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N. Raghavender v. State of Andhra Pradesh, CBI

Prevention of Corruption Act, 1988 – Ss. 13 (2) r/w. 13(1)(d) – Penal Code, 1860 – Ss. 409, 420 & 477A – Relevant statutory ingredients necessary to bring home the guilt of an accused when charged under Sections 409, 420 and 477A IPC.

Ingredients necessary to prove a charge under Section 409 IPC

Section 409 IPC pertains to criminal breach of trust by a public servant or a banker, in respect of the property entrusted to him. The onus is on the prosecution to prove that the accused, a public servant or a banker was entrusted with the property which he is duly bound to account for and that he has committed criminal breach of trust.

The entrustment of public property and dishonest misappropriation or use thereof in the manner illustrated under Section 405 are a sine qua non for making an offence punishable under Section 409 IPC. The expression ‘criminal breach of trust’ is defined under Section 405 IPC which provides, inter alia, that whoever being in any manner entrusted with property or with any dominion over a property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property contrary to law, or in violation of any law prescribing the mode in which such trust is to be discharged, or contravenes any legal contract, express or implied, etc. shall be held to have committed criminal breach of trust. Hence, to attract Section 405 IPC, the following ingredients must be satisfied:

(i) Entrusting any person with property or with any dominion over property;

(ii) That person has dishonestly mis-appropriated or converted that property to his own use;

(iii) Or that person dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation of any direction of law or a legal contract.

It ought to be noted that the crucial word used in Section 405 IPC is ‘dishonestly’ and therefore, it pre-supposes the existence of mens rea. In other words, mere retention of property entrusted to a person without any misappropriation cannot fall within the ambit of criminal breach of trust. Unless there is some actual use by the accused in violation of law or contract, coupled with dishonest intention, there is no criminal breach of trust. The second significant expression is ‘mis-appropriates’ which means improperly setting apart for ones use and to the exclusion of the owner.

No sooner are the two fundamental ingredients of ‘criminal breach of trust’ within the meaning of Section 405 IPC proved, and if such criminal breach is caused by a public servant or a banker, merchant or agent, the said offence of criminal breach of trust is punishable under Section 409 IPC, for which it is essential to prove that:

(i) The accused must be a public servant or a banker, merchant or agent;

(ii) He/She must have been entrusted, in such capacity, with property; and

(iii) He/She must have committed breach of trust in respect of such property.

Accordingly, unless it is proved that the accused, a public servant or a banker etc. was ‘entrusted’ with the property which he is duty bound to account for and that such a person has committed criminal breach of trust, Section 409 IPC may not be attracted. ‘Entrustment of property’ is a wide and generic expression. While the initial onus lies on the prosecution to show that the property in question was ‘entrusted’ to the accused, it is not necessary to prove further, the actual mode of entrustment of the property or misappropriation thereof. Where the ‘entrustment’ is admitted by the accused or has been established by the prosecution, the burden then shifts on the accused to prove that the obligation vis-à-vis the entrusted property was carried out in a legally and contractually acceptable manner. [Paras 41 – 45]

Ingredients necessary to prove a charge under Section 420 IPC

Section 420 IPC, provides that whoever cheats and thereby dishonestly induces a person deceived to deliver any property to any person, or to make, alter or destroy, the whole or any part of valuable security, or anything, which is signed or sealed, and which is capable of being converted into a valuable security, shall be liable to be punished for a term which may extend to seven years and shall also be liable to fine.

It is paramount that in order to attract the provisions of Section 420 IPC, the prosecution has to not only prove that the accused has cheated someone but also that by doing so, he has dishonestly induced the person who is cheated to deliver property. There are, thus, three components of this offence, i.e., (i) deception of any person, (ii) fraudulently or dishonestly inducing that person to deliver any property to any person, and (iii) mens rea of the accused at the time of making the inducement. It goes without saying that for the offence of cheating, fraudulent and dishonest intention must exist from the inception when the promise or representation was made.

