Supreme Court Acquits Bank Manager in Corruption Case: N. Raghavender vs. State of Andhra Pradesh (2021)

Introduction

Date of the Judgment: 13 December 2021

Citation: (2021) INSC 780

Judges: N.V. Ramana (CJI), Surya Kant, Hima Kohli

Can a bank manager be convicted of corruption charges when the bank has not suffered any financial loss and the key witness has not been examined? The Supreme Court of India recently addressed this question in a case involving a bank manager accused of fraud. The core issue revolved around whether the prosecution had sufficiently proven criminal breach of trust, cheating, and falsification of accounts against the appellant, N. Raghavender, a former branch manager of Sri Rama Grameena Bank. The judgment was delivered by a three-judge bench comprising Chief Justice N.V. Ramana, Justice Surya Kant, and Justice Hima Kohli, with the majority opinion authored by Justice Surya Kant.

Case Background

N. Raghavender, the appellant, was a Branch Manager at Sri Rama Grameena Bank, Nizamabad, from May 1990 to September 1995. A. Sandhya Rani, Accused No. 2, was a Clerk-cum-Cashier at the same bank from 1991 to 1996. C. Vinay Kumar, Accused No. 3, was the Treasurer of Nishita Educational Academy and the brother-in-law of the appellant. The prosecution alleged that the appellant and Accused No. 2 colluded with Accused No. 3 to allow withdrawals of up to Rs. 10,00,000 from the Academy’s account, despite insufficient funds.

The alleged modus operandi involved the appellant issuing loose-leaf cheques and not entering the debits in the ledger. The appellant was also accused of prematurely closing two Fixed Deposit Receipts (FDRs) belonging to B. Satyajit Reddy and crediting the amounts to the Academy’s account, with only a portion of it being recorded in the ledger. The bank’s auditor noticed these irregularities, leading to an internal inquiry and a complaint to the CBI.

The CBI registered a case and charged the appellant and his co-accused under Sections 409, 420, and 477A of the Indian Penal Code (IPC), and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. The Special Judge, CBI Cases, Hyderabad, convicted the appellant but acquitted the other two accused. The Andhra Pradesh High Court upheld the conviction, leading to the present appeal before the Supreme Court.

Timeline:

Course of Proceedings

The Special Judge, CBI Cases, Hyderabad, convicted the appellant under Sections 409, 420, and 477A of the IPC and Section 13(2) read with Section 13(1)(d) of the PC Act, sentencing him to a total of five years of rigorous imprisonment with fines. However, the Special Judge acquitted Accused Nos. 2 and 3 of all charges. The Trial Court emphasized the premature withdrawal of the FDRs without proper authority as the primary reason for conviction.

The High Court of Judicature, Andhra Pradesh, at Hyderabad, upheld the Trial Court’s decision, noting that while no financial loss was caused to the bank, B. Satyajit Reddy had incurred a loss due to the unauthorized transfer of his deposits. The High Court also held that the appellant had falsified records related to the three cheques passed in 1994 to benefit his brother-in-law. The High Court dismissed the appeal, leading to the appellant’s appeal to the Supreme Court.

Legal Framework

The judgment discusses several key legal provisions:

• Section 409 of the Indian Penal Code (IPC): This section deals with criminal breach of trust by a public servant or a banker. It requires proof that the accused was entrusted with property and dishonestly misappropriated or used it. The court noted that the crucial word is ‘dishonestly’ and therefore, it pre-supposes the existence of mens rea.
• Section 420 of the IPC: This section addresses cheating and dishonestly inducing delivery of property. It requires proof that the accused deceived someone and induced them to deliver property with dishonest intent from the beginning. The court noted that mere breach of contract cannot give rise to criminal prosecution under Section 420 unless fraudulent or dishonest intention is shown right at the beginning of the transaction.
• Section 477A of the IPC: This section pertains to falsification of accounts. It requires proof that the accused, being a clerk, officer, or servant, wilfully and with intent to defraud, falsified accounts belonging to their employer. The court noted that the expression ‘intent to defraud’ as given under Section of 477-A, contains two elements, deceit and injury.
• Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988: This section deals with criminal misconduct by a public servant. It requires proof that the public servant, by corrupt or illegal means, obtained a pecuniary advantage.

Arguments

Appellant’s Submissions:

• The prosecution’s case was based on conjectures, and the best neutral evidence, i.e., the testimony of B. Satyajit Reddy, was withheld.
• The two letters (Ex P6 & Ex P7) authorizing premature withdrawal of FDRs were not investigated properly, and the handwriting expert confirmed the signatures.
• No financial loss was caused to the bank, and the statements of the Chairman (PW-1) and Branch Manager (PW-8) confirmed this.
• The deposit of interest from the appellant’s account was not part of the charges and was not put to the appellant during his examination under Section 313 of the Cr.P.C.
• There was no finding of insufficient funds in account No. 282 when the withdrawals were allowed, and the evidence of PW-2 and PW-6 was inconsistent.
• There was no mens rea, as no benefit was drawn by the appellant, and the acquittal of Accused No. 3 was sustained.
• The use of loose cheques was not illegal, and the omission to record entries in the ledger was a procedural lapse, not a criminal act.
• The signatures of the Appellant on the cheques were not proved and the specimen signatures were not taken before a Judicial Officer.
• Charges under Sections 409 and 420 of the IPC cannot go together.
• The appellant was a victim of rivalry between two factions of the Bank.
• The appellant had a successful tenure as a Branch Manager and has no criminal antecedents, warranting a reduction in sentence.

