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In Re: N. Swaminatha Iyer and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany;Criminal
CourtChennai High Court
Decided On
Case NumberCriminal Misc. Petn. Nos. 1289, 1291, 1293, 1294, 1313 and 1329 to 1345 of 1951
Judge
Reported inAIR1952Mad727
ActsCode of Criminal Procedure (CrPC) , 1898 - Sections 196-A, 233, 234, 235, 239 and 439; Indian Penal Code (IPC) - Sections 107, 109, 120-A, 120-B, 409 and 477-A; Banking Companies (Amendment) Act, 1950 - Sections 11; Companies Act - Sections 237(1) and 278(1)
AppellantIn Re: N. Swaminatha Iyer and ors.
Appellant AdvocateS. Gopala Aiyar, Adv. for ;M. Ranganatha Sastry, Adv., ;M.K. Nambiar, ;M. Srinivasagopalan, ;N. Panchapakesa Aiyar, ;K.V. Ramachandra Aiyar, ;P.C. Sarangapani, ;G. Ramanatha Aiyar, ;K. Desikachari and
Respondent AdvocatePublic Prosecutor
Cases ReferredGopal Raghunath v. Emperor
Excerpt:
criminal - prima facie - sections 196a, 233, 234, 235, 239 and 439 of criminal procedure code, 1898, sections 107, 109, 120a, 120b, 409 and 477a of indian penal code, 1860, section 11 of banking companies (amendment) act, 1950 and sections 237 (1) and 278 (1) of companies act - petition filed for quashing charges - there was no wrong or mala fide in accusation of conspiracy to falsify accounts - everything wrong with way in which books, documents and papers of bank under liquidation have been flung into this case without any attempt at selection or crystallising specific charges on which prosecution sought to bring home guilt to offenders - charges framed against petitioner liable to be quashed. - - if that were indeed the result of the section, as the high court seem to be.....order1. these are petitions by the accused in what is known as the hanuman bank conspiracy case to quash no less than 67 charges framed against them by the special magistrate, tanjore, on grounds of misloinder some, of the accused also contending that there were no prima facie grounds to justify any charge against them.2. the actual trial of this case commenced in november 1948, two years and nine months ago, in the course of which over 6000 exhibits were filed and 203 witnesses examined.* * * * *3. a few facts about the bank and the personnel of the accused may be set out before we come to the most regrettable history of the trial of this case. the hanuman bank was incorporated in tanjore in 1933 in a small way with an authorised capital of only rs. 20,000 which was increased to rs. 5.....
Judgment:
ORDER

1. These are petitions by the accused in what is known as the Hanuman Bank Conspiracy case to quash no less than 67 charges framed against them by the Special Magistrate, Tanjore, on grounds of misloinder some, of the accused also contending that there were no prima facie grounds to justify any charge against them.

2. The actual trial of this case commenced in November 1948, two years and nine months ago, in the course of which over 6000 exhibits were filed and 203 witnesses examined.

* * * * *

3. A few facts about the Bank and the personnel of the accused may be set out before we come to the most regrettable history of the trial of this case. The Hanuman Bank was incorporated in Tanjore in 1933 in a small way with an authorised capital of only Rs. 20,000 which was increased to Rs. 5 lakhs in 1943 and to Rs. 7 lakhs in 1946 as shown in the balance sheets. At the time the Bank crashed in 1947 it had 20 branches, 16 in Tanjore district and one each at Madras, Chidambaram, Tiruchira-palli and Madurai. .

4. Accused 1, Diwan Bahadur N. Swaminatha Aiyar, retired Chief Engineer of the Public Works Department, now an old man of 73, was President of the Board of Directors from 1938. He was also Chairman of a managing committee of three, the other members of which were accused 2 and accused 3.

Accused 2, K.V. Krishnamurthi Aiyar, now aged 63, was an ex-clerk of the Registration Department on a pension of Rs. 25-4-0, when he became a director of this Bank and also acted as Managing Director from 1937 under powers of delegation from the then Managing Director. He was then elected Managing Director in 1944 by the general body of share-holders for five years.

Accused 3, Viswanatha Aiyar, was an ex-clerk of some coffee plantations. He became Director in 1937 and was subsequently manager. He was a promoter from the beginning.

Accused 4, Dr. T.S. Varadachari, is a doctor practising at Negapattinam and was a Director continuously from 1940.

Accused 5, N. Rajamani Aiyar, is a registered accountant, with the qualifications of G. D. A., R. A. He was the auditor of, the Bank from its inception in 1933.

Accused 6, A.S. Venkatarama Aiyar was an-assistant in the employ of accused 5.

Accused 7, V. Ganesa Aiyar, was the Secretary of the Bank from October 1943 on a salary of Rs. 100 a month including allowances.