It is equally well-settled that the phrase ‘dishonestly’ emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, the offence becomes punishable under Section 420 IPC. Contrarily, the 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. It is equally important that for the purpose of holding a person guilty under Section 420, the evidence adduced must establish beyond reasonable doubt, mens rea on his part. Unless the complaint showed that the accused had dishonest or fraudulent intention ‘at the time the complainant parted with the monies’, it would not amount to an offence under Section 420 IPC and it may only amount to breach of contract. [Paras 46 – 48]

Ingredients necessary to prove a charge under Section 477-A IPC

The last provision of IPC with which we are concerned in this appeal, is Section 477A, which defines and punishes the offence of ‘falsification of accounts’. According to the provision, whoever, being a clerk, officer or servant, or employed or acting in that capacity, wilfully and with intent to defraud, destroys, alters, mutilates or falsifies any book, electronic record, paper, writing, valuable security or account which belongs to or is in possession of his employer, or has been received by him for or on behalf of his employer, or wilfully and with intent to defraud, or if he abets to do so, shall be liable to be punished with imprisonment which may extend to seven years. This Section through its marginal note indicates the legislative intention that it only applies where there is falsification of accounts, namely, book keeping or written accounts.

In an accusation under Section 477A IPC, the prosecution must, therefore, prove—

(a) that the accused destroyed, altered, mutilated or falsified the books, electronic records, papers, writing, valuable security or account in question;

(b) the accused did so in his capacity as a clerk, officer or servant of the employer;

(c) the books, papers, etc. belong to or are in possession of his employer or had been received by him for or on behalf of his employer;

(d) the accused did it wilfully and with intent to defraud. [Paras 49 & 50]

Penal Code, 1860 Ss. 409 & 420 Can charges under Section 409 and Section 420 IPC go together ?

Learned Senior Counsel for the Appellant had raised another contention, namely, that the charges under Section 409 and Section 420 IPC cannot go together. He eloquently argued that the essential ingredients of the two offences are conflicting in nature. Section 409 (or 405) IPC deals with offences where the accused has been ‘entrusted’ with the property and Section 420 IPC deals with offences where the accused has ‘dishonestly induced’ the victim/complainant to depart with the property in question. It was, therefore, argued that an accused cannot be charged under both the sections simultaneously. This contention, however, has been rendered academic in the light of the afore-stated discussion and conclusion(s). Page | 45 We thus do not express any opinion and leave this question open for adjudication in an appropriate case. [Para 68]

Facts of the Case

In this case the CBI has either adopted a casual and callous approach or there was some hidden pressure to derail a fair investigation. The resultant effect is that though there is a strong suspicion of criminal breach of trust, cheating and/or fabrication of the Bank records against the Appellant, but such suspicion falls short of a conclusive proof to hold him guilty of the criminal charges. The best evidence having been withheld by the prosecution, the benefit of doubt must be extended to the Appellant, for no conviction can be sustained on the basis of conjectures and surmises. Non-production of the records of the Bank also adversely comments on the fairness and independence of the investigation conducted in the instant case.

The following incontrovertible factors have emerged in the present appeal:

First, no financial loss was caused to the Bank.

Second, the record before us does not indicate that any pecuniary loss was caused to B. Satyajit Reddy or to any other customer of the Bank.

Third, the material before us does not disclose any conspiracy between the accused persons. In the absence of any reliable evidence that could unfold a prior meeting of minds, the High Court erred in holding that Appellant and other accused orchestrated the transactions in question to extend an undue benefit to Accused No.3.

Fourth, the Appellant committed gross misconduct by misusing his position as the Branch Manager. Notwithstanding the final outcome, the Appellant’s abuse of powers clearly put the Bank at the risk of financial loss.

Fifth, despite dereliction of his duties, none of the acts proved against the Appellant constitute ‘criminal misconduct’ or fall under the ambit of Sections 409, 420 and 477-A IPC.

The prosecution has failed to prove the charges under Sections 409, 420 and 477A IPC against the Appellant beyond reasonable doubt. As a necessary corollary thereto, his conviction under Section 13(2) read with Section 13(1)(d) of the PC Act can also not be sustained. However, the benefit of doubt being extended to him on account of a thin margin between ‘strong suspicion’ and ‘conclusive proof’, shall not entitle him to initiate a second round of lis to seek his reinstatement or to claim other service benefits from the Bank. We have already held that the Appellant is deemed to be guilty of gross departmental misconduct, for which the punishment of dismissal from service has been adequately awarded. It requires no repetition that standard of proof to establish a misconduct in a domestic enquiry i.e. even preponderance of evidence, is drastically different to those of proving a ‘criminal charge’ beyond any reasonable doubt. The Appeal is accordingly disposed of in the above terms.