Rajeevanvsp of Policeevidence

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2011 (1) KHC 738

Kerala High Court
V. Ramkumar, J.
Rajeevan and Others v. Superintendent of Police, Cochin and Another

Parallel citation(s): 2011 (1) KHC 738 : 2011 (1) KLD 361 : 2011 (1) KLJ 764 :
2011 (3) KLT SN 26 : 2011 CriLJ 2801
Prevention of Corruption Act, 1988 -- S.13(1)(d), S.13(2) -- Allegation that

accused, while serving as the Manager of a Bank misappropriated huge
amounts by advancing loan -- Held, even before the disbursal of the loan
amounts, the loans were fully secured by collateral security -- Senior
Manager also a party who approved the loan -- Intention of the Manager
to cheat the Bank cannot be inferred -- Penal Code, 1860, S.120B, S.420,
S.468
Facts of the case

It is an admitted fact that even before the disbursal of the loan amounts in all
the three cases, the loans were fully secured by collateral security. If so, an
intention to cheat the bank cannot be readily inferred. All the loans were
granted on the strength of collateral security after taking into account the
valuation made by the valuers, namely, one Asokan and one Subrahmania
Iyer (both of whom were not examined) and also on the strength of
confidential reports which were suppressed. A1 had sanctioned the loans
acting on the recommendations of PW 23, the Senior Manager who had
conducted the pre-sanction inspection and who had not made any report to
the effect that any of the firms including Distributors Quilon was fictitious. If so,
A1 the Branch Manager cannot be blamed at all in sanctioning the loans. The
Court below was not right in accepting the prosecution case in this behalf.
Important Para(s):18, 21
Prevention of Corruption Act, 1988 -- S.13(1)(d), S.13(2) -- Allegation that

accused, while serving as the Manager of a Bank advanced loan to
fictitious firms -- Held, a firm was in existence or not could be
established only by examining appropriate persons and adducing
reliable evidence by the prosecution -- Mere fact that an address which
was not known to the postman cannot be a reason for straightaway
assuming that the firm was not in existence -- Criminal Trial
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Held:
It was PW 15 the postman attached to the G.P.O., Trivandrum, who returned
Ext. P52 letter undelivered to the CBI Inspector with his endorsement 'not
known' dated 15/04/1991. Here again, from the mere fact that an address
which was not known to the postman in April, 1991, it cannot be straightaway
assumed that the firm was not in existence in the year 1989 when the
transaction took place. That apart, there is the admission by PW 15 himself
that the entire area of M.G. Road, Trivandum was not within his limits and that
there were two other postmen in the G.P.O., Trivandrum for M.G. Road area.
By examining PW 15 who was a postman who had jurisdiction only over a
portion of M.G. Road, Trivandrum the prosecution cannot succeed in showing
that there was no firm by name K. S. Agencies in M.G. Road, Trivandrum.
Without examining the appropriate persons concerned and without adducing
reliable evidence the prosecution could not have canvassed for the position
that K. S. Agencies was a fictitious and non-existing firm. When the loan was
sanctioned on the strength of adequate collateral security and after
conducting proper enquiries and pre-sanction inspection and on the strength
of CRs, legal opinion etc. and on the recommendation of PW 23, it was not
open to the prosecution to contend that A1 was sanctioning the loan
dishonestly and without proper verification.
Important Para(s):23, 24
Criminal Trial -- Examination of witnesses -- Accused not permitted to

cross-examine prosecution witnesses for the reason that those
witnesses did not speak anything against the accused -- Propriety of --
Held, when accused is facing the charge of criminal conspiracy, he
should have been permitted to cross-examine the witnesses -- Refusal
to do so would cause prejudice to the accused -- Penal Code, 1860,
S.120B, S.420, S.468
Held:
Yet another procedural violation committed by the trial Judge was that the first
accused was not permitted to cross examine nine prosecution witnesses
namely PWs 4, 5, 7, 8, 12, 13, 15, 16 and 20. The specific reason recorded in
the depositions of PWs 4 and 20 for not allowing A1 to cross-examine the
above witnesses was that those witnesses did not speak anything against A1.
The learned trial Judge overlooked the fact that the first accused was facing a
charge of criminal conspiracy punishable under S.120 B IPC and therefore, he
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should have been permitted to cross-examine the aforementioned witnesses.

Refusal to do so has resulted in prejudice to A1.
Important Para(s):30
Criminal Trial -- Examination of witnesses -- Even after a witness enters

the witness box and oath administered to him, he can be asked to
withdraw from the witness box -- But once chief examination is
commenced, the party who calls him cannot give up the witness or
withdraw him and thereby deprive the opposite party the right of
cross-examination -- Practice of the prosecution giving up a witness
after the commencement of chief-examination and without tendering the
witness for cross-examination is unhealthy, irregular and not warranted
by law
Held:
A witness can be given up before he enters the witness box. Even when a
witness enters the witness box and oath is administered to him, it is not too
late and he can be asked to withdraw from the witness box. But once chief
examination is commenced, the party who calls him cannot give up the
witness or withdraw him and thereby deprive the opposite party the right of
cross-examination. The practice of the prosecution giving up a witness after
the commencement of chief-examination and without tendering the witness for
cross-examination is unhealthy, irregular and not warranted by law. (See --
Lalitha v. Sarangadharan). In Sukhwant Singh v. State of Punjab the Apex
Court observed as follows: 'S.138 envisages that a witness would first be
examined-in-chief and then subjected to cross-examination and for seeking
any clarification, the witness may be re-examined by the prosecution. There
is, no meaning in tendering a witness for cross-examination only. Tendering of
a witness for cross-examination, as a matter of fact, amounts to giving up of
the witness by the prosecution as it does not choose to examine him in chief.
There is no procedure whereby the prosecution is permitted to tender a
witness for cross-examination only, without there being any
examination-in-chief in relation to which, such a witness can be
cross-examined. The effect of witnesses being tendered only for
cross-examination amounts to the failure of the prosecution to examine them
at the trial. Their non- examination, in our opinion, seriously affects the
credibility of the prosecution case and detracts materially from its reliability.
Thus, the prosecution was not justified in giving up PW 6 after putting two
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questions to him in chief-examination.
Important Para(s):31
Referred: Kali Ram v. State of H.P., 1973 KHC 634 : 1973 (2) SCC 808 : AIR
1973 SC 2773 : 1973 SCC (Cri) 1048 : 1974 CriLJ 1; Kanu Ambu Vish v.
State of Maharashtra, 1971 KHC 469 : 1971 (1) SCC 503 : 1971 SCC (Cri)
211 : AIR 1971 SC 2256 : 1971 CriLJ 1547; C. Chenga Reddy v. State of
A.P., 1996 KHC 1264 : 1996 SCC (Cri) 1205 : 1996 (10) SCC 193 : AIR 1996
SC 3390; Hamsa v. State of Kerala, 1966 KHC 51 : 1966 KLT 136 : 1966 KLJ
184 : AIR 1967 Ker. 16 : 1966 KLR 160; Lalitha v. Sarangadharan, 1988 KHC
461 : 1988 (2) KLT 394 : 1988 (2) KLJ 428 : 1989 (1) KLN 4; Datar Singh v.
State of Punjab, 1975 KHC 789 : 1975 SCC (Cri) 530 : 1975 (4) SCC 272 :
AIR 1974 SC 1193 : 1974 CriLJ 908 : 1974 (11) ACC 262; Referred to
Advocates:
T. R. Aswas; K. A. Jaleel; B. Raman Pillai; For Appellants