Accused 8, R. Appasami Aiyar, now aged-over 60, was Accountant at the head office from 1937 onwards.

Accused 9, S. Vancheesan, was Assistant Secretary of the Bank from 1945.

Accused 10, S. Viswanathan, was in 1946 Inspector of Branches on a pay of Rs. 100 and had previously worked as Branch Agent.

Accused 11, N. Venkataraman was from 1945, Agent of the Nagapattinam branch.

Accused 12, S. Ramanathan, was an ordinary clerk from 1940 and acted as agent for one month in the Manambuchavadj branch in Tanjore district.

Accused 13, N.S. Krishnamachari was agent at Madras from 1945 after being in Bank employ since 1937.

Accused 14, K.P. Nagarajan is the son of the Managing Director, accused 2, and after enrolment as an advocate is said to have been appointed Agent on probation and from September 1946 was agent in the Madurai Branch.

Accused 15, Mahadeva Aiyar joined the bank in 1943 as a clerk and from 1946 was a Branch Agent.

Accused 16, Venkatarama Aiyar, the elder brother of accused 2, signed the memorandum of association. He was a director from 1937 to 1940 and had no official connection with the bank since. He is described as a cinema proprietor at Pondicherry.

Accused 17, Rajagopala Aiyar, is the brother of accused 2 with no official connection with the bank.

Accused 18, Sattanathan, is. a nephew of accused 2. He was director till 1940 and in 1946 became a Superintendent of Coffee plantations, a concern promoted by this bank.

Accused 22 to 28 are all bank constituents of long standing who were granted substantial overdraft facilities.

5. The circumstances which led up to the bank crash and its winding up under court orders and to this prosecution are briefly these1. On 9th December 1946, the Reserve Bank wrote a confidential letter stated to be Ex. P. 2515 to the Secretary of the Hanuman Bank inviting attention to Section 42(6)(a) of the Reserve Bank Act which required an application for registration as a scheduled bank to be made as the previous balance sheet disclosed an authorised capital which exceeded Rs. 5 lakhs. This of course involved an account scrutiny by the Reserve bank of this bank's affairs. It is the prosecution case that in December 1946 and January 1947 the officials of the Bank despara-tely resorted to wholesale and fictitious manipulation of accounts to cover up a shortage in assets amounting to Rs. 5,31,704-12-0 and that in fact a false balance sheet, Ex. P. 3217 was prepared and passed and signed by accused 1 to 4, 5, 7 and 8 and also by other directors in their official capacities. The Bank made no application to the Reserve Bank, & it would appear after correspondence with the Government of India accused 2 wrote to the Reserve Bank that the balance sheet was likely to be ready by June 1947 after which the application would be filed.

On 15th July 1947, the Bank suspended payment. On 26th July 1947 a creditor filed O. P. No. 192 of 1947 in this court to wind up the bank. There was also a moratorium application filed, which was dismissed on 19th August 1947. In pursuance of a resolution passed at a directors' meeting on JOth August 1947 at which accused 1, 4 and one K. Narayanaswami Aiyar P. W. 181, a retired Income-tax Officer, were present, accused l himself made a complaint to the District Superintendent of Police with serious allegations of a criminal nature against accused 2, 7, 8, 9, 10 and 14. According to the learned Public Prosecutor, P. W. 181 had made a previous complaint on 22nd July 1947 to the Police, but received a reply from the D. S. P. that a complaint should be made by the Board of directors, and this it was which led to this complaint filed by accused 1 whose hand was thereby forced.

6. On 1st August 1947 Messrs. Brahmayya and Co. are appointed auditors by the Registrar of Joint Stock Companies under Section 277(3) of the Indian Companies Act in connection with a moratorium application under this section. They completed the audit in November 1947. The winding up court appointed the Official Receiver as provisional liquidator and on court orders Messrs. Brahmayya and Co. continued investigation as investigating auditors. The winding up order was passed on 5th November 1947 and Brahmayya and Co. were appointed Official Liquidators. In the meantime, it would appear, at the instance of the Premier, -(?) directed the C. I. D. to investigate the criminal complaint laid by accused 1. On the 20th April 1948 Bell J. passed an order on Appln. No. 1420 of 1948 that a police investigation be made into the offences committed by the Directors and officers of the Bank, and that in view of the nature of the investigation the Inspector of C. I. D. who was in charge of the investigation at the instance of the Government should conduct the same.

7. The C. I. D. investigation appears to have been based largely on the report of the auditors who are also now the Official Liquidators. A preliminary charge sheet was laid on 4tb August 1948 and the final charge sheet on 29th September 1948 alleging a conspiracy commencing from 1938 to commit criminal breach, of trust under Section 409 of the Indian Penal Code and falsification of the accounts of the Bank under Section 477-A of the Indian Penal Code.

