1. A criminal conspiracy to which, according to the prosecution, M.G.Agarwal, M.K. Kulkarni and N. Laxminarayan, hereafter called accused Nos. 1, 2and 3 respectively, were parties between December, 1954, and June 1955, at Bombay,has given rise to the criminal proceedings from which the two present appealsarise. At the relevant time, the three accused persons were attached to theoffice of the Income-tax Officer, Ward No. A-III in Greater Bombay. Accused No.1 was designated as the First Income-tax Officer, and accused Nos. 2 and 3worked under him as second and third Assessment Clerks respectively. The maincharge against these persons was that during the relevant period, they hadentered into a criminal conspiracy by agreeing to do or cause to be doneillegal acts by corrupt and illegal means and by abusing their position aspublic servants to obtain for themselves pecuniary advantage in the form ofincome-tax refund orders and this criminal object was achieved by issuing thesaid refund orders in the names of persons who either did not exist or were notassessees entitled to such refunds. The prosecution case was that after thesaid refund orders were thus fraudulently issued, they were fraudulently cashedand illegally misappropriated. The ten persons in whose names these refundorders were fraudulently issued were G.M. Thomas, P.N. Swamy, K.S. Patel, S.R.Bhandarkar, S.P. Jani, D.M. Joshi, C.B. Kharkar, Ramnath Gupta, V.M. Desai andK.V. Rao. It appears that twenty-five bogus vouchers were issued in respect ofthese ten fictitious cases; eleven accounts were fraudulently opened indifferent Banks in Bombay and misappropriation to the extent of Rs. 54,000/-has thereby been committed. That, in substance, is the main charge which wasleveled against the three accused persons.
2. Nine other subsidiary charges were also framed against them. Charges 2,3, and 4 were in respect of the income-tax refund order issued on the 7thJanuary, 1955, in favour of Mr. G.M. Thomas. The prosecution alleged that bytheir several acts in respect of the issuance of this refund order, the threeaccused persons had committed offences under sections 467 and 471 read with s.34 I.P.C., as well as section 5(2) of the Prevention of Corruption Act read withs. 5(1)(d) of the said Act and s. 34 of the Indian Penal Code. Similarly,charges 5, 6, and 7 were framed under the same sections respectively in regardto the income-tax refund order issued in favour of Mr. G.M. Thomas on the 2ndApril, 1955. In regard to the income-tax refund order issued in favour of Mr.S.R. Bhandarkar on 2nd April, 1955, charges 8, 9 and 10 were framed under thesaid respective sections. That is how the case against the three accusedpersons under ten charges was tried by the Special Judge, Greater Bombay.
3. It would thus be seen that, in substance, the prosecution case is that inorder to carry out the criminal object of the conspiracy, the three accusedpersons adopted a very clever and ingenious modus operandi in defrauding thepublic treasury. They decided to take adequate steps to issue income-tax refundorders in the names of non-existing persons and to misappropriate the amountsby encashing the said refund certificates issued in pursuance of the saidrefund orders. In furtherance of the conspiracy and in furtherances of thecommon intention of all the conspirators, steps were taken to forge thesignatures of the said fictitious persons as claimants wherever necessary, toprepare some of the supporting documents and to deal with the cases as thoughthey were cases of genuine assessees submitting a return and making a claim forrefund. It is by adopting this clever device that all the accused persons havesucceeded in misappropriating such a large amount as Rs. 54,000/-.
4. It appears that when a return or refund application is received in theIncome-tax Office, it first goes to the assessment refund clerk who, in duecourse, puts it up for orders before the Income-tax Officer. In ordinarycourse, the Income-tax Officer sends a notice to the assessee, examines him andthe accounts produced by him to see if the return is correct. That done, anassessment order is passed by the Income-tax Officer. Thereafter, a form knownas I.T. 30 form is prepared. This form contains several columns which, whenfilled in, give details about the income-tax payable by the assessee, the taxpaid by him, the refund ordered by the Income-tax Officer or the collectiondemanded by him. After this form is duly filled, it is sent to another clerkfor preparing the refund order. At that stage, the refund order is prepared andthe said order together with the demand and collection register and I.T. form30 are sent back to the Income-tax Officer who examines the record and signsthe refund order and the I.T. form 30 and himself makes or causes to be made anentry in the demand and collection register. At this time, he also cancels therefund certificates, such as dividend warrants. The Income-tax Officer alsoreceives the advice memo prepared by the refund clerk and signs it. The saidmemo is sent to the Reserve Bank and the refund order is sent to the assessee.After the refund voucher is cashed by the Reserve Bank, the advice memo isreceived back in the Income-tax Office. It is thereafter that an entry is madein the Daily Refund Register. The prosecution case is that the conspiratorspurported to adopt all steps which they deemed necessary to carry out theircriminal object in order formally to comply with the procedure prescribed bythe department in making refund orders.
