Supreme Court Overturns Convictions in BHEL Desalination Plant Case: A. Srinivasulu vs. State (2023) INSC 971

LEGAL ISSUE: Whether the accused were guilty of criminal conspiracy, cheating, forgery and corruption in awarding a contract for desalination plants. CASE TYPE: Criminal Law, Prevention of Corruption. Case Name: A. Srinivasulu vs. The State rep. by the Inspector of Police. Judgment Date: 15 June 2023

Date of the Judgment: 15 June 2023
Citation: (2023) INSC 971
Judges: V. Ramasubramanian, J., Pankaj Mithal, J.
Can a public servant be convicted of corruption and cheating based on the uncorroborated testimony of an approver and without proper sanction? The Supreme Court of India recently addressed this critical question in a case involving alleged irregularities in the award of a contract for desalination plants by Bharat Heavy Electricals Limited (BHEL). The court examined whether the accused, including BHEL officials, had engaged in criminal conspiracy, cheating, forgery and corruption. The Supreme Court bench, comprising Justices V. Ramasubramanian and Pankaj Mithal, overturned the convictions of all the accused, citing lack of evidence and procedural lapses.

Case Background

The case revolves around a contract awarded by BHEL, Trichy, for the construction of Reverse Osmosis Desalination (ROD) plants in Tamil Nadu during 1991-92. The contract was awarded to Entoma Hydro Systems after a limited tender process. An interest-free mobilization advance of Rs. 4.32 crores was released to the contractor. Subsequently, the contract was cancelled, and BHEL invoked the bank guarantee, recovering Rs. 4,84,13,581. The Central Bureau of Investigation (CBI) filed a First Information Report (FIR) alleging criminal conspiracy and cheating against BHEL officials and the contractor.

Timeline

Course of Proceedings

The Principal Special Judge for CBI cases, Madurai, acquitted A-2 but convicted A-1, A-3, A-4, and A-7 for various offenses. The convicted individuals filed appeals before the Madurai Bench of the Madras High Court, which were dismissed. The accused then appealed to the Supreme Court. During the pendency of the appeals, A-3 passed away, leading to the abatement of his appeal. Consequently, the Supreme Court heard the appeals of A-1, A-4, and A-7.

Legal Framework

The case involves several key legal provisions:

• Section 120B of the Indian Penal Code, 1860 (IPC): Deals with punishment for criminal conspiracy.
• Section 420 of the IPC: Addresses cheating and dishonestly inducing delivery of property.
• Section 468 of the IPC: Concerns forgery for the purpose of cheating.
• Section 471 of the IPC: Relates to 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(2) read with Section 13(1)(e) of the PC Act: Pertains to criminal misconduct by a public servant.
• Section 109 of the IPC: Addresses abetment of any offence.
• Section 197(1) of the Code of Criminal Procedure, 1973 (CrPC): Requires prior sanction to prosecute a public servant for acts done in the discharge of official duty.
• Section 306 of the CrPC: Deals with the procedure for granting pardon to an accomplice.
• Section 307 of the CrPC: Deals with the power to direct tender of pardon by the Court.
• Section 73 of the Indian Evidence Act, 1872: Allows for comparison of signatures and writings.
• Section 133 of the Indian Evidence Act, 1872: Declares an accomplice to be a competent witness.
• Section 114 of the Indian Evidence Act, 1872: Provides that an accomplice is unworthy of credit unless he is corroborated in material particulars.
• Section 195(1)(b)(i) of the CrPC: Stipulates that no court shall take cognizance of any offence punishable under Section 193 IPC, except on a complaint in writing of that Court or of some other Court to which that Court is subordinate.

These provisions are interpreted within the framework of the Constitution, ensuring fair trial and due process for all accused.