8. We do not propose to waste too much time or paper traversing these 67 charges which coyer 43 pages of closely typed matter. Charge 1 is a general charge of conspiracy against all these accused under Section 120-B read with Section 409, I. P. C. and Section 477-A I. P. C. The criminal conspiracy alleged is said to have the object of defrauding the Hanuman Bank

'by committing the offences of criminal breach of trust.....by dishonest misappropriation, unlawful disposal or diversion or suffering the misappropriation or diversion of monies, assets and securities of the said Hanuman Bank Ltd. lawfully entrusted to him under the domination of the managing director, accused 2. and other agents and officers on his behalf by diverse means, namely, dishonestly granting or suffering the grant of advances on overdrafts, accounts, loans, bills, advance accounts, etc. to one or other of you or your relations or friends without any control by or sanction of the Board of directors or Committee of Management without security or sufficient security.........and to do or cause to bs done all acts which may facilitate or serve to_ conceal the commission of offences of criminal breach of trust by wilful and fraudulent falsification of the books of account of the bank.'

Charge 2 is a direct charge against accused 2 under Section 409, I. P. C. that between the years 1939 and 1947 in Tanjpre and diverse other places he committed criminal breach of trust or suffered the criminal misappropriation of moneys and assets of the Bank aggregating to Rs. 6,76,216-6-1. Then follows a multitude of offences on alleged manipulations, fraudulent closures of accounts, fictitious entries and fraudulent credits with reference to a mass of exhibits.

Charge 3 is one against accused 1 and 3 under Section 409 read with Section 109, I. P. C. of abetment of the charges specified in charge 2 in. pursuance of the alleged conspiracy.

The next charge No. 4 is against the auditor, accused 5. and his assistant, accused 6, under Section 409 read with Section 109, I. P. C. for abetment of all the offences conglomerated in charge 2.

9. We may now pass on to the alleged conspiracy to falsify accounts. The main charge out of several framed dealing with this is charge 7 which charges directly accused 1 to 3, 7 to 10 and 12 to 15, namely, the Bank employees and officials for making fraudulent and fictitious entries in chittas, cash books and C.D. accounts, loan ledgers, and so on between November 1946 and February 1947. This charge is one directly under Section 477-A of the I. P. C. and contains a catalogue of more than 100 exhibits including for instance Ex. P. 2152 (aa to oo) without any indication whatsoever as to who committed any particular falsification. It is in fact an omnibus charge against all these officials and employees collectively.

Charge 8 is one under Section 477-A read with Section 109 I. P. C. against accused 18 and 22 to 28 for abetment of falsification of accounts between November 1946 and February 1947 as per particulars contained in charge 7.

Charge 58 is one of falsification under Section 477-A between 1st January 1945 and 31st December 1945 against accused 2, 7, 9, 12 and 14.

Charge 59 is another charge of falsification against accused 2, 7 and 15 also relating to 1945.

Charge 60 is another charge of falsification of several items against accused 2, 7, 9, 12 and 15 relating to 1946.

Charge 67 is a direct charge against accused 2, 7, and 14 of falsification of several ledgers and so on relating to the year 1944.

10. In none of these falsification charges does the auditor, accused 5, appear as accused even of abetment at all. Under charge 4 we find him charged to our great surprise only with abetment of criminal breach of trust and a number of such offences committed by accused 2 under charge 2. The learned Public Prosecutor can only explain this by saying it was a regrettable omission and cannot expfain at all the charge of abetment against the auditor under Section 409 read with Section 109.

11. The other charges are mainly under Section 409 of abetment, most charges containing several counts. These charges have been formulated on no intelligible plan, system or' sequence. For instance, charge 37 is one under Section 409 against accused 2 for allowing accused 4 to overdraw his account by Rs. 6683-1-3. Accused 2 is also charged in a comprehensive charge, No. 17, directly under Section 409 with more offences including this item. We then find accused 4 charged in charge 23 under Section 409 read with Section 109 for abetting this offence catalogued in charge 17 item (o).

12. When some petitions to quash charges were filed before me during the vacation in June this year, after hearing the Asst. Public Prosecutor I directed them to be placed before the Chief Justice for orders for posting before a Bench with an observation that they required the careful scrutiny of the Public Prosecutor who should only be heard on them. The result is that we are hearing this as a Bench with the very able assistance of the learned Public Prosecutor, Sri V.T. Rangaswami Aiyangar, who assumed office only last year. He has readily conceded the utter impossibility of trying any accused on these unintelligible and impossible charges at one trial. He has presented to us with ability and clarity the conspiracy to falsify the Bank accounts wholesale in December 1946 which was the pivot of further audit enquiry.

