Allowed

Sri V.D Kurtakoti v. State by Cbi/Acb

Karnataka HC9 Dec 2022CRL.A/43/2011

Case brief

AI extract

What is this about?

In this criminal appeal under the Prevention of Corruption Act, the High Court set aside the conviction of a bank manager for holding disproportionate assets. After adjusting known incomes (NSC proceeds, agricultural income) and recalculating permissible household expenditure based on net salary, the court found the remaining disparity was under 10%, leading to acquittal.

What did the court decide?

The judgment of conviction dated 18.12.2010 was set aside; the accused is acquitted; his bail bond is cancelled.

Sri V.D Kurtakoti Vs State by Cbi/Acb — Corruption | Karnataka HC (2022)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9^TH DAY OF DECEMBER, 2022

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BEFORE

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THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR

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CRIMINAL APPEAL NO.43 OF 2011

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BETWEEN:

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Sri V.D.Kurtakoti, S/o Devadutta S. Kurtakoti, Aged about 56 years, R/o 169, Nobel Residency, 2^nd Cross, SOS Post, Bannergatta Road, Bengaluru-76.

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…Appellant

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(By Sri R.Nagendra Naik, Advocate)

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AND:

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State by CBI/ACB, Ganganagar, Bellary Road, Bengaluru.

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…Respondent

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(By Sri Madhav Kashyap, Advocate for Sri P.Prasanna Kumar, Advocate)

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This Criminal Appeal is filed under Section 374(2) Cr.P.C. praying to set aside the judgment and conviction dated 18.12.2010 passed in Spl.C.C.No.150/2008 on the file of XXXII Additional City Civil and Sessions Judge and Special Judge for CBI Cases, Bengaluru – convicting the appellant/accused for the offence p/u/s 13(1)(e) read with 13(2) of the Prevention of Corruption Act 1988 and etc.

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This Criminal Appeal having been heard & reserved on 17.11.2022 , coming on for pronouncement this day, the Court pronounced the following:

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JUDGMENT

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This appeal is by the accused who has suffered conviction for the offence punishable under section 13(2) r/w section 13(1)(e) of Prevention of Corruption Act (‘PC Act’ for short), and been sentenced for simple imprisonment for two years and fine of Rs.50,000/with default imprisonment for six months.

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The accused was working as the manager of Canara Bank, Sindhaghatta Branch, Mandya District, during the check period 1.5.2004 to 9.5.2006. The investigation that followed the raid conducted on the residential premises of the accused on 9.5.2006 resulted in charge sheet being filed with the allegation that the accused was found to have acquired assets and expended money disproportionate to his known sources of income. The following is the computation made by the investigating officer.

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Assets at the beginning of the check period (A) Rs.15,66,748 Assets at the end of the check period (B) Rs. 32,31,896

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Assets acquired during

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the check period	(B-A)	Rs. 16,65,058
Receipts and Income during the check period	(C)	Rs.9,59,279
Expenditure during the check period	(D)	Rs.5,21,127
Likely savings during the check period	(C-D)	Rs.4,38,152
Extent to which assets and expenditure are disproportionate to likely savings	E=(B-A)+D) - C	Rs. 12,26,906
Percentage of disproportionate assets over total of income	(E x 100) C	127.89%

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The difference between the aggregate of assets and expenditure, and known source of income was Rs.12,26,900/-.

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At the conclusion of trial, assessing the oral evidence of 32 prosecution witnesses and the documentary evidence, and the defence evidence - both oral and documentary, the trial court found that Rs.3,73,674/was the value of disproportionate assets.

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The below given tabulation depicts the

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computation made by the prosecution (CBI) and the

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trial court.

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*Sl.* *No.*	*Particulars*	*As per CBI*	*As per court*
1	Salary Income	`3,31,033.00	`5,78,924.50
2	PF Loan	`1,49,245.00	`1,49,245.00
3	Loan SWF	`1,37,900.00	`1,37,900.00
4	OD account Canara Bank	`12,506.00	`12,506.00
5	LIC Survival Benefits	`28,000.00	`28,000.00
6	Dividend Received on shares	`3,595.00	`3,595.00
7	Sale of Site Coimbatore	`1,47,000.00	`2,32,000.00
8	Gift received from father	`1,50,000.00	`2,68,000.00
9	Loan received from brother	--	`3,25,000.00
10	Proceeds of NSC
11	Agriculture income
12	Customary gifts
	*Total Income*	`9,59,279.00	`17,35,170.50

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But according to the accused, the computation

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of income from all the known sources ought to have been in the following way.

