KEYWORDS:-character” includes both reputation and disposition-Disposition means the inherent qualities of a person-
DATE:-18-03-1963.
- The essence of conspiracy is that there should be an agreementContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. between persons to do one or other of the acts described in the section. The said agreement may be proved by direct evidenceEvidence All the means by which a matter of fact, the truth of which is submitted for investigation, is established or disproved. Bharatiya Sakshya (Second) Adhiniyam 2023 or may be informed from acts and conduct of the parties. There is no difference between the mode of proof of the offence of conspiracy and that of any other offence : it can be established by direct evidence or by circumstantial evidence. But Section 10 of the Evidence Act introduces the doctrine of agency and if the conditions laid down therein are satisfied, the act done by and is admissible against the co conspirators.
AIR 1965 SC 682 : (1964) 2 SCR 378 : (1965) 1 CriLJ SC 608
(SUPREME COURT OF INDIAIndia Bharat Varsha (Jambu Dvipa) is the name of this land mass. The people of this land are Sanatan Dharmin and they always defeated invaders. Indra (10000 yrs) was the oldest deified King of this land. Manu's jurisprudence enlitened this land. Vedas have been the civilizational literature of this land. Guiding principles of this land are : सत्यं वद । धर्मं चर । स्वाध्यायान्मा प्रमदः । Read more)
| Bhagwan Swarup Lal Bishan Lal and others | Appellant |
| Versus | |
| The State of Maharashtra | Respondent |
(Before : K. Subba Rao, Raghubar Dayal And J. R. Mudholkar, JJ.)
Criminal Appeals Nos. 67, 136 and 172 of 1959 and 82 and 83 of 1962, Decided on : 18-03-1963.
Evidence Act, 1872—Sections 53 and 55—Character evidence—Evidentiary value of such evidence—It is weak kind of evidence which cannot outweigh the positive value of guilt.
The evidence of general reputation and general disposition is relevant in a criminal proceeding. Under the Indian Evidence Act, unlike in EnglandEngland In England, the Parliament was originally an advisory body summoned to consult with the monarch, and the courts exercised delegated royal powers, as “lions beneath the throne”., evidence can be given both of general character and general disposition. Disposition means the inherent qualities of a person; reputation means the general credit of the person amongst the public. There is a real distinction between reputation and disposition. A man may be reputed to be a good man, but in reality he may have a bad disposition. The value of evidence as regards disposition of a person depends not only upon the witnesses perspicacity but also on their opportunities to observe a person as well as the person’s cleverness to hide his real traits. But a disposition of a man may be made up of many traits, some good and some bad, and only evidence in regard to a particular trait with which the witness is familiar would be of some use.
But, in any case, the character evidence is a very weak evidence; it cannot outweigh the positive evidence in regard to the guilt of a person. It may be useful in doubtful cases to tilt the balance in favour of the accused or it may also afford a background for appreciating his reactions in a given situation. It must give place to acceptable positive evidence. The opinionOpinion A judge's written explanation of a decision of the court. In an appeal, multiple opinions may be written. The court’s ruling comes from a majority of judges and forms the majority opinion. A dissenting opinion disagrees with the majority because of the reasoning and/or the principles of law on which the decision is based. A concurring opinion agrees with the end result of the court but offers further comment possibly because they disagree with how the court reached its conclusion. expressed by the witnesses does credit to the accused, but, in our view, in the face of the positive evidence we have already considered, it cannot turn the scale in his favour.
Penal Code, 1860—Section 120 A—Conspiracy—Proof of—Act of one conspirator is admissible against co conspirator to prove the conspiracy.
Double jeopardy—Similar offence—Similar offence of conspiracy relating to two different transactions—Different ingredient for both the conspiracy—Both constitute distinct offences.
Evidence Act, 1872—Section 10—Conspiracy—Proof of—Admissibility of act of one conspirator against another—Scope of admissible evidence to prove conspiracy.
This section, as the opening words indicate, will come into play only when the Court is satisfied that there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, that is to say, there should be a prima facie evidence that a person was a party to the conspiracy before his acts can be used against his co conspirators. Once such a reasonable ground exists, anything said, done or written by one of the conspirators in references to the common intention, after the said intention was entertained, is relevant against the others, not only for the purpose of proving the existence of the conspiracy but also for proving that the other person was a party to it. The evidentiary value of the said acts is limited by two circumstances, namely, that the acts shall be in reference to their common intention and in respect of a period after such intention was entertained by any one of them. The expression “in reference to their common intention” is very comprehensive and it appears to have been designedly used to give it a wider scope than the words “in furtherance of” in the English law; with the result, anything said, done or written by a co conspirator, after the conspiracy was formed, will be evidence against the other before he entered the field of conspiracy or after he left it. Another important limitation implicit in the language is indicated by the expressed scope of its relevancy. Anything so said, done or written is a relevant fact only “as against each of the persons believed to be so conspiring as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it”. It can only be used for the purpose of proving the existence of the conspiracy or that the other person was a party to it. It cannot be used in favour of the other party or for the purpose of showing that such a person was not a party to the conspiracy.
Appeal—Constitution of Bench—Substantial question of law—Existence of direct decision of Supreme Court on the question—Constitution of Larger Bench of five Judges is not necessary.
Conspiracy—Proof of—Act of one conspirator is admissible against co conspirator to prove the conspiracy.
JudgmentJudgment The statement given by the Judge on the grounds of a decree or order - CPC 2(9). It contains a concise statement of the case, points for determination, the decision thereon, and the reasons for such decision - Order 20 Rule 4(2). Section 354 of CrPC requires that every judgment shall contain points for determination, the decision thereon and the reasons for the decision. Indian Supreme Court Decisions > Law declared by Supreme Court to be binding on all courts (Art 141 Indian Constitution) Civil and judicial authorities to act in aid of the Supreme Court (Art 144) Supreme Court Network On Judiciary – Portal > Denning: “Judges do not speak, as do actors, to please. They do not speak, as do advocates, to persuade. They do not speak, as do historians, to recount the past. They speak to give Judgment. And in their judgments, you will find passages, which are worthy to rank with the greatest literature….” Law Points on Judgment Writing > The judge must write to provide an easy-to-understand analysis of the issues of law and fact which arise for decision. Judgments are primarily meant for those whose cases are decided by judges (State Bank of India and Another Vs Ajay Kumar Sood SC 2022)
Subba Rao, J—These appeals by special leave arise out of two judgments of the High Court of Bombay, one that of Vyas and Kotval, JJ., dated March 31, 1958, and the other that of Shah and Shelat, JJ., dated November 3, 1958, in what, for convenience of reference, may be described as the Empire Conspiracy Case.
2. At the outset it would be convenient to state briefly the case of the prosecution. One Lala Shankarlal, a political leader and Vice-President of the Forward Bloc and a highly competent commercial magnate, and his nominees held the controlling block of shares of the Tropical Insurance Company Limited, hereinafter called the “Tropical”, and he was the Chairman and Managing Director of the said company. He had also controlling voice in another company called the Delhi Swadeshi Co-operative Stores Ltd. The said Delhi Stores held a large number of shares of the Tropical. In or about the middle of 1948, Sardar Sardul Singh Caveeshar, who was controlling the People’s Insurance Co. Ltd. and other concerns in Lahore, and Kaul, a practising barrister, came to Delhi. During that year, the former was the President of the Forward Bloc and Shankarlal was its Vice President. Shankarlal, Caveeshar and Kaul conceived the idea of purchasing the controlling block of 63,000 shares of the Jupiter Insurance Company Ltd., hereinafter referred to as the “Jupiter”, a prosperous company, in the name of the Tropical from the Khaitan Group which was holding the said Jupiter shares. But the financial position of the Tropical did not permit the said purchase and so they thought of a fraudulent device of purchasing the said Jupiter shares out of the funds of the Jupiter itself. Under an agreement entered into with the Khaitan Group, the price of the 63,000 shares of the Jupiter was fixed at ` 33,39,000 / -, and the purchasers agreed to pay ` 5,00,000/- in advance as “black money” and the balance of ` 28,39,000 /-, representing the actual price on paper, within January 20, 1949, i.e., after the purchasers got control of the Jupiter. After the purchase, Shankarlal Group took charge of the Jupiter as its Directors after following the necessary formalities, sold the securities of the Jupiter for the required amount, and paid the balance of the purchase money to the Khaitan Group within the prescribed timeTime Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”). In order to cover up this fraud various manipulations were made in the relevant account books of the Jupiter. There would be an audit before the end of the year and there was every likelihood of detection of their fraud. It, therefore, became necessary for them to evolve a scheme which would bring in money to cover the said fraud perpetuated by the Directors of the Jupiter in the acquisition of its 63,000 controlling shares. For that purpose, Shankarlal and his group conceived the idea of purchasing the controlling interest in another insurance company so that the funds of that company might be utilised to cover up the Jupiter fraud. With that object, in or about September 1949, Shankarlal and 9 of his friends entered into a conspiracy to lift the funds of the Empire of India Life Assurance Company Ltd., hereinafter referred to as the “Empire”, to cover up the Jupiter fraud. This they intended to do by purchasing the controlling shares of the Empire, by some of them becoming its Directors and Secretary, and by utilising the funds of the Empire to cover up the defalcations made in the Jupiter. The following were the members of the conspiracy:(1) Shankarlal, (2) Kaul, (3) Mehta, (4) Jhaveri and (5) Doshi – all Directors of the Jupiter – and (6)Guha, the Secretary of the Jupiter, (7) Ramsharan, the Secretary of Tropical, (8) Caveeshar, the Managing Director of the People’s Insurance Co., (9) Damodar Swarup, a political worker who was later on appointed as the Managing Director of the Empire, (10) Subhedar, another political worker,, (11) Sayana, a businessman of Bombay, and (12) Bhagwan Swarup, the nephew of Shankarlal and a retired Assistant Commissioner of Income-tax of the Patiala State. After forming the conspiracy, the controlling shares of the Empire were purchased in the name of Damodar Swarup for an approximate sum of ` 43,00,000/-. For that purpose securities of the Jupiter of the value of ` 48,75,000/ were withdrawn by the Directors of the Jupiter without a resolution of the Board of Directors to that effect and endorsed in the name of Damodar Swarup again without any resolution of the Board of Directors to that effect, Damodar Swarup deposited the said securities in the Punjab National Bank Ltd., and opened a Cash-credit account in the said Bank in his own name. He also executed two promissory notes in favour of the said Bank for a sum of Rs.10,00,000/- and ` 43,00,000/- respectively. Having opened the said account, Damodar Swarup drew from the said account by means of 8 cheques a sum of ` 43,00,000/ and paid the same towards the purchase of the said Empire shares. Out of the said shares of the Empire, qualifying shares of twenty were transferred in each of the names of Damodar Swarup, Subhedar and Sayana, and by necessary resolutions Damodar Swarup became the Managing Director and Chairman of the Empire and the other two, its Directors, and Bhagwan Swarup was appointed its Secretary. The conspirators having thus taken control of the Empire through some of them, lifted large amounts of the Empire to the tune of ` 62,49,700/- by bogus sale and loans, and with the said amount they not only recouped the amounts paid out of the Jupiter for the purchase of its controlling shares and also the large amounts paid for the purchase of the controlling shares of the Empire. After the conspiracy was discovered, in due course the following ten of the said conspirators, i.e., all the conspirators excluding Shankarlal and another, who died pending the investigationInvestigation Purpose of all investigation is to reveal the unvarnished truth. The constitutional courts are duty bound to ensure that the truth is revealed., were brought to trial before the Court of the Sessions Judge for Greater Bombay under Section 120-B of the Indian Penal Code and also each one of them separately under S. 409, read with S. 109 of the said Code:(1) Kaul, (2) Mehta, (3) Jhaveri, (4) Guha, (5) Ramsharan, (6) Caveeshar, (7) Damodar Swarup, (8) Subhedar, (9) Sayana, and (10) Bhagwan Swarup.The gravamen of the charge against them was that they, along with Shankarlal and Doshi, both of them deceased, entered into a criminal conspiracy at Bombay and elsewhere between or about the period from September 20, 1950 to December 31, 1950 to commit or cause to be committed criminal breach of trust in respect of Government securities or proceeds thereof or the funds of the Empire of India Life Assurance Co. Ltd., Bombay, by acquiring its management and control and dominion over the said property in the way of business as Directors, Agents or Attorneys of the said Company. The details of the other charges need not be given as the accused were acquitted in respect thereof.