5. At this stage, it is relevant to state briefly how, according to theprosecution, the fraud of the conspirators was discovered. In April, 1955, Mr.Sundararajan who was then the Commissioner of Income-tax, Bombay City receiveda report that many irregularities were being committed in respect of refundorders issued by A-III Ward. On receiving this report, he told Mr. Gharpure whowas the Inspecting Assistant Commissioner of Income-tax, A-Range, to carry outan inspection of the work of accused No. 1. He, however, cautioned Mr. Gharpureto carry out his assignment as if he was making an inspection in the normalcourse in order that no suspicion should arise in the mind of accused No. 1.Mr. Gharpure accordingly made inspection and submitted his report on the 6thJune, 1955. It is common ground that Mr. Gharpure was not able to discover anyfraud.
6. On the 10th June, 1955, Mr. Sundararajan asked Mr. Gharpure to producebefore him all the refund books kept in A-III Ward. They were accordinglyproduced before him. On examining these books, Mr. Sundararajan found certainsuspicious features. He came across one counter-foil of the refund order in thename of G.M. Thomas and he noticed that the relevant postal acknowledgement didnot bear any postal stamp and presented a clean and fresh appearance. Thatappeared to Mr. Sundararajan to be suspicious. He also found that a number ofrefunds were made in round figures which was very unusual. The files showedthat on the back of the counter-foils the postal acknowledgements were notstuck up nor were advice notes stuck up. His suspicions having been raised bythese unusual features of the files, Mr. Sundararajan conducted a furtherscrutiny of the six counter-foil books particularly to find out whether therefund orders were in respect of round figures and he found that such refundorders had been passed in the names of Messrs G.M. Thomas, K.S. Patel, P.N.Swamy, D.N. Joshi and S.R. Bhandarkar. After the refund orders were encashed,they were sent to the Accountant-General's Office by the Reserve Bank and so,Mr. Sundararajan thought that he could get them from the said office. All thishappened in the evening of the 10th June, 1955.
7. On the 11th June, 1955, which was a Saturday, Mr. Sundararajan called forthe income-tax files of some of the persons named above including G.M. Thomasand K.S. Patel along with the files of twenty other regular assessees. Thefiles of the twenty regular assessees were submitted to him but not of the tenfictitious persons. On enquiry, he was told that those files were notavailable. The non-production of the said files confirmed his suspicion thatsomething irregular must have happened in respect of them. That is why he sentfor accused No. 1 at 2 p.m. but he was not in his office. He came at 3 p.m. Mr.Sundararajan showed him the relevant counter-foils and examined him. Thestatement made by accused No. 1 was duly recorded by Mr. Sundararajan. As aresult of the enquiry made by him, Mr. Sundararajan was satisfied that thethree accused persons had fraudulently brought into existence several documentsas a result of which a large amount had been misappropriated, and so, herequested the Central Board of Revenue to suspend accused No. 1.
8. At that stage, Mr. Sundararajan naturally wanted to search the office ofA-III Ward, but he could not carry out the search since he was told that thekey of the A-III Ward Office had been taken away by accused No. 3. He then leftinstructions with the police guard of his office that nobody should be allowedto enter the room of A-III Ward without his permission. Next day, he attendedhis office but he found that no person in A-III Ward had gone to work. Beforehe left the office, he got the office of A-III Ward sealed and left word with theInspector on duty that if any person came to work in that office thereafter, itshould be reported to him. After Mr. Sundararajan reached home, he received atelephone message that accused No. 3 had come to A-III Ward Office with thekeys. Mr. Sundararajan directed the Inspector to take charge of the keys fromaccused No. 3 and ask him to attend office the next day.
