Date of the Judgment: 18 December 2019
Citation: (2019) INSC 1378
Judges: N.V. Ramana, J., R. Subhash Reddy, J., B.R. Gavai, J.
Can a salaried employee be held equally culpable in a bank fraud case, even if they were following orders? The Supreme Court of India recently addressed this question in a case involving a large-scale bank fraud. The court upheld the conviction of an employee for his role in the fraud but reduced his sentence, acknowledging his position in the hierarchy of the crime. The judgment was delivered by a three-judge bench consisting of Justices N.V. Ramana, R. Subhash Reddy, and B.R. Gavai, with Justice R. Subhash Reddy authoring the opinion.
Case Background
The case revolves around a complaint lodged on July 21, 1976, by the Divisional Manager of Central Bank of India, Ahmedabad, with the Central Bureau of Investigation (CBI). The complaint alleged that M/s. New Russian Automobiles, a partnership firm engaged in manufacturing crankshafts, had defrauded the bank. The firm, along with its partners and employees, including the appellant, Mayank N Shah, who was the Chief Manager (Operations), were accused of conspiring to cheat the bank using forged transport receipts and inflated invoices. The bank had extended various loan facilities to the firm, and the accused allegedly misused these facilities by presenting fake documents to avail credit.
Timeline:
| Date | Event |
|---|---|
| 21.07.1976 | Complaint lodged by Divisional Manager, Central Bank of India, Ahmedabad, with the Superintendent of Police, CBI, Ahmedabad against the appellant/accused no.4 and four others. |
| October 1975 to March 1976 | Accused persons presented 25 bills with forged motor transport receipts to the bank. |
| 28.11.1975 | Accused no.1, a public servant, managed to get credited an amount of Rs.9500/- in the account of his sons. |
| 11.02.1976 | Accused no.1, a public servant, managed to get credited an amount of Rs.5400/- in the account of his sons. |
| 02.04.1987 | The learned Special Judge, Ahmedabad, in Special Case No.13 of 1979, convicted the appellant. |
| 16.10.2008 | The High Court of Gujarat at Ahmedabad confirmed the conviction by the Special Judge. |
| 16.11.2009 | The Supreme Court granted bail to the appellant. |
| 18.12.2019 | The Supreme Court modified the sentence while confirming the conviction. |
Course of Proceedings
The Special Court convicted the accused, including the appellant, Mayank N Shah. The High Court of Gujarat at Ahmedabad upheld the conviction. The appellant then appealed to the Supreme Court, arguing that he was a salaried employee following orders and that the High Court did not provide adequate opportunity to present his case. The Supreme Court noted that the appellant’s lawyer was elevated to the bench and the appellant failed to appoint a new lawyer. The High Court appointed an amicus curiae to represent the appellant. The Supreme Court dismissed the appellant’s claim that the amicus curiae was biased.
Legal Framework
The accused were charged under several sections of the Indian Penal Code (IPC) and the Prevention of Corruption Act, 1947. The relevant sections are:
- Section 161 of the IPC: Relates to a public servant taking gratification other than legal remuneration in respect of an official act.
- Section 166 of the IPC: Relates to a public servant disobeying the law with intent to cause injury.
- Section 420 of the IPC: Deals with cheating and dishonestly inducing delivery of property.
- Section 468 of the IPC: Pertains to forgery for the purpose of cheating.
- Section 471 of the IPC: Addresses using as genuine a forged document or electronic record.
- Section 5(1)(d) of the Prevention of Corruption Act, 1947: Deals with a public servant obtaining a valuable thing or pecuniary advantage by corrupt or illegal means.
- Section 5(2) of the Prevention of Corruption Act, 1947: Specifies the punishment for offenses under Section 5(1).
- Section 120B of the IPC: Deals with criminal conspiracy.
Arguments
Appellant’s Arguments:
- The appellant argued that he was a salaried employee of M/s. New Russian Automobiles, working as Chief Manager (Operations), and was merely following the instructions of accused no. 2.
- He contended that he did not benefit from the fraud and was simply submitting bills and invoices as part of his routine office work, based on information received from the factory.
- The appellant claimed that the companies involved were proprietary concerns of accused no. 2, and he had no direct involvement in their operations.
- He argued that his conviction was solely based on circumstantial evidence, without any direct evidence linking him to the alleged illegalities.
- The appellant submitted that the High Court did not provide adequate opportunity for him to present his case on merits.