His case, as we understand it, is that Brah-mayya and Co. found in their audit (report) that the Bank books would not tally with'the balance sheet to the tune of over Rs. 5 lakhs, that at the end of 1946, it became necessary to make them tally in view of the call from the Reserve Bank, and that the Bank officials conspired together to effect fictitious entries which would have the effect of swelling the credits and making up the shortage in the bank books, and for this as he put it, more than Rs. 5 lakhs had to be brought into the 'till' of the bank books. He has referred us to the evidence of a bank employee, examined as P. W. 165 who was a Branch Agent in November 1946 to the effect that there was a conference of Bank employees including himself and accused 2, 7, 8, 9, 10 and 14 who met together and agreed (on request) to obtain cheques, hundies, loan applications and so on from the bank's longstanding customers including accused 22 to 28 so that, as we understand the prosecution case, the bank might show large sums paid in on the credit side of their accounts without actually paying out money, to their constituents by Juggling accounts in some way or other.

P. W. 165 deposed that he was asked to approach accused 23, a contractor and rice merchant and a constituent of the bank from 1940 with an existing overdraft of over Rs. 1 lakh, but that he did not do so. His evidence is of course exposed to some criticism as he is in the position of an accomplice. The learned Public Prosecutor has shown us an example of the clumsy technique which according to the prosecution was resorted to in ths shape of an overdraft account. Ex. P. 1449 (a) of one Su-bramanya Aiyar who has since died which stood only at Rs. 58-11-11 and which was inflated to Rs. 30058-11-11. with credits to the tune of Rs. 30000 placed to his account between the 23rd and 30th December 1946 in order, it is alleged, to create a volume! of fictitious bank 'receipts'. The Public Prosecutor suggested as a way out of the impasse that this conspiracy to falsify accounts be split up or taken out of the case and tried separately.

13. There are a number of charges framed arising out of alleged criminal breach of trust, diversion of funds and so on in pursuance of the conspiracy, framed in connection with a company known as Coorg Coffee Plantations promoted by the bank. Accused 1 was chairman of the Board of directors, accused 2, the Managing agent and accused 14, 18 and 24 are said to have been directors. One estate was purchased in 1945 for Rs. 1,80,700 in which accused, 2, 7, 8, 13 and 14 all took shares. Several charges relate to unauthorised loans given to these accused. Another estate was purchased in 1946 in the name of accused 2 for Rs. 1,75,000. On 1st October 1947, after the crash accused 2 conveyed this estate to Coorg Plantations Ltd., the explanation given by his advocate being that the purchase was taken in his name out of bank funds as share capital could not be recovered immediately, and that if he lost the opportunity of purchase, somebody else would have seized it. Our attention has been drawn to a legal opinion, Ex. P. 1840 by Sri D. Mahalingam Pillai, who is said to have been Public Prosecutor, Tanjore. dated 1-10-1947 while this case was under investigation that the purchase by accused 2 was in order & may be ratified by Coorg Plantations Ltd.

It is now conceded-before us that the Official Liquidators have sold these estates for Rs. 3,20,000, that the debenture-holders and preference share-holders have been paid 16 annas in the rupee and the ordinary share-holders 12 annas in the rupee and all the scrips held by such of the accused as were share-holders have been made available to the Official Liquidators who have so far declared a dividend of 7 annas in the rupee to the bank creditors. This is, in view of the impartial suspension of the liquidation for over two years, by so many of the bank ledgers, accounts books and documents being bottled up in this protracted trial, a tribute to the efficiency and zeal of the Official Liquidators. Normally there would have been nothing criminal jn the bank lending money to intending purchasers of shares in this company which they were promoting and holding the share scrip as security. It is amazing how a bank manned by personnel of the experience of accused 2 and others who do not appear to have known the elements of banking generated the confidence of the public to invest their moneys in this bank. In the affairs of the Coorg Plantations Ltd., there do appear to have been many irregularities, if not some offences, committed with which however several accused charged with this widespread conspiracy have no connection or concern at all.