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*Sl.*	*Particulars*	*As per Accused*
*No.*
1	Salary Income	`6,65,073.00
2	_PF Loan _	`1,49,245.00
3	Loan SWF	`1,37,900.00
4	OD account Canara Bank	`12,506.00
5	LIC Survival Benefits	`28,000.00
6	Dividend Received on shares	`3,595.00
7	Sale of Site Coimbatore	`2,32,000.00
8	Gift received from father	`2,68,000
9	Loan received from brother	`3,25,000
10	Proceeds of NSC	`86,500
11	Agriculture income	`1,22,000
12	Customary gifts	`2,04,000
	Total Income	`22,33,819.00

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Sri. Nagendra Naik, learned counsel for the accused argued that the investigating officer did not account two major incomes, viz., Rs.86,500/- being the proceeds of National Savings Certificates and Rs.1,22,000/-, the agricultural income as evidenced by Exs.D.5 and D.6. He also submitted that another sum of Rs.2,04,000/-, that the accused and his son received in the family function was brought to the notice of investigating officer, and had these incomes been considered, the income of the accused would

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have found to be more than the value of assets and expenditure. Even the trial court missed to notice these incomes, he argued. Then in regard to expenditure, his argument was that while calculating the household expenditure, notionally 1/3 of the net salary should be taken; but the investigating officer as also the trial court considered 1/3 of gross salary, which was wrong. If 1/3 of net salary had been taken, only Rs.50,000/- could have been taken as domestic expenditure. In this regard, he further argued that since the accused had agricultural lands, he used to bring food grains from his home town and therefore he was not required to spend more for meeting household expenses. With these points he argued for acquittal of the accused. 8. But Sri. Madhav Kashyap, learned counsel appearing on behalf of Sri. P.Prasanna Kumar for respondent-CBI argued these points – ‘The investigating officer and the trial court rightly discarded the income from agriculture, proceeds of NSC and the customary gifts as they were not

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intimated to his employer as envisaged in Explanation to Section 13(1) of P.C. Act, which was applicable at the relevant time. For these reasons, those incomes could not be treated as known sources of income. In regard to agricultural income, he argued that Ex.D.6 would show reporting of receipt of Rs.72,000/-, but no document was produced for having received another sum of Rs.50,000/-. And in regard to household expenditure to be treated as Rs.50,000/- instead of Rs.1,92,975/-, his argument was that from the crossexamination of DW.1, improbability in spending only Rs.50,000/- could be gathered, and therefore the household expenditure was rightly taken as Rs.1,92,975/-‘.

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As a reply to the argument of Sri. Madhav Kashyap, Sri. Nagendra Naik submitted that giving intimation as required under Explanation part of section 13(1) of P.C.Act did not necessarily mean that intimation to be given to employer; disclosure made in income tax returns or to the investigating officer would also meet the requirement and in this regard he

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placed reliance on decisions of the Supreme Court which I will refer later. He also filed a table of computation made by the CBI, the Court and the accused.

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Now if the table of computation filed by the accused is perused, it becomes very clear that he disputes four items, viz., salary income, proceeds form NSC, agricultural income and customary gifts. What he contends is that salary income should have been taken as Rs.6,65,073/- and the proceeds from NSC, agriculture and customary gifts should have been added to income.

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So far as the salary income is concerned, it cannot be said that the trial court has erred. The prosecution has shown the figure Rs.3,31,033/- as the total salary of the accused for the check period. Probably it is the net salary. But Ex.P.2 is the document marked by the prosecution to prove the salary income. The trial court has meticulously examined Ex.P.2 and arrived at a conclusion that Rs.5,78,924.50 was the net salary of the accused for

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the check period, and on perusal of the same, I do not see any error in holding Rs.5,78,924.50 as the gross salary of the accused for the check period. The contention of the accused that Rs.6,65,073/- was his gross salary for the check period cannot be accepted.