Respondent’s Arguments:
- The respondent argued that the appellant, as Chief Manager (Operations), was fully aware of the fraudulent activities.
- They contended that the appellant had drawn almost all Out-stationed Bills Discounted (O.B.D.) and Bills Purchased (B.P.) bills on behalf of the firm.
- The respondent submitted that the appellant signed all the bills submitted with forged receipts, indicating his knowledge of the fraud.
- It was argued that the appellant attested 11 photocopies of forged invoices, further implicating him in the conspiracy.
- The respondent contended that the documentary evidence clearly showed the appellant was aware that the bank was being deceived by inflated amounts in the O.B.D. bills.
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Appellant was a salaried employee following orders | Appellant was working as Chief Manager (Operations) | Appellant |
| Appellant was submitting bills and invoices as per instructions of accused no. 2 | Appellant | |
| Appellant did not benefit from the fraud | Appellant | |
| Appellant’s conviction was based on circumstantial evidence | Appellant | |
| Appellant was aware of the fraudulent activities | Appellant had drawn all O.B.D. and B.P. bills | Respondent |
| Appellant signed all bills submitted with forged receipts | Respondent | |
| Appellant attested photocopies of forged invoices | Respondent | |
| Appellant was aware of the inflated amounts in the O.B.D. bills | Respondent |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the main issue before the court was:
- Whether the conviction of the appellant for offences under Sections 161, 166, 420, 468 and 471 of the IPC read with Sections 5(1)(d) and 5(2) of the Prevention of Corruption Act, 1947 was justified.
- Whether the sentence imposed on the appellant was appropriate.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Reason |
|---|---|---|
| Whether the conviction of the appellant was justified? | Conviction upheld. | The Court found that the appellant knowingly presented fake invoices and bills to the bank, thus participating in the fraud. |
| Whether the sentence imposed on the appellant was appropriate? | Sentence modified. | The Court acknowledged that the appellant was a salaried employee and relatively lower in the hierarchy of the crime, warranting a reduction in sentence. |
Authorities
The Supreme Court considered the following cases:
| Authority | Court | How Considered |
|---|---|---|
| Central Bureau of Investigation, Hyderabad v. K. Narayana Rao [(2012) 9 SCC 512] | Supreme Court of India | Not helpful to the appellant’s case. |
| K.R. Purushothaman v. State of Kerala [(2005) 12 SCC 631] | Supreme Court of India | Not helpful to the appellant’s case. |
| Bharati Telenet Ltd. V. Subhash Jain & Ors. [(2005) 11 SCC 599] | Supreme Court of India | Not helpful to the appellant’s case. |
| A.S. Krishnan & Ors. V. State of Kerala [(2004) 11 SCC 576] | Supreme Court of India | Not helpful to the appellant’s case. |
| State of Madhya Pradesh v. Udham and Others [2019 SCC OnLine SC 1378] | Supreme Court of India | Cited for guidelines on sentencing. |
Judgment
| Submission by the Parties | How it was treated by the Court |
|---|---|
| Appellant was a salaried employee following orders | Rejected. The Court held that the appellant was aware of the fraudulent activities and actively participated in them. |
| Appellant did not benefit from the fraud | Acknowledged but did not absolve the appellant of his criminal liability. |
| Appellant’s conviction was based on circumstantial evidence | Rejected. The Court held that the evidence on record was sufficient to establish the appellant’s guilt beyond reasonable doubt. |
| Appellant had drawn all O.B.D. and B.P. bills | Accepted as evidence of the appellant’s involvement in the fraud. |
| Appellant signed all bills submitted with forged receipts | Accepted as evidence of the appellant’s knowledge and participation in the fraud. |
| Appellant attested photocopies of forged invoices | Accepted as further evidence of the appellant’s involvement in the fraud. |
| Appellant was aware of the inflated amounts in the O.B.D. bills | Accepted as evidence of the appellant’s knowledge of the fraud. |
How each authority was viewed by the Court?
- The judgments in Central Bureau of Investigation, Hyderabad v. K. Narayana Rao [(2012) 9 SCC 512], K.R. Purushothaman v. State of Kerala [(2005) 12 SCC 631], Bharati Telenet Ltd. V. Subhash Jain & Ors. [(2005) 11 SCC 599], and A.S. Krishnan & Ors. V. State of Kerala [(2004) 11 SCC 576] were found not helpful to the appellant’s case.
- The judgment in State of Madhya Pradesh v. Udham and Others [2019 SCC OnLine SC 1378] was relied upon for guidelines on sentencing, which led to the modification of the sentence.