M. V. S. Namboothiri; S. Sreekumar; For Respondents
COMMON JUDGMENT
1. These appeals filed under S.374(2) CrPC arise out of the common
judgment dated 28/04/2000 on the file of the Court of the Special Judge (SPE
/ CBI) - 1, Ernakulam (hereinafter referred to as the 'Special Court' in CC Nos.
9, 10 and 11 of 1993. Two of the accused in two of the aforesaid CC Cases
are common. In CC 9 of 1993 there were three accused persons and in CC
Nos. 10 and 11 of 1993 there were two accused persons. The first accused in
all the three cases namely Joseph Alappatt is a common accused. The
appeals filed by the said common first accused in CC Nos. 9, 10 and 11 of
1993 are Crl. Appeals 307, 315 and 316 of 2000. Crl. Appeal 304 of 2000 is
filed by the 2nd accused (H. Vahab) in CC 9 of 1993. Crl. Appeal No. 295 of
2000 is filed by the 3rd accused (Rajeevan) in CC 9 of 1993). Crl. A. 305 of
2000 is filed by the 2nd accused (K. Thajudheen @ Thaju) in CC 10 of 1993.
Crl. A. 296 of 2000 is filed by the 2nd accused (Rajeevan) in CC 11 of 1993.
2. PROSECUTION CASE IN CC 9 OF 1993
The case of the prosecution in CC 9 of 1993 is as follows:
A1 (Joseph Alappatt) was working as the Manager of the Quilon Branch of the
Punjab National Bank ('PNB' for short) during the period 1988-1990 and was
competent to sanction term loans. He was responsible for conducting pre -
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sanction inspection of the units / premises of the applicants for loan for
ascertaining the genuineness of the application and eligibility of the applicants
before sanctioning the loan. Some time during October 1989 A1 (Joseph
Alappatt), A2 (H. Vahab) and A3 (Rajeevan) entered into a criminal
conspiracy to cheat PNB. In pursuance of the said criminal conspiracy, A2
representing the firm Salim Agencies filed a false loan application before PNB
for a term loan of Rs.1,50,000/- on 7-10-1989 to operate a shop for hiring
steel tables and chairs. Along with the loan application A2 had enclosed a
quotation from 'Distributors Quilon' at Kadappakkada, a non - existing firm
purportedly represented by A3 Rajeevan for the supply of folding chairs and
folding tables for Rs.2,04,375/-. On 07/10/1989 itself A1 sanctioned the loan
fully knowing that the loan application was false. A1 issued pay orders for
Rs.1,44,375/- dated 07/10/1989 and Rs. 60,000/- dated 16/10/1989 including
the margin money of Rs.54,375/- remitted by the loanee in favour of
'Distributors Quilon'. In pursuance of the said conspiracy A3 Rajeevan opened
an account in the name of 'Distributors Quilon' in the Quilon branch of the
Dhanalakshmi Bank and credited the said pay orders in the said account and
withdrew the credited amounts by means of cheques dated 11/10/1989 for
Rs.70,000/- and Rs.74,000/- and by cheque dated 17/10/1989 for
Rs.60,000/-. A3 was not doing any steel furniture business at Kadappakkada
under the name and style of 'Distributors Quilon'. He was actually running a
Saw Mill at Quilon. He had not supplied any steel table or folding chairs to A2
and A2 had appropriated the loan amount with the assistance of A3. The
quotation in the name of 'Distributors Quilon', a non - existing firm was forged
by A3 on or about 07/10/1989 intending that it shall be used for the purpose of
cheating PNB. A1 (Joseph Alappat) being a public servant, in his capacity as
the Manager of PNB, on or about 07/10/1989 by corrupt or illegal means or by
otherwise abusing his position as such public servant, obtained for A2
pecuniary advantage to the extent of Rs.1,50,000/- by sanctioning the said
amount as loan from PNB acting on the false loan application submitted by A2
and by issuing the pay orders for Rs.1,44,375/- and Rs.60,000/- in favour of
'Distributors Quilon', which were encashed by A2 with the assistance of A3.
A1 to A3 thereby committed offences punishable under S.120B, S.420 and
S.468 IPC and S.13(2) read with S.13(1)(d) of the Prevention of Corruption
Act, 1988 ('the PC Act' for short).
In the month of November 1989 A1 (Joseph Alappat) who was working as the
Manager of PNB entered into a criminal conspiracy to cheat PNB. In
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pursuance of the said conspiracy A2 (K. Thajudheen @ Thaju) representing

the firm 'Changathees Video Centre', submitted a false loan application before
A1 on 3/11/1989 for a term loan of Rs.1,50,000/- for purchasing video
cassettes for running a video cassette library. Along with the loan application
A2 had enclosed a false quotation in the name of a fictitious and non - existing
firm by name 'K. S. Agencies', M. G. Road, Trivandrum, for having purchased
1500 video cassettes for Rs.1,01,000/-. A1 knowing fully well that the
quotation submitted along with the loan application was false, sanctioned the
loan on the same day and P.N.B. issued a Demand Draft for Rs.2,01,000/-
including margin money of Rs.51,000/- in favour of K. S. Agencies. A2
fraudulently opened an account in the Trivandrum Branch of PNB in the name
of K. S. Agencies, M. G. Road, Trivandrum on 02/11/1989. A2 then presented
the above D.D. on 06/11/1989 and drew the money thereunder. Thus the
amount intended for the supplier was drawn by the loanee himself and the
loan amount was not utilised for purchasing video cassettes. The quotation in
the name of a non - existing firm by name K. S. Agencies, M. G. Road,
Trivandrum was forged by A2 with the intention that it shall be used for
cheating PNB by dishonestly inducing the bank to sanction the loan. A1 being
a public servant, by corrupt or illegal means or otherwise abusing his position
as such public servant obtained for A2 pecuniary advantage to the extent of
Rs.1.5 lakhs by sanctioning the said loan. A1 and A2 have thereby committed
offences punishable under S.120B, S.420 and S.468 IPC and S.13(2) read
with S.13(1)(d) of the PC Act.
Sometime in the month of Nov. 1988 A1 (Joseph Alappat), Branch Manager,
PNB, Quilon, and A2 (Rajeevan), Proprietor, Aswathi Wood Industries,
entered into a criminal conspiracy to cheat PNB. In pursuance of the said
conspiracy A2 submitted a false loan application before the Bank on
27/11/1989 for a term loan of Rs.1,50,000/- for running a saw - mill and for
constructing a shed for the saw mill. Along with the said loan application A2
had enclosed a false quotation from M/s. Deepak Industries, Kadappakkada,
Quilon for the supply of machinery costing about Rs.1,42,485/- and a false
quotation from C. K. Prasad, PW D. Contractor, Ayathil, Quilon for the
construction of a shed for the saw mill for a sum of Rs.64,924.81. On
05/12/1989, A1 sanctioned the loan fully knowing that the loan application
was false. Accordingly, the Bank issued a pay order for Rs.1,06,985/- in
favour of Deepak Industries and another pay order for Rs.49,924.81 in favour
of C. K. Prasad including margin money of Rs.6,904.81 remitted by the
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loanee. Rajesh, the brother of A2 opened account No. 532 in the Quilon
Branch of the Dhanalakshmi Bank in the name of Deepak Industries, a
fictitious firm and presented the pay order for Rs.1,06,985/- in the above
account on 06/12/1989 and withdrew the amount in instalments on different
dates. C. K. Prasad, the PWD. Contractor presented the pay order for
Rs.49,924.81 in the said bank on 06/12/1989 and withdrew the amount. A2
did not utilise the loan for the purpose for which it was applied. C. K. Prasad
did not construct the shed for the saw mill. A2 had appropriated the entire
amount with the assistance of Rajesh and C. K. Prasad. The quotation in the
name of M/s. Deepak Industries, Kadappakkada, Quilon, a non - existing firm
was forged by A2 on or about 27/11/1989 intending that it shall be used for
the purpose of cheating PNB. A1 being a public servant, by corrupt or illegal
means or by otherwise abusing his position as such public servant had
obtained for A2 pecuniary advantage to the tune of Rs.1,50,000/- by
sanctioning the above loan on the basis of false loan application and false
quotations. A1 and A2 thereby committed offences punishable under S.120B,
S.420 and S.468 IPC and S.13(2) read with S.13(1)(d) of the PC Act.
5. THE TRIAL
As agreed to by both sides, all the aforesaid three CC cases were jointly tried
by the Special Court. CC No. 9 of 1993 was treated as the main case in which
evidence was recorded.
6. On the accused persons pleading not guilty to the separate charges
framed against them for the aforementioned offences, the prosecution was
permitted to adduce evidence in support of its case. The prosecution
altogether examined 26 witnesses as PWs 1 to 26 and got marked 123
documents as Exts. P1 to P123. The prosecution also got marked four
material objects as MO 1 series. After the close of the prosecution evidence,
the accused persons were questioned under S.313(1)(b) CrPC with regard to
the incriminating circumstances appearing against them in the evidence for
the prosecution. They denied those circumstances and maintained their
innocence.
7. The common first accused namely Joseph Alappat had the following to
submit further before the court below:
He has not done anything against the interests of the Bank. It was his first
posting as Manager at the Quilon Branch after his promotion. The profit of a
Bank increases proportionately to the increase in credit limits. After his joining
the Quilon Branch the Regional Office had given huge credit limits to the
Quilon Branch. As a result of his work in the Quilon Branch that branch was
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upgraded from scale II Managers' Branch to Scale IV Managers' Branch. He