3. Learned Sessions Judge made an elaborate enquiry, considered the innumerable documents filed and the oral evidence adduced in the case and came to the conclusion that Accused 1, 2, 4, 5, 6 and 10 were guilty of the offence under S. 120-B, read with S. 409 of the Indian Penal Code and sentenced them to various terms of imprisonment. Accused 6, i.e., Caveeshar, was sentenced to suffer rigorous imprisonment for 5 years, and accused 10, i.e., Bhagwan Swarup, to rigorous imprisonment for period of 5 years and also to pay a fine of ` 2,000/- and in default to suffer a rigorous imprisonment for a further period of six months. He acquitted accused 3, 7, 8 and 9.
4. The State preferred an appeal to the High Court against that part of the judgment of the learned Sessions Judge acquitting some of the accused; and the convicted accused filed appeals against their convictions. The appeal filed by Caveeshar, Accused-6, was dismissed in limine by the High Court. The appeals filed by the other convicted accused against their convictions were dismissed and the appeal by the State against the acquittal of some of the accused was allowed by the High Court. Accused-7 was sentenced to 5 years’ rigorous imprisonment, Accused 8 to 3 years’ rigorous imprisonment, and Accused 9 to 3 years’ rigorous imprisonment.
5. Accused 6, 7, 8, 9 and 10 have by special leave preferred these appeals against their convictions and sentences. We are not concerned with the other accused as some of them died and others did not choose to file appeals.
6. At the outset it may be stated that none of the learned counsel appearing for the accused questioned the factum of conspiracy, nor did they canvass the correctness of the findings of the Courts below that the funds of the Empire were utilised to cover up the fraud committed in the Jupiter, but on behalf of each of the appellants a serious attempt was made to exculpate him from the offence. But, as the defalcations made in the finances of the Jupiter and the mode adopted to lift the funds of the Empire and transfer them to the coffers of the Jupiter will have some impact on the question of the culpability of the appellants, we shall briefly notice the modus operandi of the scheme of conspiracy and the financial adjustments made pursuant thereto.
7. We have already referred to the fact that Shankarlal Group purchased the controlling shares of the Jupiter from Khaitan Group and that as a consideration for the said purchase the former agreed to pay the latter ` 5,00,000/- as “black money” and pay the balance of about ` 28,39,000/- on or before January 20, 1949. After Shankarlal Group became the Directors of the Jupiter, they paid the said amount from and out of the funds of the Jupiter. To cover up that fraud, on January 11, 1949, the Directors passed a resolution granting a loan of ` 25,15,000/- to Accused 6, on the basis of an application made by him, on equitable mortgage of his properties in Delhi:(see Ex. Z-22-. They passed another resolution sanctioning the purchase of plots of the Delhi Stores, a concern of Shankarlal, for a sum of ` 2,60,000/-. It is in evidence that Accused 6 had no property in Delhi and that the said plots were not owned by the Delhi Stores. The said loan and the sale price of the plots covered by the said resolutions were really intended for drawing the money of the Jupiter for paying the Khaitan Group before January 20, 1949. But some shareholders got scent of the alleged fraud and issued notices; and the Directors were also afraid of detection of their fraud by the auditors during their inspection at the close of the year 1949. It, therefore, became necessary to show in the accounts of the Jupiter that the loan alleged to have been advanced to Accused-6 was paid off. For this purpose the Directors brought into existence the following four transactions:(1) a loan of ` 5,00,000/- advanced to Raghvji on November 5, 1949; (2) a loan of ` 5,30,000/- to Misri Devi on December 12, 1949; (3) a fresh loan of ` 5,30,000/- to Caveeshar, Accused-6, on November 5, 1949; and (4) a transaction of purchase of 54,000 shares of the Tropical for ` 14,00,000 /- on May 25, 1949 and December 20, 1949. These four fictitious transactions were brought about to show the discharge of the loan advanced to Caveeshar, Accused-6. Further manipulations were made in the accounts showing that parts of the loans due from Raghavji, Misri Devi and Caveeshar and also the price of the Tropical shares were paid by Caveeshar. These paper entries did not satisfy the auditors and they insisted upon further scrutiny. It is the case of the prosecution that Shankarlal and his co-conspirators following their usual pattern conceived the idea of getting the controlling interest of the Empire, which had a reserve of ` 9 crores. Jupiter securities worth about ` 45,00,000/- were endorsed in favour of Accused-7, who in his turn endorsed them in favour of the Punjab National Bank Ltd., for the purpose of opening a cash-credit account therein. On October 5, 1950, under Ex. Z-9,the controlling shares of the Empire were purchased from Ramsharan Group and the consideration therefor was paid from and out of the money raised on the Jupiter securities. The Directors of the Jupiter had to make good to the Company not only the amounts paid out of the Jupiter funds to purchase the controlling shares of the Jupiter, in regard to which various manipulations were made in the Jupiter accounts, but also about ` 45,00,000/- worth of securities transferred in the name of Damodar Swarup. Having purchased the controlling shares of the Empire, Shankarlal and his colleagues got their nominees, namely, Accused 7, 8 and 9 as Directors and Accused-10 as the Secretary of the Empire. On November 27, 1950, a resolution of the Directors of the Empire sanctioned the purchase of ` 20,00,000/ – worth of Government securities alleged to belong to the Jupiter. Though the securities were not delivered, two bearer-cheques dated October 26, 1950 and October 27, 1950 for ` 15,00,000/- and ` 5,00,000/- respectively were made out and cashed and the said moneys were utilised to cancel the loan alleged to have been advanced to Raghavji and for the purchase of the Tropical shares for ` 14,00,000 /-. But the conspirators had still to make good the securities transferred in favour of Accused-7 and other amounts. The Directors again sanctioned 12 loans, the first six on November 27, 1950 totalling ` 28,20,000 / and the other six on December 18, 1950 totalling ` 42,80,000/- admittedly to fictitious loanees 12 bearer-cheques for an aggregate of ` 71,00,000 / – were issued by Accused-10 between December 19 and 23, 1950. This amount was utilised for getting 5 drafts for different amounts in favour of Accused 1 and 2, the Directors of the Jupiter, Accused-4, its Secretary, and Accused-5, the Secretary of the Tropical; (see Ex. Z-230). The said drafts were sent to Bombay and one of the said drafts was utilised for paying off the loan of Misri Devi and the other drafts for ` 57,00,000/- were paid into the Jupiter account in the Punjab National Bank Ltd., Bombay. This amount was utilised to cover up the loss incurred by the Jupiter by reason of its securities worth about ` 45,00,000/- assigned in favour of Accused-7, and also by reason of the securities worth ` 20,00,000 / – alleged to have been sold to the Empire on November 27, 1950. It is, therefore, manifest, and indeed it is not disputed before us now, that Shankarlal and his conspirators, whoever, they may be, had conspired together and lifted large amounts of the Empire and put them into the Jupiter coffers to cover up the loss caused to it by their fraud. Therefore, in these appeals we proceed on the basis that there was a conspiracy as aforesaid and the only question for consideration is whether all or some of the appellants were parties to it.
8. Before dealing with the individual cases, as some argument was made in regard to the nature of the evidence that should be adduced to sustain the case of conspiracy, it will be convenient to make at this stage some observations thereon. Section 120-A of the Indian Penal Code defines the offence of criminal conspiracy thus.:
“When two or more persons agree to do, or cause to be done an illegal act, or an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy.”
The essence of conspiracy is, therefore, that there should be an agreement between persons to do one or other of the acts described in the section. The said agreement may be proved by direct evidence or may be inferred from acts and conduct of the parties. There is no difference between the mode of proof of the offence of conspiracy and that of any other offence:it can be established by direct evidence or by circumstantial evidence. But S. 10 of the Evidence Act introduces the doctrine of agency and if the conditions laid down therein are satisfied, the act done by one is admissible against the coconspirators. The said section reads:
“Where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to be so conspiring as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it.”
This section, as the opening words indicate, will come into play only when the Court is satisfied that there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, that is to say, there should be a prima facie evidence that a person was a party to the conspiracy before his acts can be used against his co-conspirators. Once such a reasonable ground exists, anything said, done or written by one of the conspirators in reference to the common intention, after the said intention was entertained, is relevant against the others, not only for the purpose of proving the existence of the conspiracy but also for proving that the other person was a party to it. The evidentiary value of the said acts is limited by two circumstances, namely, that the acts shall be in reference to their common intention and in respect of a period after such intention was entertained by any one of them. The expression “in reference to their common intention” is very comprehensive and it appears to have been designedly used to give it a wider scope than the words “in furtherance of” in the English law; with the result, anything, said, done or written by a co-conspirator, after the conspiracy was formed, will be evidence against the other before he entered the field of conspiracy or after he left it. Another important limitation implicit in the language is indicated by the expressed scope of its relevancy. Anything so said, done or written is a relevant fact only “as against each of the persons believed to be so conspiring as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it”. It can only be used for the purpose of proving the existence of the conspiracy or that the other person was a party to it. It cannot be used in favour of the other party or for the purpose of showing that such a person was not a party to the conspiracy. In short, the section can be analysed as follows:(1) There shall be a prima facie evidence affording a reasonable ground for a Court to believe that two or more persons are members of a conspiracy; (2) if the said condition is fulfilled, anything said, done or written by any one of them in reference to their common intention will be evidence against the other; (3) anything said, done or written by him should have been said, done or written by him after the intention was formed by any one of them; (4) it would also be relevant for the said purpose against another who entered the conspiracy whether it was said, done or written before he entered the conspiracy or after he left it; and (5) it can only be used against a coconspirator and not in his favour.
9. With this background let us now take the evidence against each of the appellants and the contentions raised for or against him. But it must be stated that it is not possible to separate each of the accused in the matter of consideration of the evidence, for in a case of conspiracy necessarily there will be common evidence covering the acts of all the accused. We may, therefore, in dealing with some of the accused, consider also the evidence that will be germane against the other accused.
10. We shall first take the case of Accused-6, Caveeshar, who is the appellant in Criminal Appeal No. 82 of 1962. So far as this appellant is concerned the learned Sessions Judge found that he was a member of the conspiracy and the High Court confirmed that finding. It is the practice of this Court not to interfere with concurrent findings of fact even in regular appeals and particularly so in appeals under Art. 136 of the Constitution. We would, therefore, approach the appeal of this accused from that perspective.