14. We come now to the alleged misjoinderin these C7 charges. They cannot be held to bevitiated legally or technically by misjoinder inthe light of ease law laid down up to the PrivyCouncil. The evolution of conspiracy law isinteresting. In 'Subramanya Iyer v. Emperor', 25 Mad 61 (PC) two officers of the Military Accounts Department were charged under Section 109 and 161, I. P. C. andSection 109 and384, I. P. C. with 41 acts of bribes and extortions extending over two years. One1 of themwas tendered a pardon during the trial andgave evidence as an approver. A Full Benchof this court upheld the conviction of Subra-mania Aiyar on one count. In appeal thePrivy Council set it aside holding that the trialwas vitiated by non-compliance with Section 234,Cr. P. C., under which a single person may betried only for three offences of the same kindif committed within a period of .one year. Section 239, Cr. P. C. was not then in existenceand was enacted by the Criminal ProcedureAmendment Act (XVIII of 1923). Under thissection persons may be charged and tried together (a) if accused of the same offence committed in the course of the same transaction,(b) if accused of an offence along with personsaccused of abetment or of an attempt to commitsuch offence, (c) accused of more than one offence of the same kind, within the meaning ofSection 234 committed by them jointly within theperiod of 12 months and (d) if accused of different offences committed in the course of thesame transaction. N

15. In 1913 the new offence of criminal conspiracy, defined in Section 120-A, I. P. C. and punishable under Section 120-B, to commit an offence was created by the Legislature with the primary object, as would appear from the Statement of Objects and Reasons, of punishing even a conspiracy which does' not culminate in any offence. In cases in which in pursuance of conspiracy an offence was in fact committed the only avenue for the prosecution was by charges of abetment under Section 109, Section 107 defining an abettor as one who engages with one or more persons in any conspiracy for the doing of a thing, if an act or illegal omission takes place in pursuance of that conspiracy.

16. The resultant effect of Section 120-A and 120-B, I. P. C. and Section 239, Cr. P. C. has been to open out an unlimited avenue for masses of charges being framed against persons in a joint trial on a mere accusation of conspiracy. There are several reported cases in which such trials have been held and convictions upheld negativing pleas of embarrassment by misjoinder 'Satyanarayana v. Emperor', 1933 Mad W N Cri. 77; 'Venkata Hanumantha rao v. Emperor', 1933 Mad W N Cri. 213; 'IN RE Mal-Lu dora', 49 Mad 74; 'Mukund Singh v. Emperor', 8 Lah 230 ; 'Gopal Raghu-Nath v. Emperor', 53 Bom 344; 'Abdul Salim v. Emperor'. 49 Cal 573. In 'Babu-Lal Chowkhani v. Emperor', I.L.R. (1938) 2 Cal 295 (PC) a case considered by the Privy Council in which several persons were tried and convicted under Section 120-B and on numerous charges under Section 379, I. P. C. and Section 39 of the Electricity Act, Lord Wright held that Section 239, Cr. P. C. was an express exception to Section 233, Cr. P. C. and did not import either expressly or by implication the limitations set out in Section 234 nor those in Section 235(1) and that in fact there was no limit to the number of offences specified in Section 239, the only limitation being that the1 accusation should be of offences committed 'in the course of the same transaction. He upheld the view taken in our courts, including 'Gopal Raghunath v. Emperor', 53 Bom 344. In that judgment he made the following observations which are pertinent and most relevant to the present problem which now confronts us:

'It has been affirmed that improper advantage is taken of Section 239 (d) so as to bring into one proceeding a great number of accused and a great multiplicity of offences, with serious hardship and injustice to the accused. If that were indeed the result of the section, as the High Court seem to be apprehensive it might be, it would be much to be regretted and might well be a ground for an amendment of the section by the legislature, if such practice prevailed notwithstanding the warning of the High Court and their determination to see that the accused are not being unfairly dealt with and to prevent any procedure by which cases which should be comparatively short and simple become unwieldy, complicated and lengthy. But even so that can be no ground why the court should misconstrue the section. Indeed it is difficult to think that such apprehensions are justified. It must be hoped, and indeed assumed, that Magistrates will exercise their discretion fairly and honestly. Such is the implied condition of the exercise of every discretionary power. If they do not, or if they go wrong in fact or in law, then the accused has prima facie a right of recourse to the superior courts by way of appeal or revision. The passage already quoted from the judgment of the High Court shows how vigilant and resolute that court would be to see that the accused were not prejudiced or embarrassed by an improper mis-joinder of charges or of persons accused. Those safeguards may well have appeared to the legislature to be sufficient. It may seem paradoxical that the prosecution should have the advantage of joining different offences and different accused simply because the allegation of a conspiracy seemed to the Magistrate to be prima facie justified, whereas at the trial the allegation breaks down. But the charges nave to be framed, for better or for worse, at an early stage of the proceedings. It would be paradoxical if one, no one could tell till the end of the trial whether the trial was legal or illegal.'

We do not think Lord Wright could have visualised the possibility of a case such as this, where after a trial before a Magistrate lasting for 21/2 years a confused conglomeration of charges has resulted, bewildering not merely to any defending counsel, but also to any trying court and on the basis of which no further trial can possibly proceed on a vast accumulation of matter indiscriminately flung into the case. As regards magisterial discretion it has unfortunately been quite impossible for the Magistrate who framed these charges to exercise any at all.