Arguments

Arguments on behalf of A-1 (A. Srinivasulu):

• There was no evidence to connect A-1 with the commission of any offense.
• The allegations were based entirely on the statement of the approver (PW-16), which was unreliable.
• A previous sanction under Section 197(1) of the CrPC was necessary but not obtained.
• The prosecution failed to establish that A-1 obtained any pecuniary advantage, which is essential for offenses under Section 13(1)(d) of the PC Act.

Arguments on behalf of A-4 (K. Chandrasekaran):

• A-4 played no role in the preparation of the tender or in choosing the tenderers.
• The committee of which A-4 was a member was only a Negotiation Committee, not a Tender Committee.
• A-4 was subordinate to the other members of the committee.
• No wrongful loss was caused to BHEL; instead, A-4 helped secure a bank guarantee.
• BHEL refused to grant sanction to prosecute A-3 and A-4, on the ground that they acted in the best commercial interest of the Company.
• Once A-4 was not held guilty of the offence under Section 120B, it was not possible to convict him for the other offences.

Arguments on behalf of A-7 (N. Raghunath):

• The confession statement of PW-16 was recorded by the XVIII Metropolitan Magistrate, Chennai, but pardon was granted by the Additional Chief Judicial Magistrate, Madurai, and the final report was filed directly before the Special Court for CBI cases.
• The procedure under Section 306(4)(a) of the CrPC was not followed.
• There was no incriminating evidence against A-7.
• A-7 was implicated merely because of his relationship with A-5 and a sum of money being transferred to his firm.
• The High Court improperly compared handwritings under Section 73 of the Evidence Act without proper foundation.
• There was no loss caused to BHEL, which is essential for the offence under the PC Act.
• A-7 was wrongly convicted for the offence under Section 13(1)(e) of the PC Act.

Arguments on behalf of the State:

• There was cogent evidence to connect all the accused with the offenses.
• The evidence of the Approver (PW-16) was corroborated by other witnesses.
• No actual loss is required for an offense under Section 13(1)(d) of the PC Act.
• Previous sanction under Section 197(1) of the CrPC is not necessary for offenses not done in the discharge of official duties.
• The power to grant pardon is available concurrently to the Chief Judicial Magistrate/ Metropolitan Magistrate as well as the Court of Session.

Issues Framed by the Supreme Court

The Supreme Court addressed the following key issues:

1. Whether the prosecution failed to obtain previous sanction under Section 197(1) of the Code of Criminal Procedure, 1973, for prosecuting A-1 for the offences under the Indian Penal Code, 1860.
2. Whether the procedure adopted while granting pardon under Section 306 of the Code of Criminal Procedure, 1973, was correct.
3. Whether the prosecution established 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 overturned the convictions of all the appellants. The Court held that the prosecution failed to establish the charges beyond a reasonable doubt. The Court also noted the failure to obtain prior sanction under Section 197(1) of the CrPC for A-1 and the improper reliance on Section 73 of the Evidence Act by the High Court for A-7. The Court also noted the unreliability of the approver’s testimony and the lack of evidence of wrongful loss to BHEL.

How each authority was viewed by the Court?

• Dr. Hori Ram Singh vs. The Crown [CITATION]: The Court applied the principle that the act must be attached to the official character of the person doing it, to determine that A-1’s actions required prior sanction.
• Matajog Dobey vs. H.C. Bhari [CITATION]: The Court used the principle of reasonable connection between the act and official duty to conclude that A-1’s actions were within the scope of his official duty.
• State of Orissa through Kumar Raghvendra Singh vs. Ganesh Chandra Jew [CITATION]: The Court reiterated that protection under Section 197 is available only when the act is reasonably connected with official duty.
• Devinder Singh vs. State of Punjab through CBI [CITATION]: The Court summarized the principles for applying Section 197 of the CrPC, emphasizing that authority cannot be camouflaged to commit crime.
• Parkash Singh Badal vs. State of Punjab [CITATION]: The Court distinguished the observations in this case, noting that they were too general and could not be regarded as carving out an exception to the statutory prescription of Section 197.
• Bangaru Laxman vs. State (through CBI) [CITATION]: The Court used this case to highlight the dual power of the Special Judge under the PC Act.
• State through Central Bureau of Investigation, Chennai vs. V. Arul Kumar [CITATION]: The Court relied on this case to note that Section 306 of the CrPC is bypassed when the Special Court takes cognizance directly.
• Suresh Chandra Bahri vs. State of Bihar [CITATION]: The Court highlighted that non-compliance with Section 306(4)(a) would vitiate the committal order.
• Sarwan Singh vs. State of Punjab [CITATION]: The Court applied the tests laid down in this case to assess the reliability of the approver’s testimony.
• M.O. Shamsudhin vs. State of Kerala [CITATION]: The Court noted that an accomplice is unworthy of credit unless corroborated in material particulars.
• Sardar Iqbal Singh vs. State (Delhi Administration) [CITATION]: The Court used this case to support the conclusion that when a Special Judge takes cognizance, the approver is examined only once.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several key factors:

• Lack of Sanction: The failure to obtain prior sanction under Section 197(1) of the CrPC for A-1 was a significant factor.
• Unreliable Approver Testimony: The testimony of the approver (PW-16) was deemed unreliable due to inconsistencies and attempts to shift blame.
• Absence of Evidence: The prosecution failed to provide sufficient evidence to connect the accused with the alleged offenses.
• Procedural Lapses: The High Court’s improper reliance on Section 73 of the Evidence Act and the Trial Court’s flawed reasoning contributed to the decision.
• No Wrongful Loss: The Court found that BHEL did not suffer any wrongful loss, and in fact, the contractor was owed money.

The Court’s reasoning was heavily influenced by legal principles and procedural requirements, as shown by the higher percentage of ‘Law’ in the ratio table.

Logical Reasoning

Issue 1: Whether the prosecution failed to obtain previous sanction under Section 197(1) of the Code of Criminal Procedure, 1973, for prosecuting A-1 for the offences under the Indian Penal Code, 1860.

Issue 2: Whether the procedure adopted while granting pardon under Section 306 of the Code of Criminal Procedure, 1973, was correct.

Issue 3: Whether the prosecution established the culpability of each of the appellants beyond reasonable doubt.

The Court considered alternative interpretations and rejected them due to lack of evidence and procedural irregularities. The final decision was based on a thorough analysis of the facts, evidence, and applicable laws.

The Supreme Court’s decision was based on a step-by-step analysis of the evidence, legal precedents, and procedural requirements. The Court meticulously reviewed the facts, the testimonies of witnesses, and the judgments of the lower courts. It then applied relevant legal principles to conclude that the prosecution had failed to establish the guilt of the accused beyond a reasonable doubt. The Court also emphasized the importance of proper procedure, such as obtaining prior sanction and adhering to the rules of evidence. The decision was reached after considering all the evidence and arguments presented by both sides.

“The reported decisions on the application of sec. 197 of the Criminal Procedure Code are not by any means uniform.”

“The Court has to be satisfied that the act complained of was done by the public servant in the discharge of his official duty.”

“The act must bear such relation to the duty that the public servant could lay a reasonable, but not a pretended or fanciful claim, that he did it in the course of the performance of his duty.”

“The protection under Section 197 of the Code is not available to the public servant when he has acted in excess of his duty or under the colour of his duty.”

“The Special Judge is a Court of original jurisdiction and is empowered to take cognizance of the offence directly.”

“The Special Judge under the PC Act is a Court of original jurisdiction and the provisions of Section 306(4)(a) of the CrPC are not applicable.”

“The evidence of an approver is to be accepted with great caution.”

“The approver is a most unworthy friend and if he is not reliable, no reliance can be placed on his testimony.”

“An accomplice is unworthy of credit unless he is corroborated in material particulars.”

“The High Court has not followed the procedure prescribed under Section 73 of the Evidence Act.”

“The prosecution has failed to establish the guilt of the accused beyond a reasonable doubt.”