was depending on Sri. Ayyappan (PW 23), the loan officer for sanctioning all
loans. Ayyappan belonged to that area and had been handling the loan
section in different branches before joining the Quilon Branch. So he
entrusted the loan section to Ayyappan. There were specific office orders
entrusting the above responsibilities to Ayyappan. Those orders were withheld
by the authorities. The loans granted in these cases were not big loans
compared to loans worth crores of rupees which were sanctioned by the
Quilon Branch. During his tenure a loan for Rs. 25 crores had been
sanctioned to the Kerala Cashew Development Corporation and stock of
KSCDC had to be inspected by the Manager himself every month. The said
loan was spread over three districts and about 33 factories. The parties in this
case had approached PW 23 for the loan and had submitted the papers to
him. After fulfilling the formalities, PW 23 had put up the papers to A1 for
sanction with his recommendations. A1 did not go for a thorough verification.
He had not gone in search of the firm of the suppliers. It was not possible for
the Manager to do so in the case of each and every loan account in a Branch
like Quilon. What he had carefully verified was the credit worthiness of the
borrower. For this he had depended on the valuation report of the bank's
valuer of the properties and legal opinion of the title deeds pertaining to the
immovable properties by the Bank's approved lawyers. This case was foisted
against him since some of the senior officers thought that he was over smart.
8. H. B. Vahab (A2 in CC 9 of 1993) and Thajudeen (A2 in CC 10 of 1993)
submitted that both of them were innocent.
9. Rajeevan (A3 in CC 9 of 1993) submitted that he had started the
establishment by name Distributors Quilon in the year 1984, that he was
getting letters sent to the address of the said establishment which had sales
tax registration and he is prepared to produce evidence in this behalf. The
said Rajeevan who was the 2nd accused in CC 11 of 1993 submitted that the
amounts taken as loan for his factory by name Aswathy Wood Industries were
fully utilised for the purpose of the loan, that his factory had all the requisite
licenses and that the said factory is functioning even now.
10. THE TRIAL COURT'S VERDICT
The learned Special Judge after trial as per common judgment dated
28/04/2000 held:
(a) in CC 9 of 1993 that A1 to A3 therein conspired to secure pecuniary
advantage to A2 (Vahab) to the tune of Rs. 1,50,000/- by furnishing bogus
quotations for folding chairs and tables from Ms. Distributors Quilon, a non -
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existing firm and A1 sanctioned the loan on the date of application itself
without complying with the formalities and without verifying whether the firm
was an existing firm or not and thereby cheated the Quilon Branch of PNB
and therefore, A1 to A3 committed offences punishable under S.120 B , 420
and 468 IPC and S.13(2) read with S.13(1)(b) of the PC Act.
(b) in CC 10 of 1993 that A1 and A2 therein conspired together to obtain
pecuniary advantage to A2 (Thajudeen @ Thaju) to the tune of Rs. 1,50,000/-
by furnishing the bogus quotations for Video Cassettes from M/s. K. S.
Agencies , M. G. Road, Trivandrum, a fictitious and non - existing firm and A1
sanctioned the loan on the date of application itself without complying with the
formalities and without verifying whether the firm was a genuine one and
thereby cheated the Quilon branch of PNB and therefore A1 and A2 have
committed offences punishable under S.120B, S.420 and S.468 IPC and
S.13(2) read with S.13(1)(d) of the P.C. Act.
(c ) in CC 11 of 1993 that eventhough Ext. P13 quotation for Rs. 64,924.81
submitted by the Contractor C. K. Prasad (PW 19) for the construction of the
shed for Aswathy Wood Industries, Quilon was true and A2 therein
(Rajeevan) had got the shed constructed by utilising the loan amount, A1 and
A2 therein conspired together to obtain pecuniary advantage to A2 (Rajeevan)
to the tune of Rs. 1,42,485/- by furnishing the bogus quotations for machinery
for saw mill from Deepak Industries, Quilon a fictitious and non - existing firm
and on 05/12/1989 A1 sanctioned the loan which was applied for on
27/11/1989 without obtaining any report as to whether Deepak Industries was
real or fictitious and without complying with the formalities and A1 and A2
have thereby committed offences punishable under S.120B, S.420 and S.468
IPC and 13(2) read with S.13(1)(d) of the PC Act.
Accordingly, -
i) each of the accused in each of the three cases was sentenced to rigorous
imprisonment for one year for the conviction under S.120 B IPC.
ii) the common first accused (Joseph Alappatt) in each of the three cases
was sentenced to rigorous imprisonment for one year and to pay fine of '
5,000/- and on default to pay the fine to suffer rigorous imprisonment for three
months for the conviction under S.13(1)(d) read with S.13(2) of the PC Act.
iii) A2 (Vahab) in CC No. 9 of 1993 and A3 (Rajeevan) in CC No. 9 of 1993
and A2 (Thajudeen @ Thaju) in CC 10 of 1993 and A2 (Rajeevan) in CC 11 of
1993 were each sentenced to rigorous imprisonment for one year and to pay
a fine of Rs. 5,000/- and on default to pay the fine to suffer rigorous
imprisonment for three months for the conviction under S.420 IPC.
iv) A2 (Vahab) in CC 9 of 1993 and A3 (Rajeevan) in CC 9 of 1993 and A2
(Thajudeen @ Thaju) in CC 10 of 1993 and A2 (Rajeevan) in CC No. 11 of
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1993 were each sentenced to rigorous imprisonment for one year and to pay
a fine of ' 5,000/- and on default to pay the fine to suffer rigorous
imprisonment for three months for the conviction under S.468 IPC.
11. THESE APPEALS
It is the aforesaid judgment which is assailed in these appeals.
12. I heard Advocate Sri. B. Raman Pillai, the learned counsel appearing for
the common first accused ( Joseph Alappatt) in all the cases, Advocate Sri. K.
A. Jaleel, appearing for A2 in CC 9 of 1993 and A2 (Thajudeen @ Thaju) in
CC 10 of 1993 and Advocate Sri. T. R. Aswas, the learned counsel appearing
for Rajeevan (A3 in CC 9 of 1993 and A2 in CC 11 of 1993). I also heard Adv.
Sri. M. V. S. Namboothiri, the learned Standing Counsel for the CBI.
13. The only point which arises for consideration in these appeals is as to
whether the conviction entered and the sentence passed against all or any of
the appellants are sustainable or not?
14. THE POINT:
THE WITNESSES EXAMINED IN THE CASE
Prosecution Witnesses
[A]. PW 1. (B. R. Kher) was the zonal manager in the zonal office of P.N.B.
Madras. It was this witness who sent Ext. P1 complaint dated 24/01/1991 to
the S.P. CBI Cochin, by post. His complaint was on the basis of Ext. P2
enquiry report dated 20-4-1990 of PW 2 (S. K. Prasad) who was the Chief
Zonal Manager and on the basis of the report of PW 3 (Anantharaman) who
was a senior manager attached to the zonal office. Ext. P2 enquiry report of
PW 2 was marked subject to objection and the said objection was never
considered at the time of final judgment. Ext. P2 (a) is a statement given in
writing by PW 23 (Ayyappan who was originally the 2nd accused in the FIR)
to PW 2 on 16/03/1990. Ext. D1 Circular prescribing the mode and manner of
preparing the confidential reports (C.R. for short) and Ext. D2 flash report from
the Regional Manager to A1 directing A1 to achieve the target for priority
sector advances fixed by the Regional Office, were marked through PW 2.
PW 3 Anantharaman had, on the direction by PW 1, conducted a detailed
investigation regarding the accounts of several advances given from the
Kollam Branch. Ext. P3 is the relevant portion of his Inspection report
pertaining to CC 9 of 1993. Exts. P7 and P12 are the relevant portions of his
report pertaining to CC Nos., 10 and 11 of 1993. Exts. P4 to P6 and P8 to P19
were also marked through him. PW 4 (Koshy Jacob) was the Manager of
State Bank of Travancore (S.B.T) Kollam. He was a witness to the search
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conducted in the premises of Aswathy Wood Industries. Ext. P20 is the