9. Next day was a Monday (13-6-1955). On that day, Mr. Sundararajanaccompanied by certain other officers went to the office of A-III Ward, openedthe seal and the lock and after going inside, attached six registers. He alsomade a search for the assessment records of the ten persons in question but hedid not find them. He then transferred accused No. 1 to an unimportant chargeand instructed the Banks that no withdrawals should be allowed from any of theeleven accounts, since the said accounts appeared to him to be suspicious. Hethen sent for accused No. 3 and examined him. He also sent for accused No. 2but he was not available since he had gone on leave. He directed one of hisinspectors to enquire whether the said ten persons were real persons or weremerely fictitious names. All this happened on the 13th June, 1955.
10. On the 14th June, 1955, Mr. Sundararajan went to A-III Ward Office alongwith accused No. 3. He wanted to search for the missing papers, viz., theassessment record of the ten person in question. Accused No. 3 waited for sometime and then opened accused No. 2's table and took out some papers. A list ofthese papers was made and they were taken in charge. This list has been signedby Mr. Sundararajan and the officers who accompanied him as well as by accusedNo. 3. Thereafter, accused Nos. 2 & 3 were suspended and as a result of theinvestigation which followed, all the three accused persons were put up fortheir trial before the learned Special Judge for Greater Bombay on the chargesalready indicated.
11. Before the learned trial Judge, accused No. 3 pleaded guilt to all thecharges framed against him, whereas accused Nos. 1 and 2 denied that they hadanything to do with the alleged commission of the offences charged.
12. The prosecution sought to prove its case against all the three personsby producing before the learned trial Judge the relevant documents including thefiles kept in A-III Ward office, and it examined four witnesses from thedepartment for the propose of showing the procedure that is followed in passingassessment orders and granting refunds and with the object of showing that theconspiracy could not have succeeded without the active assistance andco-operation of accused No. 1. These witnesses are Sundararajan, P.W. 1,Nagwekar, P.W. 2, Subramanian, P.W. 5 and Downak, P.W. 21. It also examined DasGupta, P.W. 26, to prove the handwriting of the accused persons. Eleven otherwitnesses were examined to prove the identity of accused Nos. 2 and 3 inrespect of the steps taken by them to open accounts in different banks in orderto encash the refund vouchers issued in pursuance of the refund orders passed byaccused No. 1.
13. The learned trial Judge held that the evidence adduced by theprosecution did not establish beyond a reasonable doubt the existence of thecriminal conspiracy between the three accused. He was not inclined to hold thatthe ten alleged persons were non-existent. Even so, he proceeded to deal withthe case on the basis that the ten persons were non-assesses and yet the refundorders had been passed in their favour. According to the learned trial Judge,accused No. 1 may have innocently signed the relevant documents without lookingto them in a hurry to dispose of cases, placing confidence in his staff, andso, it would be difficult to hold that he was a member of the conspiracy. Theutmost, said the learned Judge, that can be argued against him is that he wasnegligent. That is how he acquitted accused No. 1 of the principal charge ofconspiracy under section 120-B and as a result, the other charges as well. Inregard to accused No. 2, the learned Judge was likewise not satisfied that theevidence adduced by the prosecution to prove his signatures on the relevantdocuments established the fact that he had signed those documents and he wasnot impressed by the other evidence led before him to show that he assistedaccused No. 3 in the matter of encashing the refund vouchers. On thesefindings, accused No. 2 was acquitted of all the charges framed against him.Since accused No. 3 had pleaded guilty to the charges, the learned Judgeconvicted him under sections 471, of the I.P.C. and s. 5(2) of the Preventionof Corruption Act and sentenced him to different terms of imprisonment whichwere ordered to run concurrently. He, however, acquitted accused No. 3 so faras the charge of conspiracy was concerned and he acquitted accused Nos. 1 and 2of all the offences.
