Supreme Court overturns discharge in disproportionate assets case: State of Tamil Nadu vs. K.N. Nehru (2017)

Introduction

Date of the Judgment: July 21, 2017

Citation: 2017 INSC 692

Judges: Arun Mishra, J., Amitava Roy, J.

Can a High Court discharge an accused in a corruption case when a key aspect of the investigation—the source of income of a related party—is still under scrutiny? The Supreme Court of India recently addressed this question, overturning a High Court’s decision to discharge the accused in a disproportionate assets case. The core issue revolved around whether the High Court could exonerate the accused while simultaneously ordering further investigation into the financial affairs of their son. The judgment was delivered by a two-judge bench comprising Justice Arun Mishra and Justice Amitava Roy.

Case Background

The case originated from a First Information Report (FIR) filed on September 15, 2011, against K.N. Nehru, who served as the Minister of Transport for the Government of Tamil Nadu from May 2006 to March 2011. The FIR alleged that Mr. Nehru, along with his wife Shanta and son Arun, had amassed assets far exceeding their known sources of income during this period. The check period was from May 13, 2006, to March 24, 2011.

The initial investigation indicated that the family’s assets had increased from ₹2,83,87,518.58 to ₹18,52,99,420.40 during the check period. Mr. Nehru was given an opportunity to explain these discrepancies. In his written response on July 9, 2012, he claimed that his son Arun had received income from M/s. True Value Homes (India) Private Limited, Chennai, and had also taken a loan from the same company for a house purchase, which he was repaying.

A charge sheet was subsequently filed against Mr. Nehru under Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988, and against his wife under Section 109 of the Indian Penal Code read with the same provisions of the Prevention of Corruption Act. Although the initial FIR included Arun’s assets, the charge sheet excluded them because Arun had not filed any income tax returns during the check period, making it difficult to ascertain his exact income.

Timeline

Course of Proceedings

The respondents, K.N. Nehru and his wife, filed an application under Section 239 of the Criminal Procedure Code before the Trial Court, seeking their discharge. The Trial Court, after reviewing the materials, found it necessary to investigate the genuineness of Arun’s income. It ordered further investigation into Arun’s income and properties, dispensing with the personal appearance of the respondents until the investigation was complete.

The State, dissatisfied with the Trial Court’s order, filed a revision petition before the High Court, seeking a direction to frame charges against the respondents. The respondents, in turn, prayed for their discharge. The High Court concurred with the Trial Court that the prosecution should verify Arun’s income and its source. It noted that even though Arun had not submitted his accounts, the prosecution should have included him as an accused to prove that he had not advanced any money to Mr. Nehru. The High Court inferred that Arun had indeed lent money to Mr. Nehru and, therefore, the accusation of disproportionate assets was untenable. The High Court, while affirming the direction for further investigation into Arun’s income, discharged the respondents.

Legal Framework

The case primarily involves Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988, which deals with criminal misconduct by a public servant. Specifically, Section 13(1)(e) states that a public servant is said to commit criminal misconduct if they or any person on their behalf, is in possession of pecuniary resources or property disproportionate to their known sources of income. Section 13(2) of the Prevention of Corruption Act, 1988, prescribes the punishment for the offence under Section 13(1).

Additionally, Section 109 of the Indian Penal Code, 1860, is relevant, as it pertains to the punishment of abetment of any offence, if the act abetted is committed in consequence, and where no express provision is made for its punishment. The charge sheet against the wife of the public servant was under Section 109 of the Indian Penal Code read with Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988.

Arguments

Arguments by the State:

• The State argued that the High Court should not have discharged the respondents at this stage, especially when further investigation into Arun’s income was still ongoing.
• The observations made by the High Court suggested the innocence of the respondents, which were not supported by the records. These observations were predetermined and could adversely affect the further investigation.
• The outcome of the further investigation would have a vital bearing on the charge leveled against the respondents, and therefore, their discharge was unwarranted.
• The gravity of the charge and the disclosures in the investigation already conducted warranted interference by the Supreme Court.

Arguments by the Respondents:

• The respondents argued that they have a right to explain the lawful source of income and the assets alleged to be disproportionate before being prosecuted under the Prevention of Corruption Act, 1988.
• The materials available on record did not substantiate the allegation of disproportionate assets.
• The investigation into the source of income of Arun was related to the explanation furnished by the respondent No. 1. However, their continuance as accused pending the probe was indefensible in law.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the core issue can be summarized as:

✓ Whether the High Court was justified in discharging the respondents while simultaneously ordering further investigation into the source of income of their son, Arun.