search list signed by him and Ext. P21 is the file seized as per Ext. P20. PW 5
(Abdul Vahab Sait) was the Executive Officer of Vadakkevila Panchayath,
Kollam during April 1991. He proved Ext. P22 reply dated 20-4-1991 to the
investigating officer stating that no license was issued to Deepak Industries,
Kadappakkada, Kollam from the said Panchayath. PW 6 (Dr. Peer
Muhammed) was the health officer of Thiruvananthapuram Corporation. He
was cited to depose about K. S. Agencies. After putting 2 or three questions
this witness was given up by the prosecution. PW 7 (G. B. Jagadhara
Panicker) was the Junior Superintendent of Kilikkollur Panchayath. He proved
Ext. P23 reply dated 20/04/1991 addressed to the CBI. Inspector in answer to
the letter given by the CBI asking him whether Deepak Industries was
functioning in Kilikollur Panchayath area. PW 8 (Anil Damodaran) was
working with Sastha Roadways, Ashramam, Quilon belonging to his brother
during the period 1989-90. This witness stated that No. 78548 was the
telephone No, of Sastha Roadways. PW 9 (Appukuttan Nair) was working as
a clerk in the Kollam branch of Dhanalakshmi Bank during 1989. He
introduced Rajeevan (A3 in CC 9 and A2 in CC 11 of 1993) to open a current
account in the said branch in the name of "M/s. Distributors Quilon" on
06/01/1989. Ext. P24 is the account opening form. PW 10 (T.S.S. Krishnan)
was the manager of the Kollam Branch of P.N.B, from December, 1989
onwards. He had succeeded A1 consequent on the transfer of A1 to
Bangalore as Senior Manager. PW 11 (Lekshmanan Pillai) was the Manager
of the Kollam Branch of the Dhanalakshmi Bank during 1987 to 1991. He
proved Ext. P44 account opening form of current A/c. No. 531 of Deepak
Industries, Kadappakkada, Kollam opened by R. Rajesh, Ext. P45
proprietorship declaration submitted by R. Rajesh, Ext. P46 ledger extract of
the account of Deepak Industries from 06/12/1989 to 31/03/1991, Ext. P47
credit slip dated 07/12/1989 for crediting Rs. 106985/- as per Ext. P18 pay
order of P.N.B. issued in favour of Deepak Industries, Ext. P48 series (17
Nos.) of Cheques by which withdrawals were made from that account and
Ext. P14 pay order of PNB issued in favour of C. K. Prasad (PW 19) which
was credited to the account of PW 19. He also proved Exts. P24 and P37 to
P43 documents produced as per Ext. P49 letter and relating to the current
account of Distributors Quilon belonging to A3 in CC 9/1993. PW 12 (K.
Ramachandran Nair) runs a medical shop at Kollam and
Thiruvananthapuram. He had introduced Thajudeen (A2 in CC 10 of 1993) to
open a current account in the Trivandrum M.G. Road branch of Punjab and
Sind Bank. Ext. P50 is the account opening form. A1 was not permitted to
cross - examine this witness. PW 13 (Radhakrishna Pillai) is a resident of
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Pattathanam, Quilon and the proprietor of K. K. Industries which is having an

account with the Quilon Branch of the Dhanalakshmi Bank. He introduced
Rajesh (Proprietor of Deepak Industries and who is his neighbour) to
Dhanalakshmi Bank for opening an account as revealed by Ext. P44 account
opening form. Rajeevan who was running Aswathi Industries and Distributors
Quilon was also known to him. PW 14 (T.G.T. Nair) was the manager of
Ernakulam Branch of P.N.B. He had produced before the C.B.I. Ext. P9
demand draft dated 3/11/1989 as per Ext. P51 letter dated 24/07/1992. PW
15 (Natesan) was the Postman in the General Post Office, Trivandrum during
the period 1990-1992. He was examined to prove that he could not deliver
Ext. P52 registered letter sent by the CBI to K. S. Agencies, M.G. Road,
Thiruvananthapuram and had returned the said letter to the CBI with the
endorsement "not known" dated 15/04/1991. PW 16 (John C. Chiramattel) is
the proprietor of Highway Hotel, Thiruvananthapuram. He deposed that the
sales tax registration number of his Hotel was 11111561 and he did not permit
anybody to use the said KGST Number. PW 17 (P. K. Gupta) was the Deputy
General Manager of P.N.B. He issued Exts. P103, P104 and P105 sanction
orders for prosecuting A1 in CC Nos. 9, 10 and 11/1993. PW 18 (K. P. Raju)
was the manager of the Trivandrum Branch of the Punjab and Sind Bank. He
had produced before the CBI. Ext. P50 account opening form dated
02/11/1989 for opening a current account in the name of K. S. Agencies, Ext.
P106 Ledger copy of the said account and Exts. P107 to P110 to prove the
credit of Rs. 2,01,000/- on 06/11/1989 as per Ext. P9 Demand Draft and the
subsequent withdrawals of the said amount from the above account by
various cheques, and Ext. P11 specimen signature card of Thajudeen. Ext.
P112 is the letter dated 07/05/1999 as per which this witness had produced
the aforesaid documents. PW 19 (C. K. Prasad) is a contractor who gave Ext.
P13 quotation dated 25/11/1989 to Aswathi Industries owned by Rajeevan
(A2 in CC 11 of 1993) for a sum of Rs. 64,924.81 for the construction of a
shed for Aswathy Industries. He completed the construction of a shed in
December 1989. He had received Rs. 15,000/- in cash as advance and the
balance amount was received by way of Ext. P14 pay order which was given
to him by PW 23 who was a senior officer of the PNB. Ext. P14 pay order was
credited to the account of this witness in the Quilon Branch of Dhanalakshmi
Bank. PW 20 (P. S. Nair ) was the Inspector, CBI. He conducted the search of
Aswathy Wood Industries on 04/03/1991. Ext. P20 is the search list. Ext. P21
file was one of the items seized from Aswathy Wood Industries. MO 1(b) and
MO 1 (c) seals of Aswathy Wood Industries and Distributors Quilon were also
seized during the above search. PW 21 (Devanandan) was the postman of
the Head Post Office, Kollam, during the year 1991. He proved Ext. P113
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undelivered cover containing the letter dated 14/08/1991 by the CBI