11. Learned counsel for this appellant argued before us that the said accused was convicted by the Sessions Judge for being a member of the conspiracy in the Jupiter case in respect of his acts pertaining to that conspiracy and therefore he could not be convicted over again in the present case on the basis of the facts on which the earlier conviction was founded; in other words, it is said that he was convicted in the present trial for the same offence in respect of which he had already been convicted in the Jupiter case and such a conviction would infringe his fundamental right under Art. 20(2) of the Constitution, and in support of this contention reference was made to certain decisions of the Supreme Court of the United States of America. The said Article reads:
“No person shall be prosecuted and punished for the same offence more than once.”
The previous case in which this accused was convicted was in regard to a conspiracy to commit criminal breach of trust in respect of the funds of the Jupiter and that case was finally disposed of by this Court in Sardul Singh Caveeshar vs. State of Bombay, 1958 SCR 161:(S) AIR 1957 SC 747. Therein it was found that Caveeshar was a party to the conspiracy and also a party to the fraudulent transactions entered into by the Jupiter in his favour. The present case relates to a different conspiracy altogether. The conspiracy in question was to lift the funds of the Empire, though its object was to cover up the fraud committed in respect of the Jupiter. Therefore, it may be that the defalcations made in Jupiter may afford a motive for the new conspiracy, but the two offences are distinct ones. Some accused may be common to both of them, some of the facts proved to establish the Jupiter conspiracy may also have to be proved to support the motive for the second conspiracy. The question is whether that in itself would be sufficient to make the two conspiracies the one and the same offence. Learned counsel suggests that the question raised involves the interpretation of a provision of the Constitution and therefore the appeal of this accused will have to be referred to a Bench consisting of not less than 5 Judges. Under Art.145 (3) of the Constitution only a case involving a substantial question of law as to the interpretation of the Constitution shall be heard by a Bench comprising not less than 5 Judges. This Court held in State of Jammu and Kashmir vs. Thakur Ganga Singh, AIR 1960 SC 356 that a substantial question of interpretation of a provision of the Constitution cannot arise when the law on the subject has been finally and effectively decided by this Court. Two decisions of this Court have construed the provisions of Art. 29 (2) of the Constitution in the context of the expression “same offence”. In Leo Roy Frey vs. Supdt. District Jail, Amritsar, (1958) SCR 822 at page No. 827 proceedings were taken against certain persons in the first instance before the customs authorities under S. 167 (8) of the Sea Customs Act and heavy personal penalties were imposed on them. Thereafter, they were charged for an offence under S. 120B of the Indian Penal Code. This Court held that an offence under S. 120B is not the same offence as that under the Sea Customs Act. Das, C. J., speaking for the Court, observed:
“The offence of a conspiracy to commit a crimeCrime A positive or negative act in violation of penal law; an offense against the state classified either as a felony or misdemeanor. is a different offence from the crime that is the object of the conspiracy because the conspiracy precedes the commission of the crime and is complete before the crime is attempted or completed, equally the crime attempted or completed, does not require the element of conspiracy as one of its ingredients. They are, therefore, quite separate offences.”
This Court again considered the scope of the words “same offence” in State of Bombay vs. S. L. Apte, (1963) 3 SCR 107 at page No. 114. There the respondents were both convicted and sentenced by the Magistrate under S. 409 of the Indian Penal Code and S. 105 of the Insurance Act. Dealing with the argument that the allegations of fact were the same, Rajagopala Ayyangar, J., rejecting the contention, observed on behalf of the Court:
“To operate as a bar the second prosecution and the consequential punishment thereunder, must be for ‘the same offence’. The crucial requirement therefore for attracting the Article is that the offences are the same, i.e., they should be identical. If, however, the two offences are distinct, then notwithstanding that the allegations of fact in the two complaints might be substantially similar, the benefit of the ban cannot be invoked. It is, therefore, necessary to analyse and compare not the allegations in the two complaints but the ingredients of the two offences and see whether their identity is made out.”
This decision lays down that the test to ascertain whether two offences are the same is not the identity of the allegations but the identity of the ingredients of the offences. In view of the said decisions of this Court, the American decisions cited at the Bar do not call for consideration. As the question raised has already been decided by this Court, what remains is only the application of the principle laid down to the facts of the present case. We cannot, therefore, hold that the question raised involves a substantial question of law as to the interpretation of the Constitution within the meaning of Art. 145(3) of the Constitution. 12. In the present case, applying the test laid down by this Court the two conspiracies are not the same offence:the Jupiter conspiracy came to an end when its funds were misappropriated. The Empire conspiracy was hatched subsequently, though its object had an intimate connection with the Jupiter in that the fraud of the “Empire was conceived and executed to cover up the fraud of the Jupiter. The two conspiracies are distinct offences. It cannot even be said that some of the ingredients of both the conspiracies are the same. The facts constituting the Jupiter conspiracy are not the ingredients of the offence of the Empire conspiracy, but only afford a motive for the latter offence. Motive is not an ingredient of an offence. The proof of motive helps a Court in coming to a correct conclusion when there is no dire evidence. Where there is direct evidence for implicating an accused in an offence, the absence of proof of motive is not material. The ingredients of both the offences are totally different and they do not form the same offence within the meaning of Art. 20 (2) of the Constitution and, therefore, that Article has no relevance to the present case.
13. The next question is whether this appellant was a party to the Empire conspiracy. He was a close associate of Shankarlal in the Political field, he being the President of the Forward Bloc and Shankarlal being its Vice-President. That is how they were drawn together. There is also evidence that out of the 63,000 shares of the Jupiter that were purchased in August 1949 by Shankarlal Group, 4475 shares were allotted to this appellant. It is, therefore, clear that Accused-6, though ex facie he was neither a Director nor an office-bearer in the Jupiter, had heavy stakes in it. We have already noticed that after the purchase of the said shares from and out of the Jupiter funds, a bogus loan in the name of Accused-6 for a sum of ` 25,15,000/- was shown in the Jupiter accounts and later on it was substituted by other manipulations. That he was a willing party to these manipulations is also made clear by Exs. Z-305A and Z-125 which record the second loan in favour of this accused. Ex. Z-305A is a receipt passed by Accused-6 to the Tropical acknowledging the receipt of a sum of ` 26,15,563/10/6 in full settlement of the amount advanced by him to them against the proposed purchase of their building and plots of land. It is not disputed that this transaction was only a bogus one brought about to cancel the fictitious loan given to Accused,6; and this indicates that this accused was taking active part in the manipulations of the Jupiter accounts. Ex. 125 is another receipt passed by Accused-6 to the Jupiter for having received a sum of ` 5,30,000/- on December 27, 1949. This is, as we have already stated earlier, one of the devices adopted to cancel the earlier bogus loans. This also establishes the complicity of this accused in the Jupiter tranctions. It is, therefore, clear that Accused.6 had an ample motive to join the conspiracy to lift the Empire funds to cover up the defalcations made in the Jupiter. Ex. F dated March 17, 1949 is a letter written by Accused-6 to one Chopra, a broker, wherein he authorized the said Chopra to negotiate the purchase of majority of the share of the Empire or at least a minimum of 2,200 shares of the above Company from M.S. Ram Ratan Gupta, Gulab Chand Jain and/or their nominees or friends. He informed Chopra that the rate would be approved “by us” from time to time and that he would be paid a consolidated brokerage of ` 40,000/-. Though this letter was written about 1 1/2 years before the alleged conspiracy, it was subsequent to January 29, 1949 the date when the Jupiter securities were purchased from and out of the Jupiter funds by making necessary manipulations in their accounts. This was the first indication of the conception of the scheme of conspiracy to get at the Empire funds. This shows that, along with Shankarlal, Accused-6 was also a brain that gave the direction to the conspiracy. The letter also indicates that Accused-6 expected that the purchase of the majority of shares of the Empire would take considerable time and also that it would be by bits or in small blocks, for he said in the letter that the rate would be approved by them from time to time. The words “by us” in the letter further show that he was not writing the letter only for himself but on behalf of a group and he was only one among many who were seeking to purchase the Empire shares P.W. 1, who was doing business in the name of Chopra and Co., deposed in regard to this document. He said that in pursuance of the authority given to him by Accused-6 he negotiated for the purchase of the Empire shares; he also spoke to the fact that the words “by us” in the authority meant the group consisting of Accused-6, Shankarlal and Accused-1 and that he corresponded with Shankarlal subsequently in respect of the said negotiations. In the said circumstances, the time lag between the letter and the period of conspiracy for which the accused are charged is not in itself sufficient to detract from its evidentiary value. In the context of the subsequent events this letter certainly connects Accused-6 with the Empire fraud.
14. The next circumstance against Accused-6 is that out of the sum of ` 20,00,000/- paid by the Empire to the Jupiter as the price for the alleged purchase of securites of the former from the latter went to cancel the false entries of transactions made in the Jupiter accounts. We have already stated earlier that the original loan of ` 25,15,000/-alleged to have been given to Accused-6 was, by subsequent manipulations, wiped out by four different transactions, including a fresh loan in favour of this accused. The said money was used to cover up the loan of ` 5,00,000/-alleged to have been given to Raghavji and the alleged purchase of 54,000 Tropical shares for ` 14,00,000/-. This transaction is a further proof that with the knowledge of Accused-6 the Empire funds were utilised to cancel the false transactions entered into by him and others and to cancel the false entries made in the Jupiter accounts.
15. What is more, he had taken a keen and active interest in inducing the Chief of Bagarian to take a heavy loan of Rs, 77,50,000/- on the security of his properties with a view to cover the misappropriations of the Empire funds. The details of the said alleged loan and the part taken by him we shall consider at a later stage, but briefly the transactions were entered into under the following circumstances:On January 24, 1951 there was a police raid on the Empire office. On January 30, 1951 the Directors of the Empire sanctioned a loan of ` 77,50,000/- to the Chief of Bagarian who, it is said, agreed to set off the amount of the earlier loans amounting to ` 71,00,000/- and take only the balance, for, it is said, that there was some arrangement between him and Shankarlal that he would pay that amount directly to the Chief of Bagarian. P. W. 85 is Jagdisnarayan Kanojia, an architect practising in Delhi and his evidence is as follows:He met Accused-6 who told him that a valuation of the estate of the Chief of Bagarian had to be made and asked him to accompany him for that purpose; he was introduced to Uttam- prakash and Ardhamansingh. i.e., the chief of Bagarian, who took him to the estate; the witness took a rough measurement of the properties shown by Ardhamansingh; he gave the original report of valuation to Accused-6 and a copy of it to Uttamprakash. Haridhan- singh, the son of the Chief of Bagarian, was examined as P. W. 99 and he deposed that he talked with Accused-6 on several occasions to find some financier to help him to develop his lands that in February 1951 he was introduced to Shaukarlal and that during his conversation with him Accused-6 was also present; he fur- ther said that, though he had not received the money, he executed promissory notes in favour of the Empire to the effect that he had received the value, thereof in cash, because Shankarlal told the money would be paid in instalments by the Empire and that he would send the promissory notes as and when money was paid to him from time to time. He admitted that he signed the documents though he did not know Shankarlal, as he was assured by Accused-6 that he could do so. Except for immaterial variations, he stuck to the version in the cross-examination. P. W. 98 was the Chief of Bagarian. He knew Accused-6 and was related to him. He was also at one time the Chairman of the People’s Insurance Company Ltd. of which Accused-6 was the Managing Director. The evidence of these three witnesses establishes that Accused-6 was related to the Chief of Bagarian, that he introduced the son of the Chief of Bagarian to Shankarlal and induced him to enter into a huge transaction with the Empire by mortgaging his properties with a condition that the amounts lent, except a few lakhs, would not be paid to him directly, but Shankarlal would do so later on and that he took active interest in pushing through the transaction by getting the properties of the son of the Chief of Bagarian valued by an architect. The fact that this transaction did not ultimately fructify is not material; what is important is that Accused 6 used his influence and relationship with the Chief of Bagarian and his son, got a resolution passed by the Empire sanctioning a huge sum of ` 77,50,000/- to the son of the Chief of Bagarian to cover up the earlier fraud presumably to escape the inevitable criminal proceedings indicated by the police raid. If Accused 6 was not a party to the conspiracy, why did he take such urgent steps to avert the danger? Having regard to the other circumstances, his active interest in promoting this loan probabilizes his hand in the conspiracy.
