhs payabk to self or
bearer was given and a sum of Rs. one lakh was shown
as having been received by the Jupiter from Caveeshar
through his Tropical account and shown as paid to Misri
Devi. This reduced the Caveeshar loan due to the
Jupiter by another Rs. one lakh. At the same meeting
of December 20, a resolution was placed on record
showing that at the instance of Lala Shankarlal, a bargain was arranged on behalf of the Jupiter for purchase
of 54,000 shares of the Tropical instead of 40,000 shares
as previously contemplated in the resolution of the
S.C.R.
SUPREME COURT REPORTS
.179
directors dated May 25, 1949, for the sum of Rs. 14
1957
lakhs and purchase on this footing was confirmed.
sardul Singh
The payment of Rs.