addressed to the Proprietor Deepak Agencies, Kadappakkada and Ext.
P113(a) endorsement "not known" made by this witness. He also proved Ext.
P114 undelivered cover containing the letter dated 10/04/1991 from the CBI
addressed to M/s. Distributors Quilon and Ext. P114(a) endorsement "not
known" made by him. PW 22 (T. Sasidhara Panicker) was an additional
witness. He was the Manager of PNB, Ernakulam. He proved Ext. P115
(photocopy of the general instructions regarding the term loans and credit
facilities) and also the relevant pages namely pages 31 to 60, 117 to 133 and
229 to 248. PW 23 (K. Ayyappan) was the Assistant Manager cum
Accountant in charge of loans and advances in the Kollam Branch of PNB
since 9-8-1989 onwards. He was a Scale I officer of the Kollam Branch. He
was originally A2 in Ext. P118 FIR and his name was deleted only in the final
report dated 25/03/1993 filed under S.173 (2) CrPC and it was on that day
that his statement under S.161 CrPC was recorded. He also proved Exts.
P116 and 117 rent deeds. Ext. P2(a) is the statement given by this witness to
PW 2 during the enquiry conducted by the latter. In Ext. P2(a) statement as
well as in his deposition before Court, this witness confessed that it was he
who verified all the loan applications in these cases and recommended to A1
to sanction the loans. PW 24 (Sobhana) was the Junior Superintendent in the
office of the Sales Tax, Ist Circle, Thiruvananthapuram during the year 1991.
According to her M.G. Road, Trivandrum was within the limits of Ist Circle, and
when the CBI Officer asked her about K. S. Agencies, M.G. Road,
Trivandrum, she had verified the R. Register to say that there was no
establishment known as K. S. Agencies in M.G. Road, Trivandrum and that no
sales tax number was allotted to the said establishment. PW 25 (T. V.
Lekshmanan) was the Inspector, CBI, Kochi who conducted the major part of
the investigation. He registered Ext. P118 FIR on 20/01/1991 on the basis of
Ext. P1 complaint given by PW 1, questioned witnesses, seized various
documents by issuing letters to various witnesses who produced the same
along with their replies. He conducted the investigation till 24/06/1992. Exts.
P118 to P122 were proved through him. PW 26 (Ramesh Kumar) was the
Inspector, CBI, Cochin, who conducted the investigation from 24/06/1992
onwards. After conclusion of investigation he filed separate final reports on
25/03/1993 in RC 2 (A) of 1991 with regard to the three loan accounts in CC
Nos. 9,10 and 11 of 1993. It was on 25/03/1993 that he recorded the
statement of A2 (Ayyappan who was subsequently examined as PW 23)
whose name was deleted in the final report filed on that day.
Defence Witnesses
[B]. DW 1 (Sathyaseelan) was the Sales Tax Officer of Ist Circle, Kollam. He
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proved Ext. D3 certificate showing that Distributors Kollam belonging to

Rajeevan (A3 in CC 9/1993 and A2 in CC 11/1993) was having sales tax
registration from the year 1983-84 onwards. He also proved Ext. D4 notice
issued to Rajeevan of Aswathy Industries. He deposed that in Exts. P4 and
P5 quotations given by Distributors Quilon the sales tax registration number
has been quoted. DW 2 (Gopalakrishnan Achari), who was the Secretary of
Kollam Vadakkevila Panchayath proved Ext. D6 license dated 05/01/1990
issued in favour of Rajeevan to show that Aswathy Wood Industries was
functioning in a building in that Panchayath. He also proved Ext. D2 renewed
license for the period ending in the year 1999. DW 3 (C. S. Sreenivasan) was
the Inspector of Factories and Boilers who proved Ext. D8 license dated
26/11/1991 in favour of R. Rajeevan , Aswathy Wood Industries. He also
proved Ext. D9 license book. DW 4 (Radhakrishna Kammath) was the
manager of the Kollam Branch of the Corporation Bank. He proved Ext. D10
current account of M/s. Distributors Quilon from 16/07/1986 onwards and
deposed that the last entry in that account is on 12/03/1995. DW 5
(Vasudevan Pillai) was the postman of Beat I of Kadappakkada Post Office.
He proved Ext. D11 acknowledgment card which was returned to Distributors
Quilon on 14/06/1984 from the addressee namely M/s. Dharamshi
Enterprises, New Road, Kochi.
15. THE STAND OF CBI
Adv. Sri. M.V.S. Namboothiri, the learned Standing counsel for the CBI
argued that the trial Judge has properly marshelled the oral and documentary
evidence adduced in the cases and has rightly convicted the appellants
against whom a sentence commensurate to their conviction has also been
passed and the same do no call for any interference at the hands of this
Court.
16. JUDICIAL EVALUATION
I am afraid that, after a careful reappraisal of the oral and documentary
evidence in this case, I find myself unable to agree with the above submission
made by the Standing Counsel for the CBI. The following are the reasons to
support my conclusion:
17. CC 9 of 1993:
The case of the prosecution in CC 9 of 1993 as upheld by the trial Court is
that A1 sanctioned the loan of Rs.1,50,000/- on 07/10/1989 which was the
date on which Salim Agencies represented by A2 (Vahab) had submitted the
loan application along with bogus quotation for folding chairs and tables from
Distributors Quilon, a non - existent firm of A3 and subsequently A3 opened
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an account in the Dhanalakshmi Bank, Kollam Branch in the name of M/s.