16. Both the Courts on the basis of the aforesaid evidence came to the conclusion that Accused 6 was a member of the conspiracy and we cannot say that there is no evidence on which the Courts could have come to the conclusion to which they did. There are no permissible grounds for upsetting this finding under Art. 136 of the Constitution.
17. As regards the sentence passed against this accused, the Sessions Judge sentenced him to undergo rigorous imprisonment for a period of 5 years, whereas he sentenced Accused 7, 8 and 9 to undergo rigorous imprisonment for a period of 3 years only. We do not see any justification for this distinction between the said accused in the matter of punishment. Accused-6 had already been convicted and sentenced in the Jupiter case; and on the evidence it does not appear that he had taken a major part in the Empire conspiracy, though be was certainly in it. In the circumstances, we think that a sentence of 8 years’ rigorous imprisonment would equally suffice in his case. We therefore, modify the sentence passed on him and sentence him to undergo rigorous imprisonment for 3 years. Subject to the aforesaid modification, the appeal preferred by Caveeshar, Accused-6, is dismissed.
18. We shall now proceed to consider the appeal preferred by Damodar Swarup, Accused-7, i.e., Criminal Appeal No. 83 of 1962. Accused-7 was the Managing Director and, Chairman of the Empire during the period of the conspiracy. On October 17, 1950, he was elected the Chairman of the Board of Directors of the Empire and appointed as Managing Director on a salary of ` 2,000/- per month for a period of one year. He was removed from the post of Managing Director at the meeting of the Board of Directors held on March 12, 1951. The misappropriation of the funds of the Empire, which is the subject-matter of the conspiracy, were committed during the period of his Managing Directorship i.e., between September 20 and December 31, 1950. The prosecution case is that Accused-7 was a party to the conspiracy, whereas the defence version is that he was a benamidar for Shankarlal, that he took part in the proceedings of the Board of Directors bona fide believing that there was nothing wrong, that the resolutions were implemented by Accused-10 under the directions of Shankarlal and that the amount (sic) he had a suspicion that there was some fraud, he took immediate and effective steps not only to prevent the rot but also to investigate and find out the real culprits. The question is which version is true.
19. It would be useful to have a correct appreciation of the evidence to know the antecedents of Accused-7. Shri Sri Prakasa, the erstwhile Governor of Bombay, who has been associated with accused 7 in his political life was examined as a defence witness and he gave some facts of the past life of the accused-7. According to him he and accused 7 were closely associated in the work of the U. P. Provincial congress Committee and for some time Accused-7 was also the President of the said committee, he was in jail for nearly 25 years in connection with his political work, he was also connected with the Kashi Vidyapith for 3 or 4 years from 1924 or 1925 onwards, he was arrested in, what is called, the Kazori case and was tried along with others for the offence of conspiracy to loot the Government treasury during 1929-30 when the witness was the General Secretary of the U. P. Provincial Congress Committee. Accused-7 was one of the active workers. Shri Jawaharlal Nehru, the present Prime Minister of India, deposed that Accused-7 was a member of the Parliament and also of the Constituent Assembly. It may, therefore, be taken that Accused-7 has vast experience of men and matters and had occupied important position in the public and political life of the country. Accused-7 has described in his written statement filed in the Sessions Court how he came into contact with Shankarlal. Being a political leader, he came into contact with various national leaders of eminence; one of them being Shankarlal; on one occasion when this accused was seriously ill after his release from jail, he was attended to by Shankarlal and his wife at their residence; sometime prior to October 1950 Shankarlal expressed to him that he had a plan to purchase the shares of the Empire and requested him to be its Managing Director benami for him, as he could not in law be the Managing Director for two companies; when he expressed his unwillingness, as, if he accepted it, he would have to give up his political career, Shankarlal promised that he would personally direct the operations and that he would give him the assistance of a competent Secretary, who would practically carry on the administration with the least possible demand on his time; and that he would make an alternative arrangement to relieve him soon of the responsibility so that he would be free to devote himself completely to his political life. It may therefore, be said that Accused 7 was an important figure in the political field and that he accepted the Managing Directorship of the Empire as he was a friend of Shankarlal and was, to some extent, beholden to him.
20. The first document which throws some light as to how this accused had been inducted into the transaction of the purchase of the controlling shares of the Empire is Ex. 53 dated September 20, 1950. It is a letter written by Shankarlal to Kaul, Accused 1. Shankarlal said therein that he understood that Kaul was not prepared to sell ` 45,00,000/worth of Jupiter securities direct to Accused 7 but as Chairman and Managing Director of Jupiter he was ordering him to sell the said securities to Accused 7 and endorse them in his favour and that as he would be returning the securities in two or three days, no Board resolution was necessary for that purpose. This letter clearly shows that before September 20, 1950 Accused 7 agreed to the endorsement of Jupiter securities in his favour. Ex 234 is a letter dated September 21, 1950 written by Accused 7 to Kaul. In that letter Accused 7 stated that Shankarlal asked him to proceed to Bombay immediately, but, as he was under the impression that the plan had not materialised he had undertaken to make certain important engagements and, therefore, he could proceed to Bombay only in the first week of October and reach that place on 4th of that month. He enquired of him to let him know by wire the latest date by which he should reach Bombay and the number of days for which he should stay there in the first instance. It was also mentioned in that letter that it was a long time since he and Shankarlal had a talk about the “affair”. This letter shows that Accused 7 had a discussion with Shankarlal some time before September 21, 1950 and that he had agreed to the plan suggested by him. It also indicates that Accused 7 was led to believe that he had to stay at Bombay for a fairly long time. Three words in this letter are commented upon, viz., “plan”, “laws” and “materialised”. The use of the cryptic terms “plan” and “affairs” read along with the expression “materialised” savours of secrecy and conspiracy. This letter in itself may not be decisive of the question that Accused 7 had knowledge of the entire sinister plan of misappropriating the Jupiter funds, but, it, along with Ex. 53, leaves no room to doubt that Accused 7 knew that it was part of the plan to endorse the Jupiter securities in his favour and that out of the moneys raised on the said securities, the controlling shares of the Empire would be purchased at Bombay and that he had to go to Bombay for that purpose. Ex. 6 dated September 25, 1950 is a letter written by Kaul to Accused 7 in reply to Ex Z-234. Therein he reminded him that the matter practically materialised and that Accused 7 had to go to Bombay and stay there permanently. Kaul wrote another letter to Accused 7 on October 12, 1950, wherein he asked the latter to go to Bombay on the 15th and stay at Hotel Majesty and that he had to take charge on the 16th. He also informed Accused 7 that nothing could be done without his presence, as he was the principal party in the transaction, Accused 7 was also told that Kaul and Shankarlal would be at Bombay. Presumably, Accused 7 wrote to Kaul for the postponement of the meeting at Bombay to 19th. Kaul gave two wires to Accused 7 (Ex. 49) telling him that the matter could not be postponed to 19th and that Accused-7 should go to Bombay on the 15th evening. In the said wires he stated that if Accused 7 did not turn up on that date, they would lose lakhs and would suffer irreparable loss. If the bargain fell through why would, to use a neutral term, Shankarlal group lose lakhs and suffer irreparable loss. The purchase of the controlling shares was, therefore mainly intended to prevent loss to that group. What was that loss? It can only be the loss that might result if they failed to control the Empire and thereby cover up the fraud of the Jupiter and if that bargain had fallen through the fraud of the Jupiter might be exposed. The other loss to the group could possibly be the rise in the price of the Empire shares. But there is nothing on the record to show that they were purchasing the shares of the Empire at a low price. In the circumstances, it is reasonable to infer that Accused 7 knew that the plan, if not carried out, would cause loss to Shankarlal group. It is not disputed that securities to the tune of ` 45,00,000/- belonging to the Jupiter were endorsed by Kaul in favour of Accused 7, who in his turn endorsed them in favour of the Punjab National Bank Ltd., Bombay, to open a cash credit account therein.
21. Pausing here, one may ask the question whether Accused-7 could be ignorant of the fact that the securities of the Jupiter could not be utilised for the purchase of the controlling shares of the Empire in his name. Learned counsel appearing for him argued that he thought that the securities belonged to Shankarlal and that they were endorsed over to him only in order to purchase the controlling shares of Empire benami for Shankarlal. Admittedly the securities were not endorsed over to Shankarlal as they should have been, if he had purchased them. If he had paid the money to the Jupiter in the name of Accused- 7 and got the said securities directly endorsed to Accused-7, it would mean that Shankarlal had the ready cash of about ` 45,00,000/- with him. If he had that much cash, what was the necessity to adopt the circuitous method of purchasing the securities of the Jupiter, deposit them in the Bank as security, raise money thereon and then pay it towards the consideration for the purchase of the shares of the Empire ? The easier method would have been to put the cash in the Bank itself in the name of Accused-7 and purchase the Empire shares directly in his name. If by doing so, the real character of the transaction would be known, equally would it be known if the money was raised on the basis of the Jupiter securities endorsed over in the name of Accused- 7. It could, therefore, have been obvious to a man of ordinary intelligence that the securities belonged to the Jupiter and that they were endorsed over to him for the purpose of raising money for the purchase of the Empire shares for and on behalf of Shankarlal group. It is, therefore, very difficult to accept the contention that Accused-7 honestly believed that the said securities were the property of Shankarlal.
22. Looking at the transaction from an aspect most favourable to Accused- 7, one cannot but come to the conclusion that he thought that there was nothing wrong in utilizing the securities of one company for purchasing shares of another company for the benefit of others, as he believed that Shankarlal would as early as possible restore the said securities or their value to the Jupiter. This act of Accused is a decisive circumstance against him and the explanation offered by him is too thin for acceptance.