* * * *

17. The present impasse is not the result of the law which presumes a certain amount of commonsense, practicability and responsibility not only in the accusation of a criminal conspiracy but also in its conduct of such a prosecution. We can find nothing whatsoever wrong or mala fide in the accusation of conspiracy to falsify accounts from December 1946 but everything wrong with the way in which books, documents and papers of this bank under liquidation have been flung into this case without any attempt at selection or crystallising specific charges on which the prosecution sought to bring home the guilt to offenders.

* * * *

We have no hesitation in quashing all the charges framed not on the legai ground of mis-joinder, but for the other reasons we have given.

18. It is incumbent on us at this stage and in view of the deadlock in the trial of this case to prescribe a remedy for a growing 'conspiracy disease' which seems to afflict prosecutors in varying degrees in the conduct of these cases. We can only substitute for the old restrictions as to misjojnder in Section 233, 234 and 235 which the association of Section 120-A and 120-B and Section 239, Cr. P. C. have completely removed, the restrictions of reason, commonsense. practicability and a Sense of responsibility which all prosecutors are presumed to have. No practical purpose, so far as we can see is served by formulating in a conspiracy case a multitude of offences of the same kind against one person which would be grossly vitiated by misjoinder if he was on trial by himself. Nor can such a course be in any way justified merely because Section 239, Cr. P. C. makes it 'legally permissible'. It is also 'legally permissible' for a single person to be charged at repeated trials for offences of the same kind restricted by Section 234 to three at a tima and to be convicted say of 60 such offences on 20 separate charge-sheets at 20 separate trials and awarded concurrent sentences of imprisonment. But any prosecutor .or magistrate insisting on pursuing such a course will undoubtedly find himself speedily relieved of all his responsibilities on grounds inter alia of suspected sanity. We can see no real reason for differential treatment as regards prosecutors who seek to do, as it appears to us substantially the same thing by the backdoor of conspiracy in these trials merely on the ground that some others help him to commit these offences. Normally it would not require more than three charges of an offence of the same kind to be framed against one conspirator in any conspiracy case, however, complicated, certainly not in any case of misappropriation or branch of trust. There are special cases in which this number can be reasonably & properly exceeded. The criterion should always be the avoidance of multiplicity of criminal trials which an efficiently and intelligently conducted conspiracy case should always succeed in achieving by bringing to justice several persons at one trial. The learned Public Prosecutor agrees with us that had this course been adopted, instead of evidence of hundreds of offences being flung into this case even the twin conspiracy case of criminal breach of trust and falsification could have been completed in the course of a few months.

19. In this case there are also no less than 17 charges of abetment. As it appears to us in any true conspiracy case there should be no need to frame any charge of abetment at all Each conspirator abets every offence committed by a fellow conspirator. The formulation of| abetment charges within the ambit of conspiracy, while it may not be bad on the technical point of misjoinder as it appears to us is wholly redundant and superfluous and is made a further backdoor for the compilation of innumerable charges which complicate these cases. Several' abetment charges also within the ambit of the main conspiracy accusation suggest minor exclusive conspiratorial groups which have no relation to each other and help to weaken the main conspiracy charge exposing it to criticism that it is thin and not bona fide. It must always be remembered that abetment is also conspiracy and that Section 109, I, P. C, was prior to the creation of Section 120-B the only means of punishing conspiracy which culminated in an offence.Section 107 to 109, I. P. C. still remain law. But those sections are hardly ever invoked in cases of conspiracy which are now built round Section 120B, 1 P. C. with many charges both of direct offences' and of abetment brought within its scope.

20. In 'VENKATAKAMIAH v. EMPEROR', 1937 Mad W N Cr. 212 Newsam J. sitting by himself in 1937 in this court in revision quashed charges under Section 120-B and substituted charges under Section 109, I. P. C. observing that where the matter had gone beyond the stage of conspiracy and an offence is alleged to have been committed, Section 120-B was wholly irrelevant. In that case the question of failure to obtain sanction under Section 196-A, Cr. P. C. the offences involved being non-cognizable, arose. Such sanction was necessitated also by Section 5 of the Criminal Law Amendment Act, 1913, making sanction necessary for conspiracy to commit a non-cognizable offence. No such sanction is required, of course, for a court to take cognizance in the case of an abetment by conspiracy of any kind of offence if committed. The practice of using Section 120-B in cases of conspiracy even when offences have been committed has been approved up to the Privy Council in cases to which we have referred. The charges under Section 120-B are far more easy and convenient to frame than those under the abetment sections when more than two or three persons are involved, and we consider that the prerequisite sanction under Section 196-A, Cr. P. C. for the user of this section in non-cognisable cases in this manner a salutary safeguard.

