Supreme Court overturns convictions in BHEL corruption case: A. Srinivasulu & Ors. vs. State (2023) INSC 577 (15 June 2023)

Case Background

This case involves allegations of corruption against several individuals, including officials from BHEL, a public sector undertaking, and private contractors. The case revolves around the awarding of a contract for setting up Reverse Osmosis Desalination Plants by the Tamil Nadu Water Supply and Drainage Board to BHEL, which then sub-contracted the work to Entoma Hydro Systems. The prosecution alleged that BHEL officials conspired with the contractor to cheat BHEL, causing a loss of ₹4.32 crores by awarding the contract without following proper procedures.

The Central Bureau of Investigation (CBI) filed a First Information Report (FIR) in 1997, alleging criminal conspiracy, cheating, and corruption. The accused included A. Srinivasulu (Executive Director of BHEL), R. Krishna Rao (General Manager, BHEL), R. Thiagarajan (Assistant General Manager of Finance, BHEL), K. Chandrasekaran (Senior Manager in BHEL), Mohan Ramnath (proprietor of Entoma Hydro Systems), and his relatives NRN Ayyar and N. Raghunath.

Timeline

Course of Proceedings

The Principal Special Judge for CBI cases, Madurai, acquitted R. Krishna Rao (A-2) but convicted A. Srinivasulu (A-1), R. Thiagarajan (A-3), K. Chandrasekaran (A-4), and N. Raghunath (A-7) for various offences under the Indian Penal Code, 1860, and the Prevention of Corruption Act, 1988.

The convicted individuals filed appeals before the Madurai Bench of the Madras High Court, which dismissed their appeals on 17.09.2010, upholding the convictions. Subsequently, A-1, A-3, A-4, and A-7 filed appeals before the Supreme Court. During the pendency of the appeals, A-3 passed away, leading to the abatement of his appeal.

Legal Framework

The case involves several key legal provisions:

• Section 120B of the Indian Penal Code, 1860 (IPC): Deals with criminal conspiracy.
• Section 420 of the IPC: Addresses cheating and dishonestly inducing delivery of property.
• Section 468 of the IPC: Relates to forgery for the purpose of cheating.
• Section 471 of the IPC: Addresses using as genuine a forged document.
• Section 193 of the IPC: Deals with punishment for giving false evidence.
• Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act): Pertains to criminal misconduct by a public servant.
• Section 13(1)(e) of the PC Act: Addresses possession of assets disproportionate to known sources of income.
• Section 197(1) of the Code of Criminal Procedure (CrPC): Requires prior sanction for prosecuting public servants for acts done in the discharge of official duty.
• Section 306 of the CrPC: Deals with the tender of pardon to an accomplice.
• Section 307 of the CrPC: Empowers the Court to which the case is committed to tender pardon.
• Section 5 of the PC Act: Outlines the procedure and powers of a Special Judge.
• Section 73 of the Indian Evidence Act, 1872: Allows the court to compare disputed writings with admitted ones.

Arguments

Arguments by the Appellants:

• A-1 (A. Srinivasulu):
  • There was no evidence to connect him with the commission of any offense.
  • The case relied heavily on the approver’s statement, which was unreliable.
  • No prior sanction under Section 197(1) of the Code of Criminal Procedure, 1973, was obtained.
  • The prosecution failed to prove that he obtained any pecuniary advantage as required under Section 13(1)(d) of the PC Act.
• A-4 (K. Chandrasekaran):
  • He had no role in the preparation of the tender or in selecting the tenderers.
  • He was part of a Negotiation Committee, not a Tender Committee.
  • He was subordinate to other members of the committee.
  • No wrongful loss was caused to BHEL, and a bank guarantee was obtained and invoked.
  • BHEL refused to sanction his prosecution under the PC Act.
• A-7 (N. Raghunath):
  • The procedure for granting pardon to the approver was flawed.
  • No evidence linked him to the applications for demand drafts.
  • He was implicated merely due to his relationship with A-5.
  • The High Court incorrectly invoked Section 73 of the Indian Evidence Act, 1872, to compare handwriting.
  • No loss was caused to BHEL, which is essential for an offense under the PC Act.
  • He was wrongly convicted under Section 13(1)(e) of the PC Act.