14. Against the order of acquittal passed by the learned Judge in favour ofaccused Nos. 1 and 2, the State of Maharashtra preferred an appeal in theBombay High Court and this appeal succeeded. The High Court has found that thelearned trial Judge misdirected himself by assuming that accused No. 1 hadpleaded that he had negligently signed the relevant documents and passed therelevant orders in a hurry, placing confidence in his staff. The High Court hadpointed out that far from pleading negligence, accused No. 1 had definitelystated in his written statement filed in the trial Court that before hedirected the issue of refund in the ten cases, he had examined the filescontaining the supporting documents and had satisfied himself that it wasproper to allow the refund in each one of those cases. This position wasconceded by the learned Advocate who appeared for accused No. 1 in the HighCourt. The High Court then examined the question as to whether the ten assesseswere existing persons or were fictitious names and it came to the conclusionthat the ten names given for the eleven accounts in which refund orders werepassed were fictitious names. The High Court then examined the circumstantialevidence on which the prosecution relied in support and proof of its maincharge of conspiracy between the three accused persons and it came to theconclusion that the said charge had been proved against all the three accusedpersons beyond a reasonable doubt. That is how the High Court partially allowedthe appeal preferred by the State and convicted all the three accused personsunder section 120-B of the Indian Penal Code. It also convicted accused No. 2of the offences under Sections 467, 471, I.P.C., and s. 5(2) of the Prevention ofCorruption Act. In regard to the other offences charged, the order of acquittalwas confirmed. Having convicted accused Nos. 1 & 2 under section 120-B, theHigh Court has sentenced each one of them to suffer rigorous imprisonment for18 months for the said offence. Accused No. 2 has also been directed to sufferR.I. for 18 months in respect of each of the offences under Sections 467, 471,I.P.C. and s. 5(2) of the Prevention of Corruption Act. These sentences areordered to run concurrently with the sentence ordered under s. 120-B. It isagainst this order of conviction and sentence passed by the High Court inappeal that accused Nos. 1 & 2 have come to this Court by special leave bytheir appeals Nos. 176 of 1959 and 40 of 1960.
15. Since the impugned order of conviction and sentence was passed againstthe appellants by the High Court in exercise of its powers under s. 423 of theCriminal Procedure. Code while hearing an appeal against their acquittal, thefirst question which calls for our decision relates to the extent of the HighCourt's powers in interfering with orders of acquittal in appeal. This questionhas been discussed and considered in several judicial decisions both by thePrivy Council and this Court. In dealing with the different aspects of theproblem raised by the construction of s. 423, emphasis has sometimes shiftedfrom one aspect to the other and that is likely to create a doubt about thetrue scope and effect of the relevant provisions contained in s. 423.Therefore, we propose to deal with that point and state the position verybriefly.
16. Section 423(1) prescribes the powers of the appellate Court in disposingof appeals preferred before it and clauses (a) and (b) deal with appealsagainst acquittals and appeals against convictions respectively. There is no doubtthat the power conferred by clause (a) which deals with an appeal against anorder of acquittal is as wide as the power conferred by clause (b) which dealswith an appeal against an order of conviction, and so, it is obvious that theHigh Court's powers in dealing with criminal appeals are equally wide whetherthe appeal in question is one against acquittal or against conviction. That isone aspect of the question. The other aspect of the question centers round theapproach which the High Court adopts in dealing with appeals against orders ofacquittal. In dealing with such appeals, the High Court naturally bears in mindthe presumption of innocence in favour of an accused person and cannot losesight of the fact that the said presumption is strengthened by the order ofacquittal passed in his favour by the trial Court and so, the fact that theaccused person is entitled to the benefit of a reasonable doubt will always bepresent in the mind of the High Court when it deals with the merits of thecase. As an appellant Court the High Court is generally slow in disturbing thefinding of fact recorded by the trial Court, particularly when the said findingis based on an appreciation of oral evidence because the trial Court has theadvantage of watching the demeanour of the witnesses who have given evidence.Thus, though the powers of the High Court in dealing with an appeal againstacquittal are as wide as those which it has in dealing with an appeal againstconviction, in dealing with the former class of appeals, its approach isgoverned by the over-riding consideration flowing from the presumption ofinnocence. Sometimes, the width of the power is emphasized, while on otheroccasions, the necessity to adopt a cautious approach in dealing with appealsagainst acquittals is emphasised, and the emphasis is expressed in differentwords or phrases used from time to time. But the true legal position is thathowever circumspect and cautious the approach of the High Court may be indealing with appeals against acquittals, it is undoubtedly entitled to reachits own conclusions upon the evidence adduced by the prosecution in respect ofthe guilt or innocence of the accused. This position has been clarified by thePrivy Council in Sheo Swarup v. The King Emperor I.L.R. (1934) IndAp 398 andNur Mohammad v. Emperor .