Distributors Quilon and withdrew the amounts. Ext. P28 is the loan application
dated 07/10/1989 submitted by A2 (Vahab) on behalf of Salim Agencies. Exts.
P4 and P5 are the invoices dated 14/10/1989 and 17/10/1989 from
Distributors Quilon represented by A3 Rajeevan. Ext. P6 is the quotation
dated 27/09/1989 from Distributors Quilon. Ext. P29 is the transfer credit
voucher dated 07/10/1989 for Rs.1,44,375/-. Ext. P24 is the account opening
form of Dhanalakshmi Bank, Quilon Branch pertaining to the current account
opened by Rajeevan in the name of Distributors Quilon on 06/01/1989.
Rajeevan was introduced by PW 9, a clerk in the same branch.
18. It is an admitted fact that even before the disbursal of the loan amounts in
all the three cases, the loans were fully secured by collateral security. If so, an
intention to cheat the bank cannot be readily inferred. PW 1 the Chief Zonal
Manager has admitted at page 12 of his deposition that the primary concern
of the bank while granting loans is the security. At page 13 of his deposition
PW 1 has admitted that the loans issued in these cases were utilised for the
purpose for which they were sanctioned although not properly utilised. He has
also admitted that legal opinion had been taken beforehand. Going by the
testimony of PW 23 the legal opinion will usually bear the same date as that of
the loan application. Even PW 3 the Senior Officer from the Zonal Office who
had conducted spot verification of Salim Agencies belonging to A2 (in CC 9 of
1993) had seen old and rusted furniture there. The specific case of the
prosecution is that even the account in Dhanalakshmi Bank was opened by
A3 in pursuance of the criminal conspiracy. But, going by the testimony of PW
9 the Clerk of Kollam Branch of Dhanalakshmi Bank the current account of
M/s. Distributors Quilon represented by Rajeevan had been opened on
06/01/1989 which was long before the filing of loan application by A2. He has
further stated that the said account of Distributors Quilon is a live account
even now. Ext. P28 is the loan application dated 07/10/1989 in CC 9 of 1993
requesting for a loan of Rs.1,50,000/- for conducting the business of lending
folding chairs and folding tables. Along with Ext. P28 A2 had produced Ext.
P6 quotation from A3 who had agreed to supply chairs worth Rs. 60,000/- and
tables worth Rs.1,44,375/-. A2 had also produced Ext. P35 project report
dated 15/09/1989. It is in evidence that it was PW 23 (Ayyappan) who was a
Scale - I officer - in - charge of the loans and advances who had
recommended the loans. Similarly, it was PW 23 who admittedly had
prepared the confidential reports (C.R.) in all the three cases. Ext. C1 (a)
office order dated 09/08/1989 will go to show that as per the delegation of
powers it was for PW 23 to process the loan applications, conduct pre -
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sanction inspection, maintain the ledgers etc. and recommend to the Branch
Manager (who was then A1) to sanction the loan. In Ext. P2 (a) statement
which PW 23 had given to PW 2 during the enquiry conducted by the latter,
PW 23 had admitted his role in preparing the CRs, processing the loan
applications and finally recommending the loans. This report was never
revealed by PW 2 or PW 23 to the investigating officer. Nor was it shown as
an item of evidence in the final report filed by PW 26. There was no direction
from the Court either for the production of Ext. P2(a) statement. Ext. P2(a)
statement given by PW 23 to PW 2 was flourished by PW 2 during his chief
examination and was vigilantly got marked by the defence as Ext. P2(a). PW
2 has also confessed that all the loans were recommended by PW 23 who
was the Scale I Officer in - charge of the loans and advances in the Kollam
Branch of PNB. PW 2 has further admitted that PW 23 had prepared the CRs
for each of the loans and had forwarded copies of the same to the Regional
Office and no discrepancy was ever pointed out about these advances. It was
further admitted by PW 2 that the details of the loan sanctioned every month
would be reported to the Regional Office during the next month for scrutiny
and verification and to his knowledge no discrepancy was noted in those
advances. PW 3 the Senior Manager who allegedly conducted the first
enquiry confessed that he could not level any specific charge against A1 with
regard to the sanctioning of loan to Salim Agencies belonging to A2 in CC 9 of
1993. The facts brought out in the cross - examination of PW 3 would clearly
show that the inspection or enquiry allegedly conducted by him was only a
mockery. It was without personally visiting the firms which were alleged to be
non - existent that PW 3 gave Ext. P3 report in CC 9 of 1993, Ext. P7 report in
CC 10 of 1993 and Ext. P12 report in CC 11 of 1993.
19. The evidence of PW 10 the Senior Manager who succeeded A1 will go to
show that by the time A1 was transferred to Bangalore the volume of business
in the Kollam Branch which was only a Scale II Branch (when A1 joined the
said Branch) increased to that of a Scale III Branch due to the hard work of A1
and A1 who was only a junior officer who did not have the requisite seniority
to hold the post of the Manager of a Scale III branch had to be transferred. It
is pertinent to remember that PW 10 who took charge at Kollam in December
1989 had found the CRs in all the three loan files. According to PW 10
preparation of the CR is the most important part of pre - sanction inspection. It
has been unequivocally admitted by PW 10 that in a branch where there is a
loan officer (as in the case of PW 23) the managers used to sanction the loan
without any further verification of the pre - sanction measures taken by the
loan officer. This is a case in which PW 23 who was a Scale I officer had with
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full authority recommended all the loans. He was initially made the 2nd
accused in the case but was deleted from the array of accused only on the
date of filing the final report after recording his statement under S.161 CrPC
on the same day. If PW 23 was the senior officer who was in - charge of loans
and advances and if it was he who had conducted the pre - sanction
inspection and had also prepared the CRs in all the three loans and if it was
PW 23 who had recommended to sanction the loans, A1 cannot be blamed if
he acting on such recommendation in good faith had sanctioned the loans in
question. Absolutely no reasons have been given as to why PW 23 who had
performed all the pre - sanction formalities in all the three cases was
exonerated by the investigating officer.
20. The finding that Distributors Quilon is a fictitious and non - existing firm is
also opposed to the evidence in the case. According to the prosecution, Ext.
P114 registered letter dated 10/04/1999 sent by the CBI to the Distributors
Quilon, Kadappakkada, Quilon could not be delivered in the said address by
PW 21 the postman of the Head Post Office, Kollam and the said letter was
returned undelivered with the endorsement 'not known' by PW 21. First of all,
merely because a letter addressed to a particular firm in the year 1991
returned undelivered for the reason that the firm is 'not known', does not
necessarily mean that the said firm was not in existence in the year 1989
when the transactions took place. Distributors Quilon was shown as located at
Kadappakkada which according to PW 21 is Quilon - 8 which was not within
the limits of the Head Post Office, Quilon. The prosecution did not examine
anybody from the Kadappakkada Post Office. The defence examined DW 5
who was the postman of Beat - I of Kadappakkada Post Office. Ext. D11 is the
letter dispatched from Distributors Quilon to M/s. Dharamshi Enterprises, New
Road, Kochi. Ext. D12 acknowledgment shows that the postal
acknowledgment card promptly came back to Distributors Quilon in its
Kadappakkada address. Exts. P4 and P5 quotations from Distributors Quilon
had clearly shown the sales tax registration number of the said firm. No
enquiry was made with the Sales Tax Authorities as to whether Distributors
Quilon had sales tax registration. The defence examined DW 1 who is the
sales tax officer, Ist Circle, Kollam to prove Ext. D3 certificate dated
24/07/1999 showing that Distributors Quilon had sales tax registration. He
also proved Ext. D4 notice dated 14/01/1987 issued to Rajeevan, Proprietor of
Distributors Quilon. PW 25 the investigating officer admitted that he did not
make enquiries either with the sales tax or the postal authorities as to whether
the firms were existing or not. The testimony of PWs 5 and 7 will go to show
that Kadappakkada is within the limits of Kollam Municipality. Nobody from
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Kollam Municipality was examined by the prosecution. Both PWs 3 and 10