¶46

Then the question is whether proceeds from NSC and agricultural income should have been accounted towards income or not. No doubt for the check period, Explanation to section 13(1) of P.C.Act, as it stood before the amendment introduced by Act of 16/2018 was applicable. The Explanation reads as follows:

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“Explanation: For the purposes of this section, “known sources of income” means income received from any lawful source and such receipt has been intimated in accordance with the provisions of any law, rules or orders for the time being applicable to a public servant.”

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Law, rules or orders applicable to a public servant means service rules. Sri. Madhav Kashyap referred to Para 5 of the judgment of the Supreme Court in the case of State of M.P. Vs., Awadh

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Kishore Gupta and others [(2004) 1 SCC 691], it is held

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“5. Section 13 deals with various situations when a public servant can be said to have committed criminal misconduct. Clause (e) of sub-section (1) of the Section is pressed into service against the accused. The same is applicable when the public servant or any person on his behalf, is in possession or has, at any time during the period of his office, been in possession, for which the public servant cannot satisfactorily account, pecuniary resources or property disproportionate to his known sources of income. Clause (e) of sub-section (1) of section 13 corresponds to clause (e) of subsection (1) of section 5 of the Prevention of Corruption Act, 1947 (referred to as ' The Old Act'). But there has been drastic amendments. Under the new clause, the earlier concept of "known sources of income" has undergone a radical change. As per the explanation appended, the prosecution is relieved of the burden of investigating into "source of income" of an accused to a large extent, as it is stated in the explanation that "known sources of income" mean income received from any lawful source, the receipt

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of which has been intimated in accordance with the provisions of any law, rules, orders for the time being applicable to a public servant. The expression "known sources of income" has reference to sources known to the prosecution after thorough investigation of the case. It is not, and cannot be contended that "known sources of income" means sources known to the accused. The prosecution cannot, in the very nature of things, be expected to know the affairs of an accused person. Those will be matters "specially within the knowledge" of the accused, within the meaning of Section 106 of the Indian Evidence Act, 1872 (in short the 'Evidence Act').”

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In the above paragraphs, the observation is known source of income means sources known to prosecution and not to the accused. But in para 6 of the same judgment, the meaning of the expression, “known source of income” is elaborated, and what has been observed is:

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6. The phrase "known sources of income" in section 13(1)(e) {old section 5(1)(e)} has clearly the emphasis on the word "income". It would be primary to observe that qua the

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public servant, the income would be what is attached to his office or post, commonly known as remuneration or salary. The term "income" by itself, is elastic and has a wide connotation. Whatever comes in or is received, is income. But, however, wide the import and connotation of the term "income", it is incapable of being understood as meaning receipt having no nexus to one's labour, or expertise, or property, or investment, and having further a source which may or may not yield a regular revenue. These essential characteristics are vital in understanding the term "income". Therefore, it can be said that, though "income" is receipt in the hand of its recipient, every receipt would not partake into the character of income. Qua the public servant, whatever return he gets of his service, will be the primary item of his income. Other incomes which conceivably are income qua the public servant, will be in the regular receipt from (a) his property, or (b) his investment. A receipt from windfall, or gains of graft, crime, or immoral secretions by persons prima facie would not be receipt from the "known sources of income" of a public servant.”

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Sri. Nagendra Naik referred to judgment in Kedari Lal Vs. State of Madhya Pradesh and others [(2015) 14 SCC 505], where the Hon’ble Supreme Court gave a wide import to the meaning of the expression, “known source of income”. Paras 8 to 14, may be extracted here.

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“8. Appearing in support of the appeal, Mr. Siddharth Luthra, learned Senior Counsel submitted that every receipt of amount was duly intimated by the appellant to the department contemporaneously and such amounts were also reflected in his Income Tax Report, filed well before the initiation of the prosecution in the instant case. It was further submitted that after taking into account the amount so intimated, the balance of Rs.37,605 at best remains unexplained. But such amount being less than 10% of the total income, the appellant was entitled to the benefit in terms of decisions of this Court.