23. Accused-7, thereafter, endorsed the said securities in favour of the Punjab National Bank Ltd. and executor promissory notes in favour of the Bank and opened a cash-credit account therein on which he drew cheques to pay the price of the Empire shares to Ramsharan Behari Lal group. Ex. Z-9 dated October 5, 1950 is the agreement entered into between Behari Lal Ramsharan on the one part and Damodar Swarup on the other part whereunder the said shares were sold in favour of the latter. In this context the evidence of Naurangrai, a broker who brought about the said transaction may be considered. He was examined as P. W. 22. He said that he came to Bombay on 14th or 15th October 1950 and that the object of his visit was to see that the balance of the consideration for the agreement was paid to Ram Ratan and delivery of the shares was taken. He met Shankarlal at Dhanraj Mahal and at that time Accussed 1 and 7 were present. Shankarlal told him that he had arranged to pledge Government securities of the Jupiter with the Punjab National Bank for raising money. If this witness was speaking the truth, this evidence clearly imputes knowledge to Accused 7 of the fact that Jupiter securities were utilized for raising money. There is nothing inherently wrong with this evidence. As the broker was pressing for payment of money to the sellers of the shares, it was natural for Shankarlal to tell him that he was raising money on the said securities to pay them. The presence of Accused-7 would not have deterred him from saying so, if Accused-7 had knowledge of the fact. The circumstances already noticed by us probabilizes his knowledge rather than his ignorance of the said fact and this evidence is consistent with that inference. But in the cross-examination the statement made by this witness to the police was put to him. There he had said that he returned to Bombay on the 16th with the intention of getting his commission and that on his arrival Shankarlal had made arrangements for pledging the securities. . If he had returned only on the 16th, it is argued, he could-not have met Shankarlal on the 15th, and that one or other of the dates must be a mistake. Though we would not have acted upon the evidence of this witness in regard to this matter if that was the only piece of evidence, we do not see any reason to disbelieve his evidence as regards his meeting Shankarlal when he was with Accused-7. The conversation he had with Shankarlal was quite appropriate and natural in the circumstances under which he met him. Learned counsel for Accused-7 reminds us that the said accused is deaf and that the said conversation might have escaped his attention. But there is no material on which we can judge the intensity of his defect . Be it as may, it is only a piece of evidence which must be judged along with the other evidence in the case.
24. Then we come to the evidence relating to the period after Shankarlal, group took control of the Empire. After Damodar Swarap purchased the controlling shares, only the qualifying shares for Directorship were kept with him and the rest were endorsed over to other persons; qualifying shares were endorsed in the names of Accused 8 and 9. On October 17, 1950 at the meeting of the Board of Directors of the Empire, Damodar Swarup, Accused-7, was elected Chairman of the Company and Accused 9 was co-opted as Director. Accused-7 was also appointed the Managing Director on a salary of ` 2,000/- per month for one year and Accused-10 was appointed the Secretary of the Empire on a salary of ` 1,350/- per month. The Managing Director was authorized to purchase a car costing not more than ` 15,000/. for his use. Under one of the resolutions passed in that meeting the Managing Director was authorized to open accounts bank or banks as may be deemed necessary for the Company and to operate singly on any of the accounts of the Empire on any of the Bank or Banks and to negotiate all bills, notes etc. The Secretary was also authorized to operate on any account of the Company with any bank. In this meeting Accused-7 was made the Chairman of the Board of Directors and the Managing Director of the company with all the powers of Managing Director to open accounts, to operate on them and to negotiate bills, notes etc. Shankarlal was on all accounts a very powerful and able man who made a mark not only in politics but also in business. Would such a man make Accused-7 the Managing Director of the Empire with extensive powers if he was not a conspirator ? If Accused-7 was not a party to the colossal fraud, would Shankarlal and his group take the risk of certain chance if disclosure by placing him at the helm of affairs ? It is said that he was a figurehead and the real and effective man was the Secretary. However competent the Secretary may be, Accused-7 is also a competent man in his own way. With his vast powers, it is impossible to assume that such an intelligent man as Shankarlal would have believed that Accused- 7 could not see through the game though not immediately, but sooner or later. Soon after the new Directors took charge of the Empire negotiations were started between the Jupiter and the Empire for the sale of certain securities worth ` 20,00,000/- through one broker Kohli, who was carrying on business in the firm name of Vilaytilal Kohli and Co. Ex. Z-218 dated October 26, 1950 is a letter sent by the secretary of the Empire in reply to Kohli’s enquiry in his letter dated October 19, 1950 whether the Empire was willing to buy the securities. It was stated therein that his suggestion was placed before the Managing Director and the same had been approved by him and that they were prepared to buy the securities and make an advance payment. It is said that the reference to the Managing Director was only made in conformity with form. At the Directors’ meeting held on November 27, 1950 a resolution was passed to the effect that “the following further investments made with the consent of the Managing Director be recorded and approved.” The proceedings wherein that resolution was passed is Ex. Z-206L. In that meeting Accused-7 was present. One of the investments approved was the purchase of ` 20,00,000/- worth of Government securities from the Jupiter, soon after the alleged purchase, two bearer-cheques (Ex. Z-216) dated October 26, 1950 and October 27, 1950 for ` 15,00,000/- and ` 5,00,000/- respectively were issued and cashed to cover up the defalcation made in the Jupiter. The securities were delivered only on November 27, 1950. This transaction discloses that soon after Accused-7 took charge of the Empire as Managing Director, ` 20,00,000/- from the Empire were diverted to the Jupiter under the pretext of purchase of shares which were delivered only one month thereafter. This transaction coming as it was so soon after Accused-7 became the Managing Director of the Empire is consistent with his knowledge that the main purpose of taking control of the Empire was to divert its money to Jupiter. There was also no explanation why so soon after Accused-7 took charge as Managing Director of the Empire, the Secretary should have tried to deceive him by inserting a false recital in the letter he wrote to the broker that his letter for purchasing securities and making advance payment had the approval of the Managing Director. At that time they were on best terms and there was no conflict between them. We are, therefore, inclined to hold that Accused-7 had knowledge of the said transaction and was a willing party to make the advance payment of ` 20,00,000/- to the Jupiter, though the securities were not delivered. It is not disputed that this was admittedly an exception to the practice obtaining in the Empire not to make advance payments against future deliveries.
25. At the meeting of the Board of Directors held on November 27, 1956 at which Accused-7 presided, another resolution was passed and it was:
“The sales of 3% Govt. loan 1953/65 of the face value of as. 90,60,000/- at ` 90-4-0 per cent through the Punjab National Bank Ltd., Bombay, was approved and confirmed. The following arrangements made by the Managing Director with the Bank was recorded:
“That the Bank should credit immediately the sale proceeds of the loan referred to above at the rate mentioned above less Bank’s commission at 1/16 per cent, on the face value and a margin of 5% and further subject to the necessary adjustments by way of interest less income-tax due. The margin of 5% reserved by the Bank might have to face in disposing of the whole lot of ` 90,60,000/- against the corresponding purchase of other securities.” This arrangement is described as marginal account. Ex. Z-368 is a memorandum sent by the Punjab National Bank to the Empire giving an abstract of the details of the said transaction. It will be seen from this that price of this large block of securities was credited to the Empire and 5% of the same was kept as margin money to cover the loss the Bank might incur if and when those securities were actually sold. This is the first time in its history this Bank entered into such a speculative transaction and for that purpose large block of securities were removed from the long standing safe custody account of the Imperial Bank and transferred to the Punjab National Bank. It became necessary to enter into this extra-ordinary transaction with the Punjab National Bank as large defalcations made in the Jupiter required to be covered up. The resolution in term says that the Board approved the above arrangement made by the Managing Director. It is impossible to believe that this extraordinary transaction escaped the attention of the Managing Director. .
26. On December 18, 1950 another meeting of the Board of Directors of the Empire was held and Accused-7 again presided over it. In that meeting the minutes of the previous meeting held on November 27, 1950 were read and confirmed. The Managing Director did not question at this meeting the correctness of the statement recorded in the earlier that the arrangement was approved by him. It is rather difficult to believe that this huge transaction which is much out of the way, escaped his attention or that he blindly took part in the meetings believing in bona fide that everything was going on regularly.
27. What is more, this large amount was operated upon for advancing loans to bogus debtors. In the meeting of the Board of Directors held on November 27, 1950, six propositions for advance of loans on equitable mortgages of properties totalling to ` 28,20,000/were placed before it. The Board resolved to lend the amount to the said applicants. It is not disputed before us that the said loanees were all fictitious persons and indeed the moneys advanced on those loans went into the coffers of the Jupiter. Under the resolutions the only condition imposed for granting the loans was that they were subject to the title of each of the borrowers to his respective property being found clear and satisfactory by the solicitor or counsel approved by the company. It would be seen that the loans were sanctioned without any valuation report or any investigation whatsoever. Learned counsel for Accused 7 contends that it was the practice of the Board to sanction loans subject to the title being found clear on investigation and that after the resolutions were passed, it was the duty of the Secretary or the Managing Director to consult the solicitors or the legal advisers of the Company and ask for their report about the titles of the properties concerned and that his client bona fide believing that the said practice would be followed did not raise any objection. It is true that the record discloses many instances wherein loans were granted subject to security of title by the legal advisers of the Company, but in the resolutions in question a little variation was made, which though appears innocuous gives room for fraud as it stated that the scrutiny of title might be made not by the Company’s Advocates but by any Advocate approved by the Company. Be it as it may, the real point is that soon after Accused-7 took over the management of the Company, when large block of securities of the Company were sold and applications for loans of huge amounts were made, if Accused-7 was not a party to the fraud, he would certainly have insisted upon further scrutiny in the matter, particularly in regard to the properties before the loans were advanced. This attitude on his part may be contrasted with that adopted by him when the application on behalf of M/s. Jaswant Straw-Board Mills Ltd. was placed before him on November 4, 1950, when it was resolved that the loanees should be asked to produce additional security. This difference in attitude on the 27th has a sinister meaning. On December 18,1950 the Secretary placed before the Board of Directors six propositions received for advance of loans by the Company on equitable mortgage of property comprising buildings; see Ex. Z-206M. The total of the amounts came to ` 42,80,000/-. Accused-7 was present at that meeting. The minutes of the previous meeting were read and approved and the Board resolved to give the loans subject to the title of the borrower to the property being found clear and satisfactory by the Solicitor or counsel approved by the Company. It is also not denied that the applicants were all fictitious persons and the money really passed on to the Jupiter. The same arguments advanced in connection with the earlier six loans are again repeated, and for the same reasons we find it difficult to hold that Accused-7 bona fide believed that the resolutions were passed in the usual course. The two sets of loans together total about ` 71,00,000/-. The fact that within a short period after Accused-7 and his friends took over the management of the Company securities of the Company worth ` 90,00,000/- were sold and ` 71,00,000/- were lent to others must have been an eye opener to an honest Managing Director. It is impossible to believe that any Secretary or an Office bearer of the Company would conceive and execute such a huge fraud if he was not certain that the Managing Director was also in it. The raising of the money on the securities of the Jupiter endorsed in his favour, the purchase of the controlling shares of the Empire in his name from and out of that money, the taking over of the management of the Empire by nominally allotting from and out of the shares so purchased 20 qualifying shares to each one of the accused, viz., accused 7, 8 and 9, his approval of the resolution soon after he became the Managing Director to advance a sum of ` 20,00,000/. to Jupiter against a subsequent delivery of securities and also his approval of the resolution to sell ` 90,00,000/worth of Empire securities and opening a marginal account in the Punjab National Bank Ltd., and the resolutions sanctioning loans of ` 71,00,000/. to applicants without proper scrutiny if taken together disclose a scheme of fraud to which he was a party.
28. Ex. 622 is a letter dated December 19, 1950 which throws further light on the knowledge of the accused to the conspiracy. The letter was addressed by Accused-7 to the broker. It reads:
“I beg to confirm having purchased from you the following securities which I have already received from you duly endorsed into my favour by your seller.
Rs. 2,00,000/- 2 1/2% 1954 load @ 98/12/-.
Rs. 2,75,000/- 3%1970/75 Loan @ 97./8-0.
Rs. 23,40,000/- 3% Conversion 1946 Loan @ ` 93/-.
Rs. 9,50,000/. 3% Bombay 1962 @ 98/2/.