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:

Cases:

• State of M.P. vs. Sheetla Sahai and others [(2009) 8 SCC 617] – Supreme Court of India. This case was cited by the respondents, but the Supreme Court held that it was of no avail to them in view of the prima facie evaluation of the materials on record.
• Randhir Singh Rana vs. State (Delhi Administration) [(1997) 1 SCC 361] – Supreme Court of India. This case was cited by the respondents, but the Supreme Court held that it was of no avail to them in view of the prima facie evaluation of the materials on record.
• Reeta Nag vs. State of West Bengal and others [(2009) 9 SCC 129] – Supreme Court of India. This case was cited by the respondents, but the Supreme Court held that it was of no avail to them in view of the prima facie evaluation of the materials on record.

Legal Provisions:

• Section 13(2) read with Section 13(1)(e) of the Prevention of Corruption Act, 1988 – This provision deals with criminal misconduct by a public servant who possesses assets disproportionate to their known sources of income.
• Section 109 of the Indian Penal Code, 1860 – This provision deals with the punishment of abetment of any offence, if the act abetted is committed in consequence, and where no express provision is made for its punishment.

Judgment

The Supreme Court allowed the appeal, setting aside the High Court’s order discharging the respondents and restoring the Trial Court’s order.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the High Court had ordered further investigation into the source of income of Arun, the son of the accused, while simultaneously discharging the accused. The Supreme Court found this to be contradictory, as the outcome of the further investigation would have a direct bearing on the charge of disproportionate assets against the accused. The Court emphasized that the discharge was premature, as the genuineness of the income of Arun was still under question. The Court also noted that the High Court’s observations suggesting the innocence of the respondents were not supported by the records and could adversely affect the further investigation.

The Court reasoned that the High Court’s finding that the respondent No.1 had proved that he had received the amount only from his son Arun, and that the latter had received remuneration for which he had paid TDS under the Income Tax Act, and therefore, the question of disproportionateness of his assets did not arise, in the face of the pending investigation, amounts to prejudging the charge against the respondents.

The Supreme Court stated:

“In our estimate, in view of the correlation of the explanation provided by the respondent No.1 to the imputation of disproportionate assets and the probe ordered into the affairs of Arun, to say the least, the discharge of the respondents before the completion of the investigation is visibly prematured.”

“The finding in particular that the respondent No.1 had proved that he had received the amount only from his son Arun and that the latter had received remuneration for which he had paid TDS under the Income Tax Act and therefore the question of disproportionateness of his assets did not arise, in the face of the pending investigation, amounts to prejudging the charge against the respondents.”

“We have thus no hesitation to hold that the order of the High Court, discharging the respondents herein, pending the investigation against Arun, at this stage, is unsustainable in law as well as on facts.”

Key Takeaways

• A High Court cannot discharge an accused in a disproportionate assets case while simultaneously ordering further investigation into the source of income of a related party.
• The discharge of an accused should not be premature, especially when a key aspect of the investigation is still pending.
• Observations made by the High Court should be supported by the records and should not prejudge the outcome of the further investigation.
• Further investigation should be completed expeditiously to enable the Trial Court to proceed in accordance with the law.

Directions

The Supreme Court upheld the direction of the lower courts for further investigation into the income and assets of Arun. The Investigating Agency was directed to conduct the investigation expeditiously and submit its report as soon as possible. The Trial Court was directed to proceed in accordance with the law after the completion of the further investigation.

Specific Amendments Analysis

There were no specific amendments discussed in the judgment.

Development of Law

The ratio decidendi of this case is that a High Court cannot discharge an accused in a disproportionate assets case while simultaneously ordering further investigation into the source of income of a related party, as it is contradictory and premature. This judgment clarifies the approach that courts must take in such cases, ensuring that investigations are completed before any decision on discharge is made. There is no change in the previous position of law.

Conclusion

The Supreme Court’s judgment in the case of State represented by Deputy Superintendent of Police vs. K.N. Nehru etc. overturned the Madras High Court’s decision to discharge the accused in a disproportionate assets case. The Supreme Court held that the High Court’s order was contradictory and premature, as it had simultaneously ordered further investigation into the source of income of the accused’s son. The Supreme Court emphasized the need for thorough investigation and upheld the Trial Court’s order, directing the Investigating Agency to complete the further investigation expeditiously.