were unable to give any of the details regarding the so called enquiry made by
them to locate Distributors Quilon. PW 13 who is the proprietor of K. K.
Industries at Pattathanam, Kollam is the person who introduced Rajesh the
brother of Rajeevan. This witness is a neighbour of Rajesh. He would say that
Distributors Quilon and Aswathy Wood Industries are both at Kadappakkada
and are located at a distance of 2 1/2 kms. from each other. He further
deposed that Distributors Quilon was started during the life time of the father
of Rajesh and it deals with bulbs, tubes furniture, fan etc.
21. All the loans were granted on the strength of collateral security after
taking into account the valuation made by the valuers namely one Asokan and
one Subrahmania Iyer (both of whom were not examined) and also on the
strength of confidential reports which were suppressed. A1 had sanctioned
the loans acting on the recommendations of PW 23, the Senior Manager who
had conducted the pre - sanction inspection and who had not made any report
to the effect that any of the firms including Distributors Quilon was fictitious. If
so, A1 the Branch Manager cannot be blamed at all in sanctioning the loans.
The Court below was not right in accepting the prosecution case in this
behalf.
22. CC 10 of 1993:
The case of the prosecution is that A2 (Thajudheen @ Thaju) styling himself
as the proprietor of Changathees Video Cassette Centre, Kundara, applied for
a loan of Rs.1,50,000/- for purchase of Video Cassettes by producing bogus
quotation from a non - existing firm by name K. S. Agencies, M.G. Road,
Trivandrum and A1 the Manager knowing fully well that K. S. Agencies was a
fictitious firm sanctioned the loan and A1 and A2 thereby cheated PNB. Ext.
P64 is the loan application dated 03/11/1989 submitted by A2. Ext. P8 is the
quotation from K. S. Agencies, M.G. Road, Trivandrum. Ext. P10 is the bill
dated 04/11/1989 for Rs.2,01,000/- regarding the sale of video cassettes to
Changathees Video Cassette Centre of A2. The borrower's contribution was
Rs.51,000/- thus making a total of Rs.2,01,000/-. This loan also was
supported by adequate collateral security in the form of immovable property of
one Haneefa Kunju. Ext. P79 is the legal opinion regarding the title of the
guarantor. Ext. P78 is the valuation report prepared by Subrahmaniya Iyer
(who was the Bank's valuer) regarding the collateral security. Ext. P79 is the
legal scrutiny report dated 28/09/1989 by Advocate V. Balakrishna Pillai with
regard to the property of the guarantor. Ext. P80 is the balance sheet of
Changathees Video Cassette Centre prepared and signed by a Chartered
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Accountant. Ext. P106 is the ledger extract of current account number 476 of
K. S. Agencies with the Trivandrum Branch of the Punjab and Sind Bank. Ext.
P76 is the limit proposal dated 03/11/1989 for sanctioning the term loan of
Rs.1,50,000/- to Changathees Video Cassette Centre. This was filled up by
PW 23 who had recommended to A1 to sanction the loan. If there was any
criminal conspiracy as alleged, there was no need to execute hypothecation
deed by the guarantor or obtain legal opinion by the Bank acting through PW
23. In this case also it was PW 23 who conducted the pre - sanction
inspection and carried out all other formalities. It was PW 23 who
recommended to A1 that the loan applied for could be sanctioned. It was
again PW 23 who prepared the CR pertaining to this loan also. Ext. P9 is the
D.D. for Rs.2,01,000/- in favour of K. S. Agencies.
23. Ext. P52 is the registered letter addressed by the CBI Inspector to K. S.
Agencies, M.G. Road, Trivandrum. It was PW 15 the postman attached to the
G.P.O., Trivandrum, Trivandrum, who returned Ext. P52 letter undelivered to
the CBI Inspector with his endorsement 'not known' dated 15/04/1991. Here
again, from the mere fact that an address which was not known to the
postman in April, 1991, it cannot be straightaway assumed that the firm was
not in existence in the year 1989 when the transaction took place. That apart,
there is the admission by PW 15 himself that the entire area of M.G. Road,
Trivandum was not within his limits and that there were two other postmen in
the G.P.O., Trivandrum for M.G. Road area. By examining PW 15 who was a
postman who had jurisdiction only over a portion of M.G. Road, Trivandrum
the prosecution cannot succeed in showing that there was no firm by name K.
S. Agencies in M.G. Road, Trivandrum.
24. According to the prosecution, the sales tax registration number shown on
Ext. P10 bill dated 04/11/1989 of K. S. Agencies was really that of Hotel
Highway, Trivandrum of which PW 10 was the proprietor. Apart from the fact
that the sales tax registration number of Highway hotel was not duly proved
by either producing any certificate from the Sales Tax office concerned or by
summoning the sales tax officer concerned, no attempt was made to produce
any bill of Highway Hotel showing that its sales tax registration number was
11111561 which was the number printed on Ext. P10 bill issued by K. S.
Agencies. Even according to PW 16 the above K.G.S.T. number was printed
only in their food bills. No bill book containing the aforesaid K.G.S.T. number
was available with PW 16. PW 16 who claimed to be the proprietor of the said
hotel admitted that he does not remember the door number of the hotel
building and could not produce any document to show that he was the owner
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of the said hotel. PW 24 was the Junior Superintendent in the office of the
Sales Tax, Ist Circle, Trivandrum during 1991. When the CBI Officer asked
her about K. S. Agencies, she replied by saying that there was no such
establishment in her Circle and that the said reply was given by her after
verifying the 'R' Register. Neither the 'R' Register, nor any other authentic
document in that behalf was produced before Court, PW 24 confessed that
the Ist Circle does not cover the whole area of M.G. Road. She also admitted
that without perusing the 'R' Register she cannot say about the period
covered by the 'R' Register examined by her. The evidence of PW 18 who
was the Manager of the Trivandrum Branch of the Punjab and Sind Bank will
go to show that K. S. Agencies was not a fictitious concern. It was on being
satisfied that K. S. Agencies was an existing concern that he permitted A2
(Thajudheen) to open a current account on 02/11/1989 in the name of K. S.
Agencies. Thus, without examining the appropriate persons concerned and
without adducing reliable evidence the prosecution could not have canvassed
for the position that K. S. Agencies was a fictitious and non - existing firm.
When the loan was sanctioned on the strength of adequate collateral security
and after conducting proper enquiries and pre - sanction inspection and on
the strength of CRs, legal opinion etc. and on the recommendation of PW 23,
it was not open to the prosecution to contend that A1 was sanctioning the loan
dishonestly and without proper verification.
25. CC 11 of 1993:
Here the stand of the prosecution was that pursuant to the criminal conspiracy
hatched between A1 and A2 (Rajeev) a sum of Rs.1,06,985/- was sanctioned
in the name of a non - existent firm by name Deepak Industries being the cost
of machineries supplied to Aswathy Wood Industries, Quilon belonging to A2
and another sum of Rs.49,924.81 was sanctioned to PW 19 being the cost of
a shed allegedly constructed by PW 19 for Aswathy Wood Industries. It is the
case of the prosecution that no such shed was constructed as alleged.
26. With regard to the construction of the shed, the trial judge did not accept
the prosecution case and came to the conclusion that a shed was in fact
constructed by PW 19 (C. K. Prasad) and the amount was validly sanctioned
in favour of PW 19 and disbursed to him. The trial Judge, however, accepted
the prosecution case that Deepak Industries, Kadappakkada, Quilon was a
fictitious and non - existent firm and that A1 and A2 cheated the PNB by
sanctioning Rs.1,06,985 / . - in favour of Deepak Industries and disbursing
the said amount to Deepak Industries. Ext. P82 is the loan application dated
05/12/1989 of Aswathy Wood Industries owned by A2 (Rajeevan). Ext. P15 is
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the quotation dated 16 / 11/1989 for Rs.1,42,485/- from Deepak Industries for
supply of machineries to Aswathy Wood Industries. Ext. P17 is the transfer
debit voucher for the margin money of Rs.6,909/-. Ext. P45 is the
proprietorship declaration submitted by Rajesh the proprietor of Deepak
Industries to P.N.B. This Rajesh is none other than the brother of A2
(Rajeevan). Ext. P85 is the hypothecation agreement executed by Aswathy
Wood Industries on 05/12/1989. Ext. P88 is the consent letter by Aswathy
Wood Industries authorising PNB to initiate revenue recovery or any other
proceedings against them to recover the loan amount in the event of any
default. Ext. P92 is the audited balance sheet of Aswathy Wood Industries for
the period ending on 29/11/1989 signed by a Chartered Accountant and
submitted to PNB. Ext. P96 is the limit proposal dated 05/01/1989 filled by Sri
Ayyappan (PW 23) who has recommended to A1 to sanction the loan. PW 23
while recommending the loan had written the following 'since the party is
having means, recommended' and had signed below that. PW 23 had further
certified that the paid up capital of the firm was Rs. 5,00,000/- and the net
income was 4,94,900/- and the proprietor was having nine years experience
and his products were having very good local market as well as market in
Madras, Bangalore, Gujarat and Tamil Nadu. Ext. P99 is the hypothecation
agreement dated 05/12/1989. Ext. P101 is the legal scrutiny report dated
30/10/1989 in respect of 28 cents of landed property belonging to Rajeevan
offered as security to PNB. Advocate Sri. V. Balakrishna Pillai, Quilon had
furnished the legal opinion. The very same Advocate had given his legal
opinion dated 12/12/1989 regarding 10 cents of property given as additional
security. Ext. P102 is the valuation report dated 25/05/1990 prepared by
Subrahmanya Iyer at the instance of the Bank Manager.
27. One of the materials relied on by the prosecution to show that Deepak
Industries, Kadappakkada, Quilon was a fictitious and non - existing firm was
Ext. P113 undelivered registered letter sent by the CBI Inspector to the said
firm and Ext. P113(a) endorsement by PW 21 the postman of Head Post
Office, Kollam to the effect the addressee firm was not found. First of all, the
addressee in the said letter was not Deepak Industries but was Deepak
Agencies. The firm which supplied the machinery was not Deepak Agencies
but was Deepak Industries. Hence, if the post man could not find a firm by
name Deepak Agencies, that was not surprising. Moreover, PW 21 has
admitted that the place Kadappakkada is within the limits of the
Kadappakkada Post Office and not under the Head Post Office, Kollam. PW
21 further admitted that the area allotted to him from the Head Post Office was
a place near to Kadappakada, but not at Kadappakkada. No postman from
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Kadappakkada Post Office was either cited or examined.