Rs. 1,00,000/- 3% 1963/65 Loan @ ` 98/0/6.
As per your desire I am arranging to make the payment for the above securities direct to your seller the Managing Director of the Jupiter General Insurance Co. Ltd. as I am leaving for Delhi and they will pass you the necessary receipts for the payment received.” The securities which are worth about ` 38,65000/- correspond to some of the securities endorsed over to Accused-7 for raising money for purchasing the controlling shares of the Empire. This letter shows that Accused-7 was paying the price of the securities direct to the seller, the Managing Director of the Jupiter, indicating thereby that he knew that the securities were those of the Jupiter and not of Shankarlal. If this letter was true, it would clearly impute knowledge to Accused-7 that the securities endorsed over to him were those of the Jupiter. It is common case that this documeat was not utilized for the purpose for which it was intended, but was found with Accusedl0. When this was put to Accused 7 he said:
“I do not know Vilayatilal Kohli and Co. and had not met any of those persons. This typed letter was also put before me by Bhagwan Swarup asking me to sign it as a Benamidar for Shankarlal. I felt a bit surprised as to why Shankarlal wanted this letter to be signed by me. I inferred that perhaps he wanted to show the outside world that I was the real purchaser of the Company and so I signed the letter.” By this answer Accused-7 admits that he had signed the letter knowing its contents. Learned counsel for this accused contends that this letter was not required for any purpose of the Empire and no explanation was given why it should be found with Accused-10 and that on the date which it bears Accused-7 was not in Bombay. But this criticism would not answer the clear implication of the knowledge of Accused-7 of the contents of the letter, for whatever purpose it might have been executed it was admittedly signed by Accused-7 with the knowledge of its contents and this certainly supports the inference that he had knowledge of the fraud.
29. Learned counsel for Accused-7 contends that the following two important circumstances in this case established that Accused-7 was a victim of circumstances and that he was innocent:(1) Two prominent public men of this country with whom the accused worked gave evidence that he was a man of integrity; and (2) the accused took active steps to unravel the fraud and to bring to book every guilty person; if he was a conspirator, the argument proceeds, it was inconceivable that he would have taken such steps, for it would have certainly recoiled on him. We shall consider these two aspects now.
30. Mr. Sri Prakasa in his evidence said that from what he knew of Damodar Swarup for the last 32 years he was a person of high integrity, noble character and of patriotic fervour. Mr. Jawaharlal Nehru said in his evidence that he knew Damodar Swarup for nearly 40 years and that he had known him in the political field as a very earnest and enthusiastic worker and that he had often been in prison with him and that he always had respect for his sincerity. He added that the accused was a simple man, who was not too clever and who had nothing to do with business and that he was deaf. The evidence of these witnesses establish that in their opinion the accused was a man of integrity, sincerity and simplicity. The question is what is the evidentiary value of good character of an accused in a criminal case. The relevant provisions are S. 53 and the explanation to S. 55 of the Evidence Act. They read:
“Section 53. In criminal proceedings the fact that the person accused is of a good character is relevant.
Explanation to S. 55. In Ss. 52, 53, 54 and 55, the word “character” includes both reputation and disposition:but except as provided in S. 54, evidence may be given only of general reputation and general disposition, and not of particular acts by which reputation or disposition were shown.”
It is clear from the said provisions that the evidence of general reputation and general disposition is relevant in a criminal proceeding. Under the Indian Evidence Act, unlike in England, evidence can be given both of general character and general disposition. Disposition means the inherent qualities of a person; reputation means the general credit of the person amnongst the public. There is a real distinction between reputation and disposition. A man may be reputed to be a good man, but in reality he may have a bad disposition. The value of evidence as regards disposition of a person depends not only upon the witnesses’ perspicacity but also on their opportunities to observe a person as well as the person’s cleverness to hide his real traits. But a disposition of a man may be made up of many traits, some good and some bad, and only evidence in regard to a particular trait with which the witness is familiar would be of some use. Wigmore puts the proposition in the following manner.
“Whether, when admitted, it should be given weight except in a doubtful case, or whether it may suffice of itself to create a doubt, is a mere question of the weight of evidence, with which the result of admissibility have no concern.”
31. But, in any case, the character evidence is very weak evidence; it cannot outweigh the positive evidence in regard to the guilt of a person. It may be useful in doubtful cases to tilt the balance in favour of the accused or it may also afford a back-ground for appreciating his reactions in a given situation. It must give place to acceptable positive evidence. The opinion expressed by the witnesses does credit to the accused, but, in our view, in the face of the positive evidence we have already considered, it cannot turn the scale in his favour.
32. Learned counsel strongly relied upon the subsequent conduct of Accused-7 in support of his innocence. On January 29, 1951, he wrote a letter to the Secretary of the Empire wherein he brought to his notice his suspicions that all was not well with the Company’s administration. He asked Chopra and Co., Chartered Accountants, to look into the accounts of the Empire and submit their report. On February 21, 1951, the said Chartered Accountants submitted a report to him after investigating the accounts of the Empire from about October 15, 1950 to January 1951. On the same day he wrote a letter to the Senior Superintendent of Police, Delhi, informing him that he had come to know that a man of ` 7,00,000/- had been withdrawn from the Civil Lines Branch of the Punjab National Bank without any legal authority and that he had also come to know that large amounts totalling to ` 71,00,000/- had been withdrawn from the said account during the end of December 1950 and that only a sum of ` 9,00,000/-was then lying to the credit of the Company and that he had given instructiom to the Bank not to allow withdrawals by anybody; he requested the police to register a case under S. 409 of the Indian Penal Code and promised to give every assistance to the police in their investigation. On February 21, 1951 he had also addressed a letter to the controller of Insurance enclosing therein the interim report of the auditors. He informed him that he was advised to report the matter to the police and that he would inform him of the further developments. On the same day he had written a letter to the Punjab National Bank asking it not to allow any further withdrawal or transfer or operation on cheques drawn or instructions issued by the Secretary or any other person. On February 22, 1951, he informed the Punjab National Bank that the Controller of Insurance had issued orders under the Insurance Act forbidding the Company from making any investment from February 1951 and that it should take notice of the said instructions. On February 21, 1951 he suspended the Secretary as he got a sum of ` 9,00,000/- odd transferred from the Imperial Bank of India to the Punjab National Bank, Delhi, and as, when he was still on leave, he withdrew a sum of ` 7,00,000/- from the Punjab National Bank without his permission. Ex. Z-210A is the minutes of the Board of Directors dated March 3, 1951 wherein it was dated that at the instance of the Managing Director it was resolved that all the previous instructions in regard to the operation of all banking accounts of the Company were revoked and it was further resolved that any one of the Directors was authorized to operate jointly with either the Joint General Manager or the Accountant of the Company on the accounts of the Company in any bank. This precaution was taken presumably to prevent further defalcations. It appears that Accused-8, representing the Company, had applied to the Punjab High Court for a prohibitory order preventing the Controller of Insurance from proceeding under S. 52A of the Insurance Act. At the Board meeting it was resolved that the solicitors of the Company should be informed that the Company did not wish to proceed with the petition and that they should not take any further action in the matter. On March 9, 1951 two notices were issued – one at the instance of Accused-7 and the other at the instance of accused 8 and 9 – convening a meeting of the Board of Directors of the Company, as per one notice at 3 p.m. and as per the other at 11 a.m. All these show that there was a split among the Directors and the Directors were trying to obstruct the Managing Director. Accused-8 tried to get the Board meeting fixed at 3 p. m. cancelled, but Accused-7 did not agree and therefore he and his group called for a meeting at a different time on the same day. Ex. Z-210B is the minutes of the meeting of the Board of Directors held on March 12, 1951. In that meeting Sayana took the Chair and it was resolved that the appointment of Accused-7 as the Managing Director of the Company pursuant to the resolution of the Board dated October 17, 1950 was terminated with effect from that date; it was also resolved that all the resolutions passed in the Board meeting held on March 3, 1951 be treated as cancelled. On March 12, 1951, Accused-7 wrote a letter to the Commissioner of Police informing him that there were disputes between the Directors and the Managing Director of the Company, that there was disturbance at the meeting specially called for and held at 11 a. m. on that day and that there was likely to be a breach of the peace and, therefore, he was requested to take such steps as were necessary. Ex. Z-210A is the minutes of the meeting of the Board of Directors of the Empire held on March 27, 1951 and in that meeting Sayana took the Chair and Accused-7 was not present. It was resolved therein, inter alia, that the order of suspension passed by Accused-7 against Accused-10 was disapproved by the Board and was cancelled and the Secretary was ordered to resume his duties forthwith. It was also resolved that the action taken by Accused-8 in filing a suit in the High Court of Punjab at Simla against the Controller of Insurance was approved and ratified. It also approved and ratified all the actions taken by Accused-8. The letters written by Accused-7 complaining against the illegal acts of the Directors were placed before the Board meeting and his complaints were rejected. On May 13, 1951 Accused-7 filed an affidavitAffidavit An ex parte statement in writing made under oath before a notary public or other officer authorized to administer oaths, about facts which the affiant either knows of his own personal knowledge or is aware of to the best of his knowledge. in the High Court of Judicature for Punjab at Simla wherein he gave the various attempts made by him to prevent the continuation of the fraud in the Empire and the obstructive tactics adopted by the other Directors. The Empire Company, represented by Accused-7, filed a suit in the Court of the Sub-Judge, First Class, Delhi, for accounts and injunction. To that suit Accused 8, 9 and 10 were made parties; therein an application was filed for the appointment of a Receiver and a Commissioner to take into custody the accounts and other documents of the Company and for directing them to submit a complete report on the transactions of the Company from October 16, 1950 upto that date and also for a temporary injunction against the other Directors and the Secretary from interfering in any manner with the work of the Managing Director. In the affidavit filed in support of the petition the various illegal acts committed by the Directors and the Secretary were mentioned. Accused-8 filed an affidavit supporting the alleged fraudulent acts done by the Company. It is not necessary to pursue the internecine conflict between the Directors any further. The documentary evidence is clear that from January 29, 1951 Accused-7 was taking urgent steps to move the Controller of Insurance and the court to protect the interests of the Company; while the other Directors were preventing him from pursuing that course. Indeed, they had even removed him from the Managing Directorship. But notwithstanding the said facts, he made some attempts to salvage as far as possible the assets of the Company. It is argued that this conduct on the part of Accused-7 to get the affairs of the Company investigated through police and through Courts is a positive proof that he could not be a guilty party, for, it is said, if he was a conspirator, by this process he would not have focussed the attention of the authorities concerned on his misdeeds. That conduct, the argument proceeds, is inconsistent with human nature. The argument so advanced appears to be plausible, but a deeper scrutiny of the fraud perpetrated on the Company would disclose that Accused-7 is not an innocent party. It may be mentioned that there was a police raid on the office of the Company on January 24, 1951, and the feverish activity on the part of Accused-7 started thereafter. He says in his written statement filed in the Sessions Court that after the police raid he inquired about the affairs of the company from two officers, Machilivala and Cardmaster, but they could not give him any idea of the affairs of the Company and that on the next day he had tendered his resignation to the Secretary and he assured him that Shankarlal was not in Bombay and that after he came he would do the needful. It appears that thereafter he consulted Shri Ved Vyas, a Senior Advocate of the Supreme Court, who advised him to take also the help of a competent accountant and after getting the necessary advice of the Advocate and the accountant he had taken steps which we have already narrated. His conduct after the police raid is certainly consistent with his guilt, though it may have the appearance of bona fide conduct. Presumably on legal advice he took the necessary steps to exculpate himself from the impending prosecution of the Directors of the Company. His conduct may be explained on three possible hypotheses, namely, (1) he was innocent and the moment the police raid was made he was put on guard; (2) he conspired with the other people from beginning to the end, and after the raid he was trying on legal advice to escape the evil consequences of his acts; and (3) he would have thought that there was nothing wrong for the funds of one company being utilized for the other so long as there was the assurance of Shankarlal that the money so utilized would be recouped and that when he discovered that the fraud went beyond his expectations he woke up to save himself. The first hypothesis would not fit in with the antecedents of the accused and the active part he had taken in purchasing the shares of the Empire and the taking over of the Managing Directorship by him. Whichever hypothesis among the other two was accepted, he would equally be guilty.