Prosecution’s Submissions:

• There is no question of law involved in this appeal and all that has been determined , are essentially mixed question s of law and facts for which the Courts below have appraised and re -appraised the entire evidence.
• To establish mens rea or criminality under Sections 420, 409 and 477A IPC, it was not necessary to prove that the Appellant had derived benefit or caused any loss to the Bank.
• The fact remains that the action of the Appellant involved unauthorized conversion of public funds of an individual.
• The issuance of bank receipts for withdrawal of funds without existence of securities could not be justified except for illegal benefit to a private individual.
• The Appellant was the custodian of the Branch and had to take the entire responsibility for the duties he had failed to discharge.
• The onus stood shifted on the Appellant to show that he had complied with all transactions genuinely and all the requirements or conditions were adhered to.
• The Court can rely on factual presumptions to convict or exonerate the accused.

Submissions Table:

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether a case is made out for interference by this Court in the concurrent findings of the Courts below?
2. If yes, then whether conviction of the present Appellant for offences under Sections 409, 420 and 477-A of the IPC as well as under Section 13(2) read with Section 13(1)(d) of the PC Act is sustainable?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court relied on Prabhat & Ors v. State of Maharashtra [(2013) 10 SCC 391]* and Mahak Chand & Ors v. State of U.P. [(2019) SCC OnLine All 4044]*, to emphasize that the non-examination of a key witness can be fatal to the prosecution’s case. The Court also relied on Hari Sao & Anr v. State of Bihar [(1969) 3 SCC 107]* and Mohd. Ibrahim & Ors v. State of Bihar & Anr [(2009) 8 SCC 751]* to support the view that if no loss is caused, no offence is made out. The Court also relied on Samsul Haque v. State of Assam [(2019) 18 SCC 161]* to highlight that circumstances not put to the accused under Section 313 Cr.P.C. must be excluded from consideration. The Court also relied on Sadupati Nageswara Rao v. State of Andhra Pradesh [(2012) 8 SCC 547]* to state that onus is on the prosecution to prove that the accused was entrusted with property and committed criminal breach of trust. The Court also relied on N.V. Subbarao Vs. State [(2013) 2 SCC 162]* to state that Onus shifts on the accused to show that he had complied with all transactions genuinely. The Court also relied on Vinayak Narayan Deosthali v. Central Bureau of Investigation [(2015) 2 SCC 553]* and Neera Yadav v. Central Bureau of Investigation [(2017) 8 SCC 757]* to state that factual presumptions can be used to convict or exonerate the accused.

What weighed in the mind of the Court?

The Supreme Court’s decision to acquit the appellant was significantly influenced by the lack of direct evidence and the failure of the prosecution to examine key witnesses. The Court emphasized that mere suspicion cannot replace conclusive proof, and the benefit of doubt must be extended to the accused in the absence of concrete evidence. The Court also noted that the lower courts had mixed up allegations, not discussed the ingredients of the offences, and overlooked material evidence.

The Court also highlighted that the prosecution did not prove that the appellant had misappropriated the funds of the Bank and/or of B. Satyajit Reddy. The Court noted that no financial loss was caused to the bank or B. Satyajit Reddy. The Court also observed that the prosecution did not prove any conspiracy between the accused persons.

Fact:Law Ratio

The Court’s reasoning was more influenced by the factual aspects of the case, such as the lack of direct evidence and the non-examination of key witnesses, than by legal considerations.

Logical Reasoning:

The Court considered the alternative interpretation that the appellant had committed a criminal breach of trust, cheating, and falsification of accounts, but rejected it due to the lack of conclusive proof. The Court also considered the argument that the appellant had acted with dishonest intent, but found that the evidence was insufficient to prove this beyond a reasonable doubt.

Key Takeaways

The Supreme Court’s judgment in the N. Raghavender case has several practical implications:

• Importance of Direct Evidence: The judgment emphasizes the importance of direct evidence in criminal cases, particularly in corruption cases. Circumstantial evidence alone is not sufficient for conviction unless it is conclusive and leaves no room for reasonable doubt.
• Examination of Key Witnesses: The non-examination of key witnesses can be detrimental to the prosecution’s case. The prosecution must make all reasonable efforts to examine witnesses who can provide crucial evidence.
• Financial Loss: The absence of financial loss to the complainant or the bank can be a significant factor in determining whether an offence has been committed.
• Procedural Lapses vs. Criminal Acts: The judgment distinguishes between procedural lapses and criminal acts. Not every procedural irregularity amounts to a criminal offence.
• Benefit of Doubt: The benefit of doubt must be extended to the accused in the absence of conclusive proof.
• Onus of Proof: The onus lies on the prosecution to prove that the accused was entrusted with property and committed criminal breach of trust.

In conclusion, the Supreme Court’s decision in the N. Raghavender case underscores the need for meticulous investigation, the importance of direct evidence, and the necessity of proving criminal intent beyond a reasonable doubt. This case serves as a reminder that procedural irregularities alone cannot lead to a conviction without clear evidence of criminal conduct and dishonest intent.