28. PW 5 was the Executive Officer of Vadakkevila Panchayat. He proved
Ext. P22 reply dated 20/04/1991 sent by him in reply to the letter sent by the
C.B.I. Inspector stating that no license was issued to Deepak Industries,
Kadappakkada from Vadakkevila Panchayath. Similarly, PW 7 who was the
Junior Superintendent of Kilikollur Panchayath proved Ext. P23 reply dated
20/04/1991 addressed by him to the CBI Inspector in answer to the letter sent
to him by the CBI asking whether Deepak Industries was functioning in
Kilikollur Panchayath area. This witness had replied in the negative. The
marking of Exts. P22 and P23 replies was specifically objected to by the
defence since according to the defence those reply letters were hit by S.162
CrPC. But the trial judge overruled the defence objection and marked those
replies. In my view the court below fell into an error in overruling the defence
objection and marking Exts. P22 and P23. In Kali Ram v. State of H.P., 1973
KHC 634 : 1973 (2) SCC 808 : AIR 1973 SC 2773 : 1973 SCC (Cri) 1048 :
1974 CriLJ 1 a three Judge's Bench of the Supreme Court observed as
follows:
'The prohibition contained in the section (S.162 CrPC) relates to all
statements made during the course of an investigation. Letter PEEE which
was addressed by Sahi Ram to Station House Officer in the nature of
narration of what, according to Sahi Ram, he had been told by the accused.
Such a letter, in our opinion, would constitute statement for the purpose of
S.162 of the Code of Criminal Procedure. The prohibition relating to the use of
a statement made to a police officer during the course of an investigation
cannot be set at naught by the police officer not himself recording the
statement of a person but having it in the form of a communication addressed
by the person concerned to the police officer. If a statement made by a person
to a police officer in the course of an investigation is inadmissible except for
the purposes mentioned in S.162, the same would be true of a letter
containing narration of facts addressed by a person to a police officer during
the course of an investigation. It is not permissible to circumvent the
prohibition contained in S.162 by the investigating officer obtaining a written
statement of a person instead of the Investigating Officer himself recording
that statement.
In Kanu Ambu Vish v. State of Maharashtra, 1971 KHC 469 : 1971 (1) SCC
503 : 1971 SCC (Cri) 211 : AIR 1971 SC 2256 : 1971 CriLJ 1547 another
three Judges' Bench of the Apex Court held that where the witness was made
to write his statement during investigation, it was inadmissible in evidence. In
Datar Singh v. State of Punjab, 1975 KHC 789 : 1975 SCC (Cri) 530 : 1975
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(4) SCC 272 : AIR 1974 SC 1193 : 1974 CriLJ 908 : 1974 (11) ACC 262 it
was observed that annexing the signed statements of alleged eye witnesses
to the inquest report was a device adopted by the police to circumvent the bar
under S.162 CrPC. In C. Chenga Reddy v. State of A.P., 1996 KHC 1264 :
1996 SCC (Cri) 1205 : 1996 (10) SCC 193 : AIR 1996 SC 3390 it was held
that a report submitted by a Government official assisting the investigating
officer during the course of investigation and who was examined by the
Investigating Officer after the submission of the said report forming part of his
statement recorded under S.161 CrPC would attract the bar under S.162
CrPC.
29. GROUNDS COMMON TO ALL CASES
It has already been seen that all loans in these cases were recommended by
PW 23 (Ayyappan) who conducted the pre - sanction inspections, obtained
the necessary legal opinion, prepared the CRs etc. It was acting on his
recommendation that A1 sanctioned the loans in good faith. PW 23 was
initially the 2nd accused in the case. It was only at the stage of the final report
that his name was deleted from the array of accused and that too without any
disclosed reason. Except producing some of the loan documents, the
Registers and entire files in connection with the loans were not seized by the
Investigating Officer. Ext. P2(a) statement given by PW 23 to PW 2 and which
would exculpate A1 and other accused was not even seen by the
Investigating Officer. PWs 2 and 3 who had allegedly conducted the
preliminary enquiries regarding the alleged irregularities in granting loans
were not even questioned by the C.B.I. Ext. P1 complaint was based on the
report of PW 3 whose preliminary investigation was not fool - proof. All the
loans were granted on the strength of collateral security. The properties
offered as collateral security in each of the loans were valued by one Asokan
who was not examined by the prosecution. On behalf of the Bank also one
Subrahmania Iyer who had valued the securities was also not examined. The
confidential reports which were prepared in each of the loans and which were
available in the files when PW 10 (who succeeded A1) had taken charge were
subsequently removed from the files and suppressed from the Court.
30. The Trial Judge also wrongly admitted Ext. P22 and P23 replies which
were really hit by S.162 CrPC. Yet another procedural violation committed by
the trial Judge was that the first accused was not permitted to cross examine
nine prosecution witnesses namely PWs 4, 5, 7, 8, 12, 13, 15, 16 and 20. The
specific reason recorded in the depositions of PWs 4 and 20 for not allowing
A1 to cross - examine the above witnesses was that those witnesses did not
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speak anything against A1. The learned trial Judge overlooked the fact that
the first accused was facing a charge of criminal conspiracy punishable under
S.120 B IPC and therefore, he should have been permitted to cross - examine
the aforementioned witnesses. Refusal to do so has resulted in prejudice to
A1.
31. PW 6 was given up by the prosecution after putting two questions to him
in chief - examination and after showing him Ext. P12 file but without eliciting
any answer from him. The above procedure adopted by the prosecution is to
be deprecated (See -- Hamsa v. State of Kerala, 1966 KHC 51 : 1966 KLT
136 : 1966 KLJ 184 : AIR 1967 Ker. 16 : 1966 KLR 160). A witness can be
given up before he enters the witness box. Even when a witness enters the
witness box and oath is administered to him, it is not too late and he can be
asked to withdraw from the witness box. But once chief examination is
commenced, the party who calls him cannot give up the witness or withdraw
him and thereby deprive the opposite party the right of cross - examination.
The practice of the prosecution giving up a witness after the commencement
of chief - examination and without tendering the witness for cross -
examination is unhealthy, irregular and not warranted by law. (See -- Lalitha v.
Sarangadharan, 1988 KHC 461 : 1988 (2) KLT 394 : 1988 (2) KLJ 428 : 1989
(1) KLN 4). In Sukhwant Singh v. State of Punjab, 1995 KHC 467 : AIR 1995
SC 1601 : 1995 (2) KLT SN 55 : 1995 (3) SCC 367 the Apex Court observed
as follows:
'S.138 envisages that a witness would first be examined - in - chief and then
subjected to cross - examination and for seeking any clarification, the witness
may be re - examined by the prosecution. There is, no meaning in tendering a
witness for cross - examination only. Tendering of a witness for cross -
examination, as a matter of fact, amounts to giving up of the witness by the
prosecution as it does not choose to examine him in chief. There is no
procedure whereby the prosecution is permitted to tender a witness for cross -
examination only, without there being any examination - in - chief in relation to
which, such a witness can be cross - examined. The effect of witnesses being
tendered only for cross - examination amounts to the failure of the prosecution
to examine them at the trial. Their non - examination, in our opinion, seriously
affects the credibility of the prosecution case and detracts materially from its
reliability.'
Thus, the prosecution was not justified in giving up PW 6 after putting two
questions to him in chief - examination.
32. This was an avoidable prosecution if PW 1 had exercised due care and
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caution. PWs 2 and 3 also did not take pains to personally verify whether the
three firms namely, Distributors Quilon, K. S. Agencies and Deepak Industries
were really existing or not. The CBI also had the opportunity to conduct a
detailed probe into the allegations in Ext. P1 complaint and find out the truth.
Instead, they also resorted to unjustifiable modes of collection of evidence to
eventually place the accused persons for trial. The amounts involved were
also not large enough to justify the investigation and prosecution. The Trial
Judge also was not alive to the requirements of law while conducting the trial.
The appellants were the unfortunate victims of a concatenation of all the
above adverse circumstances.
33. THE CONCLUSION
The conviction entered and the sentence passed against the appellants
overlooking the above vital aspects of the matter cannot be sustained and are
accordingly dislodged. The appellants are found not guilty of the offences
punishable under S.120B, S.420 and S.468 IPC and S.13(2) read with
S.13(1)(d) of the PC Act and are acquitted thereunder. They are set at liberty
forthwith. Their bail bonds shall stand cancelled.
In the result, these appeals are allowed and the appellants are acquitted as
above.
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CaseSearch 2019 (Full Text) Copyright © Em Tee En Publications

2011 (1) KHC 738

Rajeevan and Others v. Superintendent of Police, Cochin and Another

Prevention of Corruption Act, 1988 -- S.13(1)(d), S.13(2) -- Allegation that

Facts of the case

Prevention of Corruption Act, 1988 -- S.13(1)(d), S.13(2) -- Allegation that

Criminal Trial -- Examination of witnesses -- Accused not permitted to

should have been permitted to cross-examine the aforementioned witnesses.

Criminal Trial -- Examination of witnesses -- Even after a witness enters

questions to him in chief-examination.

T. R. Aswas; K. A. Jaleel; B. Raman Pillai; For Appellants

pursuance of the said conspiracy A2 (K. Thajudheen @ Thaju) representing

upgraded from scale II Managers' Branch to Scale IV Managers' Branch. He

conducted in the premises of Aswathy Wood Industries. Ext. P20 is the

Pattathanam, Quilon and the proprietor of K. K. Industries which is having an

undelivered cover containing the letter dated 14/08/1991 by the CBI

proved Ext. D3 certificate showing that Distributors Kollam belonging to

an account in the Dhanalakshmi Bank, Kollam Branch in the name of M/s.

Kollam Municipality was examined by the prosecution. Both PWs 3 and 10

Kadappakkada Post Office was either cited or examined.

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