33. To get over this inference an attempt is made to show that he had resigned as early as December 1950 before the police raid, indicating thereby that the threatened prosecution was not the motive for his volte face. Strong reliance is placed upon Ex. Z-235 and Ex. Z-235A. Ex. Z-235 appears to be the original draft and Ex. Z-235A to be a copy of it. Ex. Z-235A is the statement sent to the Controller of Insurance through Mr. Sri Prakasa and it is dated August 27, 1951. Therein he gives the history of his connection with the Company and also the details of the various fraudulent transactions entered into by the Company. He says therein that sometime in August 1951 having come to know that Shankarlal had not been quite scrupulous in his deals relating to the Insurance Company, he decided to sever his connection with it; and handed over his resignation to Shankarlal, but the latter tore away his resignation letter and assured him that he would so arrange within a month’s time that the accused would be relieved from the Managing Directorship. Except for this indirect reference in a letter written subsequently through Mr. Sri Prakasa to the controller of Insurance, there is nothing on the record to show that he wanted to resign before the police raid. This statement presumably written on legal advice appears to make an attempt to date back his intention to sever his connections with the company sometime before the police raid. Indeed in his resignation letter dated January 25, 1951, i.e., a day after the police raid, no mention was made of his earlier letter of resignation. The said letter reads:
“for reasons personal and other which need not be touched here, I find myself quite unable to continue as the Chairman of the Board of Directors, the Managing Director or even as a Director and wish to be relieved of all these responsibilities at the earliest.”
If really he gave the resignation letter on an earlier occasion also he would have certainly mentioned the fact that on Shankarlal’s personal intervention he continued in the company so far. Further the chief of Bagarian transactions give a lie direct to this version. If he came to know of the fraud even in December and submitted his resignation to Shankarlal, how was it that on January 30, 1951, he had approved the loan to the Chief of Bagarian? On January 30, 1951, a meeting of the Board of Directors of the Empire was held and the minutes thereof were recorded in Ex. Z-207, Accused 7, 8, 9 and 10 were present at that meeting. The Secretary, placed before the Board for its consideration one proposition for advance of loan from the company to His Holiness Bhai Sahib Ardaman Singh, Chief of Bagarian, on the equitable mortgagee of his lands, forests and houses. The Board of Directors resolved that an advance of ` 77, 50,000/- be made to the chief of Bagarian on the equitable mortgage of his property, subject to the title of the borrower to the property being found to be clear and satisfactory by the Solicitors or Counsel appointed by the company. This resolution was passed, though there was no valuation report and although Accused-7 by that time, according to his case, had come to know of the fraud. The huge loan was granted following the same pattern. This shows that at any rate that till the end of January 1951, Accused-7 was not serious to get out of the management of the company. This indicates not only that he could not have resigned earlier, but was deeply involved in the fraud. It is said that the resolution of the Board dated December 29, 1950 inviting the Maharaja of Dhramjadhra to be the Chairman of the Board of Directors of the Company indicates that Accused-7 had offered his resignation earlier, but on persuasion agreed to continue for sometime. But the request to the Maharaja of Dhramjadhra was only to become the Chairman of the Board of Directors and not the Managing Director and therefore this resolution does not throw any light on the factum of Accusted-7’s resignation of the Managing Directorship in December 1950.
34. We, therefore, bold that Accused-7 was a party to the conspiracy and that the High Court has rightly convicted him under S. 120-B of the Indian Penal Code. As regards the sentence passed on Accused-7, having regard to the evidence in this case, we think that this accused must be given a comparatively less punishment than his co-conspirators, for though he took part in the conspiracy, at any rate from the end of December 1950, for one reason or other, he took necessary proceedings to bring to light the fraud. We, therefore, think that it would meet the ends of justice if the accused was sentenced to rigorous imprisonment for a period of two years. We accordingly modify the sentence passed on him by the High Court and, subject to the aforesaid modification, we dismiss the appeal preferred by him.
35. Next we come to Criminal Appeal No. 136 of 1959 preferred by Subhedar, Accused-8. The defence of this accused is that he acted throughout in good faith and under the guidance of Accused-7, the Managing Director of the Empire, and that he did not know that any fraud was perpetrated in the Empire. Before joining the Empire he was an insurance agentAgent An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the principal. Indian Contract Act and, therefore, it cannot be said that he was a stranger to the insurance-business and he may be assumed to know how it would be conducted. On October 16, 1950 twenty qualifying shares of the Empire from among the shares purchased in the name of Accused-7 were transferred in his favour and thereafter at the meeting held on that day he was co-opted as a Director. He is also, therefore, one of the persons brought in by Shankarlal and made a Director for his own purpose.
36. He was a party to the resolution Ex. Z-206F dated October 21, 1950 wherein Accused 10 was authorised to open accounts in any bank and to operate the same singly. He was also a party to the resolutions passed on November 27, 1950 and December 18, 1950 granting 12 loans of large amounts without any real scrutiny. He was also a party sanctioning a huge loan to the Chief of Bagarian. He was further a party to the resolution sanctioning the sale of the Empire securities of the value of ` 90,60,000/- and opening of marginal accounts in the Punjab National Bank Ltd. It is idle to suggest that a Director who was inducted into the Company in the manner in which it was done and who had knowledge of insurance business would have bona fide signed the resolutions dealing with large amount and with huge securities without deeper scrutiny. A reasonable inference is that he was in the conspiracy and was acting in the manner he did only for the purpose of implementing the object’ of the conspiracy. His conduct alter he fell out with Accused-7 is telltale. On February 17, 1951 even after the police raid Accused-8 transferred telegraphically a sum of ` 9,00,000/- from the account of the Empire with the Imperial Bank to the account with the Punjab National Bank, Civil Lines Branch, Delhi. On February 19, 1951 he wrote another letter Ex. Z-466A to the Imperial Bank, Bombay, that notwithstanding the previous letter-dated February 17, 1951 the transfer was not effected and that they must do so immediately. On May 17, 1951 in the suit filed by Accused-7 on behalf of the Empire, he filed an affidavit Ex. Z-634, wherein he asserted that the loan to the Chief of Bagarian was a genuine one and that it was an advance to a substantial party on good security. He did not even co-operate with Accused-7 in preventing further fraud. In spite of the police raid he was a party to all the resolutions passed subsequently putting obstacles in the way of Accused-7 and finally terminating the appointment of Accused-7 and withdrawing all instructions given in regard to the operation of the Bank account:(see Exs. Z-210A dated March 3, 1951, Ex. Z-210B dated March 12, 1951, and Z-210C dated March 27, 1951). His services to Shankarlal were recognized and under the latter’s will, Ex. 186, he was given a legacy of ` 6,000/-. We have no doubt that the aforesaid circumstances led to only one reasonable conclusion that this accused became a Director of the Empire as a member of the conspiracy and helped to put through all the transactions necessary to transfer funds from one Company to the other. He was rightly convicted by the High Court. We do not see any reason to interfere with the sentence passed against him. In the result Criminal Appeal No. 136 of 1959 is dismissed.
37. Criminal Appeal No. 172 of 1959 is preferred by Sayana, Accused-9. He was a building contractor before he was appointed a Director of the Empire. His defence is also that he bona fide acted without knowledge of the conspiracy or the fraud. He was also one of the Directors inducted into the Company by the transfer of qualifying sharing from and out of the shares purchased in the name of Accused-7. He was co-opted as a Director on October 17, 1950, under Ex. Z-206C. Though he was not present at the meeting of November 27, 1950, he was present at the meeting of December 18, 1950 and therefore, with the knowledge that six loans amounting to ` 28,80,000/- were advanced without scrutiny of the securities, he was a party in sanctioning another six loans totalling to ` 42,80,000/-. He was also a party to the resolution of January 30, 1951 sanctioning a bogus loan to the Chief of Bagarian. He was a party to the resolution dated February 9, 1951 when the said loan was confirmed and to the resolution authorizing Accused-9 to operate singly the accounts of the Company. Ex. Z-210A shows that at the meeting of March 1951 he was elected Chairman and he objected to the presence of Mr. Martin who came to the meeting at the instance of Accused-7. He was also a party to the resolution terminating the services of Accused-7. Under the authority conferred by the relevant resolutions he had taken proceedings against the Controller of insurance in the High Court of Punjab at Simla. Ex. Z-210C dated March 27, 1951 shows that he was the Chairman at the meeting and that a resolution was passed therein rescinding all previous instructions given in regard to the operation of the Bank accounts and also cancelling the order of suspension passed against the Secretary. It is, therefore clear that he was a creature of Shankarlal, that he was a party to the diversion of the funds of the Empire to the Jupiter and that when Accused-7, for his own reasons, was taking steps to stop the rot, he, along with Accused-8, obstructed him from doing so and wholly supported Accused-10. The only reasonable hypothesis on the evidence is that he was a party to the conspiracy. It is said by learned counsel appearing for this accused that his subsequent conduct would not indicate any obstructive attitude on his part but would indicate only his desire to maintain the status quo till the matters improved. This is a lame explanation, for he along with the other Directors, opposed every attempt of the scrutiny of the Company’s affairs and this can only be because they were conscious of their part in the fraud.
38. In this context another argument of learned counsel for Accused 8 and 9 may be noticed. It is said that the High Court treated the Directors as trustees and proceeded to approach the case from that standpoint inferring criminality from their inaction. Even assuming that they were not trustees in the technical sense of the term they certainly stood in a fiduciary relationship with the shareholders. The High Court’s finding is not based upon any technical relationship between the parties, but on the facts found. On the facts, including those relating to the conduct of the accused, the High Court drew a reasonable inference of guilt of the accused. There is sufficient evidence on which the High Court could have reasonably convicted Accused 8 and 9 and in the circumstances, we do not see any case had been made out in an appeal under Art. 136 of the Constitution to merit out interference.