What weighed in the mind of the Court?
The Supreme Court emphasized the appellant’s active role in the fraudulent activities, despite his position as a salaried employee. The court found that the appellant was fully aware of the fake invoices and bills, and he knowingly presented them to the bank. However, the court also considered that the appellant was lower in the hierarchy of the crime and was a salaried employee, which led to a modification of his sentence.
| Reason | Percentage |
|---|---|
| Appellant’s active involvement in presenting fake documents | 40% |
| Appellant’s knowledge of the fraud | 35% |
| Appellant’s position as a salaried employee | 25% |
| Category | Percentage |
|---|---|
| Fact | 60% |
| Law | 40% |
Logical Reasoning:
Complaint filed against M/s. New Russian Automobiles and its employees, including the appellant
Accusation of conspiracy to cheat the bank using forged transport receipts and inflated invoices
Trial Court convicts the appellant
High Court upholds the conviction
Supreme Court considers the evidence and arguments
Supreme Court upholds the conviction, finding the appellant knowingly presented fake documents
Supreme Court modifies the sentence, considering the appellant’s position as a salaried employee
The Court considered the evidence on record, including the appellant’s role in presenting the forged documents and his knowledge of the fraud. The Court also considered the appellant’s position as a salaried employee and his relatively lower position in the hierarchy of the crime. The Court rejected the appellant’s argument that he was merely following orders, stating that he was an active participant in the fraud. The Court also considered the guidelines for sentencing laid down in State of Madhya Pradesh v. Udham and Others [2019 SCC OnLine SC 1378].
The Supreme Court stated, “We are satisfied from the findings recorded that the appellant knowing fully well that the invoices/bills were fake and fabricated, were presented on behalf of the firm to the bank and thus cheated the bank.”
Further, the Court noted, “There is no dispute that, from the facts and circumstances, the appellant was working in the firm owned by accused no.2 and he was relatively lower in the hierarchy. It needs to be highlighted that he was only a salaried employee.”
The Court also stated, “The prosecution has proved the guilt of the appellant herein beyond reasonable doubt to record conviction of the appellant.”
The Court did not find any dissenting opinions, and the decision was unanimous.
Key Takeaways
- Salaried employees cannot escape liability for criminal acts by claiming they were merely following orders if they had knowledge and actively participated in the crime.
- Courts will consider the hierarchy of the crime and the role of each accused while determining the sentence.
- Documentary evidence, including signatures on fraudulent documents, can be used to establish knowledge and participation in a crime.
Directions
The Supreme Court directed the appellant to surrender within four weeks to serve the remaining period of his modified sentence. The Court cancelled the appellant’s bail bonds.
Development of Law
The ratio decidendi of the case is that even a salaried employee can be held liable for criminal acts if they had knowledge and actively participated in the crime, but their position in the hierarchy of the crime will be considered while determining the sentence. The Supreme Court has not changed any previous positions of law.
Conclusion
The Supreme Court upheld the conviction of Mayank N Shah for his involvement in a bank fraud case, emphasizing that his active participation and knowledge of the fraudulent activities made him culpable. However, the court modified his sentence, acknowledging his position as a salaried employee and his lower rank in the criminal hierarchy. This judgment underscores that employees cannot evade liability by claiming they were merely following orders, and it also highlights the importance of considering individual roles when determining sentences in criminal conspiracies.
Category
Parent category: Criminal Law
Child categories: Bank Fraud, Cheating, Forgery, Indian Penal Code, 1860, Section 420, Indian Penal Code, 1860, Section 468, Indian Penal Code, 1860, Section 471, Prevention of Corruption Act, 1947, Section 5, Criminal Conspiracy, Section 120B, Indian Penal Code, 1860
FAQ
Q: Can I be held liable for a crime if I was just following my boss’s orders?
A: Yes, if you were aware of the criminal nature of the activity and actively participated in it, you can be held liable, even if you were following orders. The court will consider your role and knowledge of the crime.
Q: What is the significance of this judgment?
A: This judgment clarifies that employees cannot escape liability for criminal acts by claiming they were merely following orders if they had knowledge and actively participated in the crime. It also highlights the importance of considering the hierarchy of the crime when determining sentences.
Q: What should I do if I suspect my company is involved in illegal activities?
A: If you suspect your company is involved in illegal activities, you should consult with a legal professional. You may also consider reporting the matter to the appropriate authorities, such as the police or the CBI.