There is no necessity for any fresh legislation to stop abuses in the conduct of conspiracy cases in the state of the law as it stands now, provided Section 120-B in conjunction with Section 239, Cr. P. C. is not misused. Its user in cases of this type has, we consider, great potentialities for good and. evil. If the potentialities for abuse continue to be exploited, the legislature may have to come to our rescue by imposing the restrictions of misjoinder contained in Section 234, Cr. P. C.-to each person charged within the ambit of a conspiracy. We are of the opinion that when the Legislature created the offence of mere conspiracy Under Section 120-B in 1913 and enacted Section 239, Cr. P. C. in 1923, they did not anticipate the possibility of a weapon being gradually forged out of this legislation by prosecuting authorities for harassment qJE numbers of accused in long and protracted trials of this nature on a veritable multitude of offences and for the tribulation of trying magistrates and courts. Finally, as the learned Public Prosecutor has conceded, no accused in this case-could possibly have been convicted on the conglomeration of charges framed in this case. The prosecution in a case of conspiracy should be most careful to avoid any exposure to the slightest criticism that it is in conspiracy with the accused to conduct these cases in such a manner as will ensure their ultimate acquittal.

21. We are also called upon to deal on these petitions with an interesting legal position created by the Banking Companies Amendment Act XX of 1950. Mr. Rangaswami Aiyangar on the first day of his arguments was inclined to take the position that this case stood automatically transferred to the High Court under Section 11 of the Act which makes special provisions for speedy disposal of winding up proceedings. Section 45-A gives the High Court exclusive jurisdiction to entertain any matter relating to or arising out of a bank in liquidation. Section 45-C empowers a winding up court to take cognizance of and try summarily offences by any promoter, director, manager or officer of a banking company, provided the offence is punishable under the Indian Companies Act with imprisonment which does not exceed two years. Section 45 C (3) requires offences by such persons punishable under the Companies Act which are not tried summarily to be tried by a Judge of the High Court other than the Judge for the time being dealing with winding up without any commitment for trial and without the aid of a jury. Section 11 then creates a difficulty. Under it,

'Where any proceedings for the winding-up of a banking company or any other proceeding, whether civil or criminal, which has arisen out of or in the course of the proceeding is pending in any court immediately before the commencement of this Act, it shall stand transferred on such commencement' to the High Court. This criminal case arose in a sense in the course of winding-up proceedings, after the winding up O. P. had been filed and later a direction was given by the winding-up Judge to C. I. p. to investigate the case, which they did mainly on the basis of the audit report from the auditors appointed in the course of the winding up proceedings. Section 11 does not of course require all offences under the Indian Penal Code which are not punishable also under the Companies Act, to be tried by a Judge of the High Court as against a managing director, directors, officers, and so on. Offences such as forgery and criminal breach of trust, even if they are disclosed in the course of the winding up, have to be tried by the ordinary courts not inferior to that of a Presidency or First Class Magistrate under Section 278(1) of the Companies Act, and the procedure under Section 237(1) for prosecution of such cases on a direction of the winding up court by the liquidator is left undisturbed. Whatever 'criminal proceedings' may mean, it cannot apply to this case prosecuted also on the direction of the winding up Judge in addition to the orders of the local Government and sanction afforded under Section 196-A of the Cr. P. C. in respect of a non-cognizable offence under Section 477-A, I. P. C.

22. In addition to this comprehensive twin conspiracy charge-sheet the C. I. D. laid no less than 25 charge-sheets alleging criminal breach of trust mother courts in the jurisdiction of which this bank had branches. The Public Prosecutor has supplied us with a list of these cases. No less than eight of them were laid against accused 13, the Agent of the Madras Branch, in which other Bank constituents not implicated in this main conspiracy case were involved. Eight similar cases were laid before the Additional First Class Magistrate, Negapattinam, in some of which we find accused 2, 7, 8, 9, 10, 11 and 13 involved along with others who are not accused in the present case. In this iist we also find two cases pending in the Sub-Divisional Magistrate's court, Tanjore, in which accused 2 and 7 are involved. Section 120-B, I. P. C. has been invoked also in no less than 22 of these cases which were all stayed by the Admission Court on the unopposed ground that the books and records required for their prosecution were all filed in this main conspiracy case. Altogether therefore the C. I. D. investigation produced 23 conspiracy cases.