Arguments by the Prosecution:

• There was sufficient evidence to connect all the accused with the offenses.
• The approver’s evidence was corroborated by other witnesses and documents.
• Actual loss is not necessary for an offense under Section 13(1)(d) of the PC Act.
• The recovery of money through the bank guarantee does not negate the initial wrongful loss.
• Sanction under Section 197(1) of the Code is not required for offenses not committed in the discharge of official duties.
• The Additional Chief Judicial Magistrate was correct in granting pardon.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. Whether the prosecution of A-1 required prior sanction under Section 197(1) of the Code of Criminal Procedure, 1973.
2. Whether the procedure adopted for granting pardon to the approver under Section 306 of the Code was correct.
3. Whether the prosecution proved the culpability of each of the appellants beyond reasonable doubt.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court allowed the appeals, overturning the convictions of A-1, A-4, and A-7. The court found that the prosecution failed to prove the charges beyond a reasonable doubt.

How each authority was viewed by the Court:

• The court relied on Dr. Hori Ram Singh vs. The Crown [1939 SCC OnLine FC 2], Matajog Dobey vs. H.C. Bhari [(1955) 2 SCR 925], and other cases to determine that A-1’s actions were within the scope of his official duty, thus requiring prior sanction.
• The court distinguished Parkash Singh Badal vs. State of Punjab [(2007) 1 SCC 1], stating that its observations were too general and did not apply to the specific facts of this case.
• The court followed State through Central Bureau of Investigation, Chennai vs. V. Arul Kumar [(2016) 11 SCC 733], concluding that the Special Court’s direct cognizance bypassed the need for the approver’s examination by a Magistrate.
• The court relied on Sarwan Singh vs. State of Punjab [1957 SCR 953] and Ravinder Singh vs. State of Haryana [(1975) 3 SCC 742] to evaluate the reliability of the approver’s testimony, finding it lacking.

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the lack of credible evidence against the appellants and the procedural lapses in the case. The court emphasized the importance of due process and the need for solid evidence in corruption cases. The court also noted the lack of wrongful loss to BHEL and the unreliable nature of the approver’s testimony. The sentiment analysis of the reasons given by the Supreme Court is as follows:

Fact:Law Ratio

The court’s decision was more influenced by the factual aspects of the case, such as the lack of evidence and wrongful loss, than by purely legal considerations.

Logical Reasoning

Issue 1: Sanction under Section 197(1) CrPC

Issue 2: Procedure under Section 306 CrPC

Issue 3: Culpability of Appellants

Key Takeaways

• Importance of Prior Sanction: Public servants must be protected from frivolous prosecution for actions within the scope of their official duties. Prior sanction under Section 197(1) of the Code is mandatory in such cases.
• Reliability of Approver’s Testimony: The testimony of an approver must be thoroughly scrutinized and corroborated by independent evidence.
• Proof of Wrongful Loss: In corruption cases, the prosecution must prove that the alleged actions resulted in a wrongful loss to the organization or a wrongful gain to the accused.
• Due Process: Courts must adhere to due process and cannot convict individuals based on assumptions or flawed logic.
• Role of Negotiation Committees: The role and responsibilities of committees must be clearly defined, and their actions must be evaluated based on their specific mandate.
• Handwriting Evidence: The comparison of handwriting must be done following the procedure under Section 73 of the Evidence Act, with either admitted or proven signatures.

Directions

The Supreme Court directed the acquittal of all the appellants, setting aside the judgments of the Special Court and the High Court. The bail bonds, if any, furnished by the appellants were discharged.

Development of Law

The ratio decidendi of this case is that a public servant cannot be convicted of corruption charges without proper evidence and adherence to due process. The court emphasized that the prosecution must prove that the alleged actions resulted in a wrongful loss to the organization or a wrongful gain to the accused. The court also reiterated that the testimony of an approver must be thoroughly scrutinized and corroborated by independent evidence.

This judgment clarifies the application of Section 197(1) of the Code, emphasizing that prior sanction is required foractions that are reasonably connected to official duty, even if they are flawed. It also reinforces the importance of the principles established in previous cases regarding the reliability of approvers’ testimonies and the need for corroboration. The judgment also clarifies the powers of the Special Judge under the Prevention of Corruption Act, particularly regarding the tender of pardon and taking cognizance of cases.