17. In some of the earlier decisions of this Court, however, in emphasisingthe importance of adopting a cautious approach in dealing with appeals againstacquittals, it was observed that the presumption of innocence is reinforced bythe order of acquittal and so, 'the findings of the trial Court which hadthe advantage of seeing the witnesses and hearing their evidence can bereversed only for very substantial and compelling reasons' : vide SurajpalSingh v. The State : 1952CriLJ331 . Similarly in Ajmer Singh v. Stateof Punjab : 1953CriLJ521 , it was observed that the interference of theHigh Court in an appeal against the order of acquittal would be justified onlyif there are 'very substantial and compelling reasons to do so.' Insome other decisions, it has been stated that an order of acquittal can bereversed only for 'good and sufficiently cogent reasons' or for'strong reasons'. In appreciating the effect of these observations,it must be remembered that these observations were not intended to lay down arigid or inflexible rule which should govern the decision of the High Court inappeals against acquittals. They were not intended, and should not be read tohave intended to introduce an additional condition in clause (a) of section423(1) of the Code. All that the said observations are intended to emphasise isthat the approach of the High Court in dealing with an appeal against acquittalought to be cautious because as Lord Russell observed in the case of SheoSwarup, the presumption of innocence in favour or the accused 'is notcertainly weakened by the fact that he has been acquitted at his trial.'Therefore, the test suggested by the expression 'substantial and compellingreasons' should not be construed as a formula which has to be rigidlyapplied in every case. That is the effect of the recent decisions of thisCourt, for instance, in Sanwat Singh v. State of Rajasthan : 1961CriLJ766 , and Harbans Singh v. The State of Punjab (1962) Supp. 1 S.C.R. 104; andso, it is not necessary that before reversing a judgment of acquittal, the HighCourt must necessarily characterise the findings recorded therein as perverse.Therefore, the question which we have to ask ourselves in the present appealsis whether on the material produced by the prosecution, the High Court wasjustified in reaching the conclusion that the prosecution case against theappellants had been proved beyond a reasonable doubt, and that the contraryview taken by the trial Court was erroneous. In answering this question, wewould, no doubt, consider the salient and broad features of the evidence inorder to appreciate the grievance made by the appellants against theconclusions of the High Court. But under Art. 136 we would ordinarily bereluctant to interfere with the finding of fact recorded by the High Courtparticularly where the said findings are based on appreciation or oralevidence.
18. There is another point of law which must be considered before dealingwith the evidence in this case. The prosecution case against accused No. 1rests on circumstantial evidence. The main charge of conspiracy under section120-B is sought to be established by the alleged conduct of the conspiratorsand so far as accused No. 1 is concerned, that rests on circumstantial evidencealone. It is a well established rule in criminal jurisprudence thatcircumstantial evidence can be reasonably made the basis of an accused person'sconviction if it is of such a character that it is wholly inconsistent with theinnocence of the accused and is consistent only with his guilt. If thecircumstances proved in the case are consistent either with the innocence ofthe accused or with his guilt, then the accused is entitled to the benefit ofdoubt. There is no doubt or dispute about this position. But in applying thisprinciple, it is necessary to distinguish between facts which may be calledprimary or basic on the one hand and inference of facts to be drawn from themon the other. In regard to the proof of basic or primary facts the Court has tojudge the evidence in the ordinary way, and in the appreciation of evidence inrespect of the proof of these basic or primary facts there is no scope for theapplication of the doctrine of benefit of doubt. The Court considers theevidence and decides whether that evidences proves a particular fact or not.When it is held that a certain fact is proved, the question arises whether thatfact leads to the inference of guilt of the accused person or not, and indealing with this aspect of the problem, the doctrine of benefit of doubt wouldapply and an inference of guilt can be drawn only if the proved fact is whollyinconsistent with the innocence of the accused and is consistent only with hisguilt. It is in the light of this legal position that the evidence in thepresent case has to be appreciated.
19. The Court then considered the evidence and the findings of the HighCourt and dismissed the appeals.
20. Appeals dismissed.