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9. Mr. C. D. Singh, learned advocate appearing for the State supported the view taken by the court below. Relying upon the decision of this court in N. Ramakrishnaiah (D) through LR's Vs. State of A.P, it was

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submitted that the loans and gifts received by the petitioner would not constitute "known sources of income" as defined under Section 13(1) (e) of the Act.

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10. The expression "known sources of income" in Section 13(1) (e) of the Act has two elements, first the income must be received from a lawful source and secondly the receipt of such income must have been intimated in accordance with the provisions of law, rules or orders for the time being applicable to the public servant. In N. Ramakrishnaiah (Supra), while dealing with said expression, it was observed:-

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"17. ‘6……Qua the public servant, whatever return he gets of his service, will be the primary item of his income. (Other income which can conceivably be) income qua the public servant will be in the regular receipt from (a) his property, or (b) his investment."

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The categories so enumerated are illustrative. Receipt by way of share in the partition of ancestral property or bequest under a will or advances from close relations

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would come within the expression "known sources of income" provided the second condition stands fulfilled that is to say, such receipts were duly intimated to the authorities as prescribed.

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11. We have gone through Rules 14, 17 and 19 of the Rules. Rule 14 lays down that a government servant on occasions such as weddings, anniversaries or religious functions may accept gifts up to certain limit, if he makes a report of such fact to the Government within a period of one month. Sub Rules (4) and (5) provide inter alia, that in any other case, the government servant shall not accept any gift without the sanction of the Government and if the gift exceeds Rs. 2000, except through an account payee cheque. Rule 17 deals with investment, lending and borrowing and provides inter alia that Government Servant may give to, or accept from a relation or a personal friend, a purely temporary loan. Rule 19 lays down that the government servant must intimate the details of property inherited or acquired by the Govt. Servant. There is no absolute embargo or prohibition in the Rules and all that is required is sanction or permission from the Government.

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12. In the instant case, every single amount received by the appellant has been proved on record through the testimony of the witnesses and is also supported by contemporaneous documents and intimations to the Government. It is not the case that the receipts so projected were bogus or was part of a calculated device. The fact that these amounts were actually received from the sources so named is not in dispute. Furthermore, these amounts are well reflected in the Income Tax Returns filed by the appellant.

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13. In similar circumstances, the acquisitions being reflected in Income Tax Returns weighed with this court in granting relief to the public servant. In M. Krishana Reddy Vs. State, it was observed in Para 14 :-

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".....Therefore, on the face of these unassailable documents i.e. the wealth tax and income tax returns, we hold that the appellant is entitled to have a deduction of Rs.56,240/from the disproportionate assets of Rs.2,37,842/-."

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14. Similarly in Supt. of Police Vs. K. Inbasagaran, the fact that the money was treated in the hands of the wife of the public servant and that she was assessed by the Income Tax Department was taken note of while accepting the explanation given by the public servant.”

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The conspectus of the above decisions can be stated like this: Primary source of income of a public servant is the income attached to his office, which may be in the form of remuneration or salary. If a public servant has income from other sources, he must disclose it to his employer according to service rules. And needless to say, such other sources of income must be legal. Though disclosure of a legal source of income other than the remuneration attached to office or salary must be made in accordance with rules or law applicable to a public servant, in case such a disclosure is not made for any reason and if the same is disclosed in income tax returns, the investigating officer cannot ignore the consideration of such income from legal source during investigation.

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In the case on hand two major incomes the investigating officer did not consider were proceeds of NSC and agricultural income. So far as investment in NSC’s are concerned, they are legal and their proceeds after maturity period are also legal. In fact in Ex.D.5, which is a statement pertaining to the bank account of the accused, there are entries indicating the deposit of Rs.39,070/- and Rs.47,430/-. The accused was the manager of a branch of Canara Bank, and bank statement also pertains to account of the accused in the Canara Bank. Therefore the investigating officer could not have ignored this income. In fact the trial court referred to Ex.D.5, but failed to account Rs.86,500/- towards income. This was an error committed by the trial court.