39. In the result Criminal Appeal No. 172 of 1959 is dismissed.
40. Finally we come to Criminal Appeal No. 67 of 1959 preferred by Bhagwan Swarup, Accused-10. The defence of this accused is that he acted throughout on the directions of Accused-7, 8 and 9, and that, as Secretary of the Company, he was bound to follow their directions. This accused is the nephew of Shankarlal. He is an M.A., LL. B. He held the office of Assistant Commissioner of Income-tax in Patiala State. He is the person who carried out the resolutions of the Board of Directors of the Empire through intricate channels to enable the large amounts misappropriated to reach the Jupiter Company. It is suggested that he was not well disposed of towards Shankarlal and therefore he could not have any knowledge of Shankarlal’s fraudulent motives behind the purchase of the controlling shares of the Empire. If Shankarlal did not like him he would not have put him in the key position in the Empire. Indeed, the will of Shankarlal shows that this accused got the best legacy under it. He was the connecting thread passing through the web of conspiracy from beginning to end. Naurangrai, as P. W. 22, says that on 14th or 15th October 1950 he met Shankarlal at Dhanraj Mahal in Bombay. There it was arranged that Accused 1, 7 and 10 should go to Ramratan’s house the next day. The three of them went to Ramratan’s place and Damodar Swarup issued the six cheques in Ramratan’s house as part payment of the purchase price of the controlling shares of the Empire. This shows that Bhagwan Swarup was with them from the beginning. On October 17, 1950 at the Directors’ meeting a resolution was passed appointing him as the Secretary of the Empire on a salary of ` 1,350/. per month. Ex. Z-206F is the minutes of the Board of Directors help on October 21, 1950 wherein a resolution was passed authorizing Accused-10 to open accounts in any bank or banks and to operate on such bank accounts as may be deemed necessary for the business of the Company; and some other powers were also conferred on him, Bhagwan Swarup was, therefore, appointed as the highest executive officer in the Company and he was in charge of the relevant transactions. He was the man who negotiated for the purchase of the securities worth ` 20,00,00/- from Kohli, the broker. P.W. 97 is Kohli. He spoke to the correspondence between him and accused-10. The letters written to Kohli were signed by Accused-10. His evidence shows that the he acted as a broker for the purchase of the securities from the Jupiter, he did not receive the price of the said securities viz., ` 20,00,000/- from the Empire, but the Jupiter told him that they had received the amount directly. Ex. Z-218 is the letter dated October 18, 1950 written by Accused 10 to M/s. Vilaytilal Kohli and Co. asking them to arrange for the purchase, on behalf of the Empire of Victory Loan and Government Loans of certain specifications. In Ex. Z-218A, Kohli, on behalf of Kohli and Co., informed Accused 10 that he would purchase the required securities, but suggested first the payment of ` 20,00,000/. might be made in advance. Ex. Z-218 dated October 26, 1950 was the reply by Accused 10 to the letter of Kohli wherein he communicated the approval of the suggestion by the Managing Director and also told him that the securities purchased might be delivered to their bankers, the Punjab National Bank Ltd. On basis of the said correspondence Accused 10 drew one self bearer cheque, Ex. Z-216, for ` 15,00,000/-. Sanghi in his evidence as P. W. 84 says that at the director of Shankarlal he followed Bhagwan Swarup to the State Bank and filled in “the paying-in-slip” Z-347A, signed it and also the counterfoil as Sanghi for depositing the said amount of ` 14,00,000/- in the Bank. He did not actually deposit the amount and he also did not see who deposited it, but Shankarlal told him that he gave ` 14,00,000/- to Accused 10 and Accused 10 was with him in the Bank throughout the conversation he had with the Manager of the Bank and during the time he was preparing the ‘“paying- in-slip”. It is, therefore, obvious that it is Bhagwan Swarup that deposited the amount in the Bank by using the name of Sanghi. Sanghi is definite in his evidence that he had nothing to do with the Tropical shares and the money deposited by him was shown in the Jupiter accounts as though the said amount was the repayment of the price of the Tropical shares worth ` 54,00,000/- purchased by the Jupiter, which was objected to by the auditors. On October 27, 1950, another self-bearer cheque for ` 5,00,000/- was drawn by Accused 10 on behalf of the Empire. This amount went into the Bank account of Jupiter as though Raghavji has repaid his loan in cash. The securities for the purchase whereof the Empire is alleged to have paid ` 20,00,000/-were given delivery only subsequently. This transfer of money by this process became necessary to meet the objections raised by the auditors, and to satisfy them before the year was out. Accused 10 contends that he withdrew the money from the bank and deposited it with the cashier of the Empire. But he neither took a receipt for deposit of the said amount nor the account books of the Empire show any entries to that effect. Machhliwala, the Zonal Accountant of the Empire, as P. W. 105, says that in spite of the said two cheques, the money never came back to the Empire. It is, therefore, clear from the aforesaid transactions that Accused 10 used his office and brought about this transaction to enable Shankarlal and the Directors of the Jupiter to tide over their difficulties with the auditors. This transaction in itself is sufficient to dub Accused 10 as one of the conspirators. No Secretary of a big company like the Empire would have dared to be a party for transferring the funds of the Empire to Jupiter unless he was in the conspiracy.
41. Accused 10’s complicity in getting the sanction of the Board of Directors on November 27, 1950 and December 18, 1950 for 12 fictitious loans is also apparent from the evidence in the case. Assuming that at the time when the applications were placed before the Board of Directors Accused 10 had no knowledge of their fictitious character, as an executive officer he was bound under the terms of the resolutions to see before the moneys were paid that the title of the properties was scrutinized and approved by the Solicitors of the Company. Machhliwala, the Accountant (page No. W, 105), deposes that at the end of November or the beginning of December 1950 he met Mr. Martin, the Solicitor and a partner of Little and Co., Bombay, twice, once alone and again with Accused 10. When he went alone, he took with him some papers given by Accused 10 to enquire what requirements had to be fulfilled before granting the loans by the Company. The documents given to him by Accused-10 were those relating to some properties in Delhi. The said documents did not bear the seal of any authority, and they were only copies. After he returned from Mr. Martin he met Accused-10 and told him that the documents were not certified copies and that the parties should execute promissory notes and declare that the said properties had not been alienated to anyone else. 5 or 6 days. later, both the witness and Accused-10 went to Mr. Martin and the documents produced by Accused-10 had seals purported to be of the Delhi Land Development Board. After Mr. Martin looked into the documents, to a remark made by him, Accused-10 told him that it was difficult to make advertisements in Bombay, Lahore and Delhi and he also told him that the originals were lost during the partition of India. No advertisements were made and that he was not consulted thereafter. On his return, Accused10 called him and handed over to him the cheque-book pertaining to the account opened in the Civil Lines Branch of the Punjab National Bank, Delhi, and told him that the loans had been sanctioned and that the payment of the amounts of loans to the different persons were made by cheques at Delhi and that he should prepare the necessary vouchers and post the necessary entries in the books of the Company. This evidence was accepted by the two Courts below. The manner in which the title of the properties of the loanees was scrutinized indicates that Accused 10 was pursuing a prearranged plan.
42. On December 14, 1950, Accused-10 wrote a letter, Ex Z-382, to the Manager of the Punjab National Bank Ltd., Bombay, asking him to open a current account in the name of the Empire at their branch office in Civil Lines, Delhi. In that letter he informed the Bank that as Secretary of the Empire he was authorised to operate singly on any account maintained by the Company at any time at any place with any bank. He forwarded his signature and promised to send the signature of the Managing Director later on. In the meantime he asked the Manager to open the account and transfer a sum of ` 30,00,000/- to the Civil Lines Branch, Delhi. It may be remembered that this letter was written after the resolution of November 27, 1950 sanctioning six loans and three days before the sanctioning of the rest of the six loans Ex. Z-383, an extract of the account of the Punjab National Bank, shows that the said amount was transferred to the Delhi Civil Lines Branch on the same day, On December 15, 1950 i.e., when the second batch of loans were sanctioned, Accused 10 wrote a letter to the Manager of the Punjab National Bank Ltd., Bombay, requesting him to transfer a further sum of ` 30,00,000/- to the Civil Lines Branch, Delhi, and requesting him to make sure that the amount was credited to the account of the Empire in the Delhi branch. It would be seen from this letter that the Secretary was anxious that the money should reach Delhi, for he knew that on December 18, 1950, the next batch of six loans would be sanctioned by the Board of Directors. Ex. Z-230 is the 12 self-bearer cheques drawn by Accused 10 between December 19 and 23, 1950. As we have already mentioned, by various manipulations these cheques were used for drawing out moneys from the Punjab National Bank and for taking out 5 drafts for various amounts in favour of Kaul, Guha and Ramsharan and Mehta of the Jupiter and the moneys reached the Jupiter. It is not disputed that Accused 10 was in Delhi on the dates the cheques bear. Accused 10 says that on December 18, 1950 before he left Bombay for Delhi he wrote the cheques at the dictation of Accused 7. Even on that assumption he cannot escape his complicity in the offence. Accused 10, being the Secretary could not have believed that the investigation and scrutiny of the title of the loanees to the properties were completed so soon after the sanction of the loans. The expedition with which the applications for loans were sanctioned, the cheques were issued, the moneys were drawn and the destination they reached, clearly indicate that the Chief Executive Officer of the Empire was a party to it. Again this accused was present at the time the Board of Directors granted a loan of ` 77,50,000/- to the Chief of Bagarian. On January 24, 1951 there was a police raid on the office of the Empire and Accused 10, being its Chief Executive Officer, knew that the police raid was in connection with the loans. But on that day a loan was sanctioned for ` 77,50,000/-. He knew that the previous loanees did not repay the amount. If he was not in league with the conspirators, was it not his duty to place before the Board of Directors the obvious fact that there was no fund out of which this huge loan could be sanctioned? That apart, would he allow, if he was really innocent and after what all happened, the transaction to which all the infirmities of the earlier loans were attached to be put through. In the circumstances, it must be a legitimate inference that he knew that the said transaction was really conceived to cover up the earlier fraud. In this context Ex Z-233 throws much light on his bona fides. This contains a statement of the details of the 12 loans alleged to have been repaid by the loanees. On this Accused 10 made the endorsement directing the Accountant “to take the entries into the books”. The Accountant as P. W. 105 says in his evidence that that statement with the aforesaid directions was handed over to him by Accused 10 for making the relevant entries. This circumstance shows that Accused 10 wanted the said entries to be made for the purpose of supporting the new transaction i.e., the loan to the Chief of Bagarian. Learned counsel appearing for this accused could only argue that the accused was a subordinate of the Directors and that he had followed only loyally the directions given by the Managing Director without any knowledge of the conspiracy. This argument is an oversimplification of the part taken by Accused 10 in this huge fraud. Both the Courts below have held, on the aforesaid circumstances and other evidence, that Accused 10 was an active participant in the conspiracy. In our view, there is ample material to justify it. In the result Criminal Appeal No. 67 of 1959 is dismissed.
Counsel for the Parties:
Mr. B. B. Tawakley, Senior Advocate (Mr. S.C. Mazumdar, Advocate, with him), for Appellant (In Crl. A. No. 67 of 1959)
Mr. S. C. Mazumdar, Advocate, for Appellant (In Crl. A. No. 136 of 1959)
Mr. T. S. Venkataraman, Advocate (amicus curiae), for Appellant (In Crl. A. No. 172 of 1959)
Mr. N. N. Keshwani, Advocate, for Appellant (In Crl. A. No. 82 of 1962)
Mr. C. B. Agarwala, Senior Advocate, Mr. K. L. Misra, Advocate-General, U. P., (M/s. Mangala Prasad Baghari, Shanti Sarup Khanduja, Malik Arjun Das and Ganpat Rai, Advocates, with them), for Appellant (In Crl. A. No. 83 of 1962)
M/s. N. S. Bindra and Mr. D. R. Prem, Senior Advocates, (Mr. R. H. Dhebar, Advocate, with them), for Respondent (In all the Appeals).
More Stories
Sinwar does not want a humanitarian deal: Mossad (14/04/2024)
Build mosque in every town in America: Mufti Muhammad Sadiq (1921)
World Trade Center Attacked: Islamic Scholars Clarify the Position (17/09/2001)