23. In a case of this kind in which several persons have stood a protracted trial for 21/2 years which has produced such charges as these, impossible to try at a single trial, a court would be justified in not directing a retrial of the accused when quashing the charges. In view of the gravity of the charges made against the officers of the bank, namely, accused 1, 2, 3, 5, 7, 8, 9, 10, 12, 13, 14 and 15 we think they should be retried in a 'de novo' trial on the charge of conspiracy between October 1946 and April 1947 to falsify bank accounts and to bring into existence a false balance sheet. We accept the Public Prosecutor's suggestion that this conspiracy charge should be split out of this case which has degenerated into a chaotic muddle. We are unable to accept his suggestion that accused 22 to 28 should also be included in this conspiracy charge. They were constituents of the bank whose accounts were juggled with in a manner of which they may not have been aware. The auditor's assistant, accused 6, accused II the Agent of the Nagappattinam branch against whom several charge sheets are pending, accused 17 and 18, we do not consider need be tried any further on any count in this unwieldy conspiracy case,. Accused 4, though a Director who signed the balance sheet, is a doctor practising in Negapattinam. The prosecution has not made all directors who signed it vicariously liable and in fact has examined two of them, K. Narayanaswami Aiyar, P. W. 181. and Swaminatha Sastri, P. W. 189, as prosecution witnesses. In quashing these charges we do not think there should be any further trial of accused 4, 6, 11, 16, 17, 18 and 22 to 28 on any counts in this charge sheet, though we do not exonerate them from culpability, in view of the protracted trial to which they have been subjected,

24. Mr. Nambiar began to address some lengthy arguments to us on the absence of any evidence to show that accused 1, President of the Board of Directors and Chairman of the Managing Committee, was at all aware of the wholesale manipulations alleged. It is true that in accused 2 as managing director under Art. 64 of the Articles of Association was vested the actual management of the bank. We do not desire to go into the merits of the evidence as regards accused 1, nor can we express any opinion at this stage. It is sufficient to say that we think that thece is a prima facie case which he has to meet and direct him to take his trial on this limited charge.

25. We have decided alter mature consideration to withdraw this entire case and all the documents piled up there to the High Court under Section 526 (1) (e) Cr. P. C. as we consider this course expedient in the interests of justice and also under Section 526 (b) on the ground that in its trial some questions of unusual difficulty may be created or are likely to arise which the Magistrate may not be capable of dealing with. We have considered and rejected the possibility even of a commitment to the Sessions Court of Tanjore on these split up charges. No commitment on the basis of the vast accumulation of matter in this case is, in our opinion, at all practicable. It is also imperative that all the Bank records should be brought to this court as expeditiously as possible for liquidation proceedings which have been unnecessarily held up for nearly three years. The course we have decided to adopt will also accord with the policy of the Banking Companies Act which requires a Judge of the High Court to try all offences committed by officers of a bank punishable under the Indian Companies Act. Falsification of accounts is also punishable under Sections 282 and 237 of the Indian Companies Act. The learned Public Prosecutor pointed out a technical difficulty in any prosecution for conspiracy under these sections for want of specific sanction as regards them. He has placed before us a draft of clear and lucid counts on which he suggests these accused may be tried in this court. It contains quite rightly, in our opinion, not more than three specific counts of falsification under Section 477-A I. P. C. against any of the accused. The Public Prosecutor's estimate of duration of such a trial is ten days and he says that about 25 witnesses may have to be examined, the prosecution founding its case mainly on the bank accounts. Under Section 526 (2), Cr. P. C. the trying Judge will have to try the case by warrant procedure, and we certainly think that under Section 267, Cr. P. C. they should be tried without a Jury. Under Section 31 (1), Cr. P. C., he is competent to pass any sentence authorised by law. The prosecution will be conducted by the Public Prosecutor.

26. The stay in the 24 cases pending in Magistrate's courts according to the list furnished by the Public Prosecutor will be immediately vacated. The Public Prosecutor is directed to control and give directions regarding their prosecution with due regard to Section 240, Cr. P. C. The records will be called for from the Special Magistrate's court as expeditiously as possible. The other counts on the C. I. D. charge-sheet will remain for the present to be dealt with in due course according to law in accordance with Section 240 Cr. P. C.

27. In view of this abortive and most protracted trial at heavy and wasteful expenditure of public money as a result of misdirected prosecution we would strongly recommend to Government the appointment of a Director of Prosecutions on a fixed salary, not much below that of a High Court Judge, who should be charged with the responsibilities of directing the conduct of prosecutions in important cases throughout the State, with the assistance in Madras also of prosecutors remunerated on a fixed adequate salary. In the observations we have made in this case we are far from underrating the difficulties in the proper prosecution of a case of deep-seated conspiracy involving several persons. It involves a great deal of preparation and the presentation before the trying court of a clear-cut case with counts capable of being formulated into charges on each of which the trying court is bound specifically to find. The remuneration for the work involved on the basis of a daily fee is in our opinion quite incommensurate with the labour involved, if the desired result of these cases being disposed of in the minimum period of time is to be achieved.


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