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So far as income from agriculture is concerned, the prosecution does not deny that the joint family of the accused possessed agricultural lands and had agricultural income. The accused who adduced evidence as DW.1 has produced documents as per Exs.D.7 to D.13 to prove existence of agricultural

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lands in the possession and ownership of joint family. While PW.32, the investigating officer was questioned as to accused having income from agricultural source being member of joint family, he might have denied the suggestion in this regard, but when DW.1 was cross-examined, he was not questioned at all on Exs.D.7 to D.13. Therefore the obvious inference is that the accused had income from agriculture.

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Accused claimed to have received Rs.1,22,000/- from agriculture. This income was not considered by the investigating officer and the trial court. Ex.D.6 is the document that the accused produced to prove that he had given intimation about receiving Rs.72,000/- on 2.5.2005 from agriculture. Ex.D.6 was addressed to the Deputy General Manager of Canara Bank. It is not the case of prosecution that information should have been given in a particular form. Ex.D.6 shows requirement of law having been complied. And in this view Rs.72,000/- should have been accounted towards income.

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Apart from Rs.72,000/-, accused claimed to have received another sum of Rs.50,000/-, which receipt was not reported.

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Then as regards domestic expenses, the investigating officer as also the trial court fell in error in taking 1/3 of gross salary income. As rightly argued, 1/3 from net salary income should be deducted. The reason is so simple that one can spend money for domestic needs from the money one receives, i.e., from the net salary only. For this reason, taking Rs.1,92,975/- towards household or domestic expenses was wrong. Net salary income was found to be Rs.3,68,998/and its 1/3 is Rs.1,22,999/-. This was the sum that could have been accounted towards household expenses. The difference amount of Rs.69,976/(Rs.1,92,975/minus Rs.1,22,999/-) has to be deducted from Rs.4,52,876/-, which was the sum held by the trial court as total expenditure of accused for the check period. Therefore total expenditure gets reduced to Rs.3,82,900/-.

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As discussed above, if Rs.86,500/- being the proceeds of NSC and Rs.72,000/income from agriculture are added to Rs.17,39,759/-, being the income of the accused from known sources, as held by the trial court, the income gets increased to Rs.18,98,259/-. Now the final computation is :

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A	Value of Assets acquired
	during check period (Not disputed)	Rs.16,65,058.00
	Total expenditure during check period	Rs.3,82,900.00
	Total	Rs.20,47,958.00
B	Total income	Rs.18,98,259.00
	A – B =	Rs.1,49,699.00

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The difference of A and B being less than 10% of B (Rs.1,89,825.9), as per the ratio of the Supreme Court in Krishnananda Agni Hotri Vs. State of Mandya Pradesh [(1977) 1 SCC 816], the accused is entitled to be acquitted.

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Besides the above reason, I also find that the check period from 1.5.2004 to 9.5.2006 is too short for comprehending the correct figures. It is held by the Supreme Court in State of Maharastra Vs. Pollonji Darabshaw Daruwalla [1987 (supp) SCC

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379] that

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“16. The choice of the period must necessarily be determined by the allegations of fact on which the prosecution is founded and rests. However, the period must be such as to enable a true and comprehensive picture of the known sources of income and the pecuniary resources and property in possession of by the public-servant either by himself or through any other person on his behalf, which are alleged to be so disproportionate. In the facts and circumstances of a case, a ten year period cannot be said to be incapable of yielding such a true and comprehensive picture. The assets spilling-over from the anterior period, if their existence is probablised, would, of course, have to be given credit-to on the income side and would go to reduce the extent and the quantum of the disproportion.”

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Therefore from the above discussion, I come to conclusion that the appeal deserves to be allowed. Ordered accordingly and the judgment of conviction dated 18.12.2010 in Spl.C.C.No.150/2008 on the file of XXXII Addl. City Civil and Sessions Judge and special Judge for CBI Cases, Bengaluru is set aside. The accused is acquitted of the offence with which he stood charged. His bail bond is cancelled.

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Sd/JUDGE

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Sri V.D Kurtakoti v. State by Cbi/Acb

Case brief

What is this about?

What did the court decide?

Sri V.D Kurtakoti v. State by Cbi/Acb

Case brief

What is this about?

What did the court decide?

What the court decided

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