Dismissed

Smt.Shoba B v. State of Karnataka by Doddapet P.S.

Karnataka HC20 Feb 2024WP/12451/2021

Case brief

AI extract

What is this about?

Five connected writ petitions arising from alleged gold-loan fraud at a cooperative bank's town branch. A former bank chairman's challenge to ED summons was rejected as his alleged offences were non-scheduled; his quashing petition on the additional charge sheet was dismissed; three petitions by the branch manager challenging reversal of her discharge orders were also dismissed.

What did the court decide?

All five writ petitions dismissed; pending interlocutory applications also dismissed.

Smt.Shoba B Vs State of Karnataka by Doddapet P.S. — Money Laundering | Karnataka HC (2024)

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NC: 2024:KHC:7096 WP No. 12451 of 2021 C/W WP No. 12423 of 2021 WP No. 12426 of 2021 WP No. 22780 of 2023 WP No. 22989 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 20^TH DAY OF FEBRUARY, 2024

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ

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WRIT PETITION NO.12451/2021(GM-RES) C/W WRIT PETITION NO.12423/2021(GM-RES), WRIT PETITION NO.12426/2021(GM-RES), WRIT PETITION NO.22780/2023(GM-RES), WRIT PETITION NO.22989/2023(GM-RES)

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W.P.NO.12451/2021:

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BETWEEN:

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SMT SHOBA B., W/O. C.S.JAGADEESH, AGED ABOUT 46 YEARS, R/O: ‘SHANTHU NILAYA’, 3^RD CROSS, TILAK NAGAR, SHIVAMOGGA-577 201.

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Digitally signed by BS RAVIKUMAR Location: HIGH COURT OF KARNATAKA

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(BY SRI M.H. SHYAMSUNDAR, SENIOR COUNSEL FOR SMT. VANDANA P.L., ADVOCATE)

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AND:

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…PETITIONER

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STATE OF KARNATAKA BY DODDAPET P.S. REPRESENTED BY HCGP, HIGH COURT OF KARNATAKA, BANGALORE - 560 001.

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SHIVAMOGGA DISTRICT CENTRAL CO-OPERATIVE BANK LTD., BALARAJ URS ROAD, SHIVAMOGGA. REPRESENTED BY ITS MANAGING DIRECTOR SRI. C.RAJANNA REDDY, S/O. CHOWDA REDDY,

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AGED ABOUT 61 YEARS, R/O: SHIVAMOGGA – 577 201.

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…RESPONDENTS

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(BY SMT. WAHEEDA, HIGH COURT GOVERNMENT PLEADER FOR RESPONDENT NO.1;

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SRI VINAYAKA B., ADVOCATE FOR RESPONDENT NO.2)

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THIS W.P. IS FILED UNDER SECTION 482 READ WITH ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT QUASHING ALL FURTHER PROCEEDINGS IN C.C.NO.2776/2019 (OLD C.C.NO.1565/2015) ARISING OUT OF CR.NO.325/2014 DATED 17.07.2014 FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 409, 465, 468, 471, 201, 120(B) READ WITH SECTION 37 OF IPC PENDING ON THE FILE OF 1^ST ADDL. CIVIL JUDGE AND JMFC SHIMOGA.

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IN W.P.NO.12423/2021:

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BETWEEN:

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SMT. SHOBA B., W/O. C.S. JAGADEESH, AGED ABOUT 46 YEARS, R/O: ‘SHANTHU NILAYA’, 3^RD CROSS, TILAK NAGAR, SHIVAMOGGA – 577 201.

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…PETITIONER

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(BY SRI M.H.SHYAMSUNDAR, SENIOR COUNSEL FOR SMT. VANDANA P.L., ADVOCATE)

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AND:

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STATE OF KARNATAKA BY DODDAPET P.S, REPRESENTED BY HCGP, HIGH COURT OF KARNATAKA, BANGALORE – 560 001.

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SHIVAMOGGA DISTRICT CENTRAL CO - OPERATIVE BANK LTD., BALARAJ URS ROAD, SHIVAMOGGA, REPRESENTED BY ITS MANAGING DIRECTOR, SRI. C. RAJANNA REDDY,

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S/O. CHOWDA REDDY, AGED ABOUT 61 YEARS, R/O: SHIVAMOGA – 577 201.

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…RESPONDENTS

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(BY SMT. WAHEEDA, HIGH COURT GOVERNMENT PLEADER FOR RESPONDENT NO.1;

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SRI VINAYAKA B., ADVOCATE FOR RESPONDENT NO.2)

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THIS W.P. IS FILED UNDER SECTION 482 READ WITH ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT QUASHING ALL FURTHER PROCEEDINGS IN C.C.NO.2634/2019 (OLD C.C.NO.1564/2015) ARISING OUT OF CR.NO.325/2014 DATED 17.07.2014 FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 409, 420, 120(B) READ WITH SECTION 37 OF IPC PENDING ON THE FILE OF III ADDL. SESSIONS JUDGE AT SHIMOGA (ANNEXURE-E).

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IN W.P.NO.12426/2021:

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BETWEEN:

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SMT. SHOBA B., W/O. C.S. JAGADEESH, AGED ABOUT 46 YEARS, R/O: ‘SHANTHU NILAYA’, 3^RD CROSS, TILAK NAGAR, SHIVAMOGGA – 577 201.

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…PETITIONER

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(BY SRI M.H.SHYAMSUNDAR, SENIOR COUNSEL FOR SMT. VANDANA P.L., ADVOCATE)

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AND:

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STATE OF KARNATAKA BY DODDAPET P.S, REPRESENTED BY HCGP, HIGH COURT OF KARNATAKA, BANGALORE – 560 001.

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SHIVAMOGGA DISTRICT CENTRAL CO - OPERATIVE BANK LTD., BALARAJ URS ROAD, SHIVAMOGGA,

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REPRESENTED BY ITS MANAGING DIRECTOR, SRI. C. RAJANNA REDDY, S/O. CHOWDA REDDY, AGED ABOUT 61 YEARS, R/O: SHIVAMOGA – 577 201.

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…RESPONDENTS

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(BY SMT. WAHEEDA, HIGH COURT GOVERNMENT PLEADER FOR RESPONDENT NO.1;

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SRI. VINAYAKA B., ADVOCATE FOR RESPONDENT NO.2)

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THIS W.P. IS FILED UNDER SECTION 482 READ WITH ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT QUASHING ALL FURTHER PROCEEDINGS IN C.C.NO.277/2019 (OLD C.C.NO.1849/201) ARISING OUT OF CR.NO.325/2014 DATED 17.07.2014 FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 409, 201, 120(B) READ WITH SECTION 37 OF IPC PENDING ON THE FILE OF PRINCIPAL CIVIL JUDGE JUNIOR DIVISION AND JMFC, SHIMOGGA (ANNEXURE–E).

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IN W.P.NO.22780/2023:

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BETWEEN:

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SRI R.M. MANJUNATH GOWDA, S/O. RAMAPPA GOWDA, AGED ABOUT 62 YEARS, R/O KARAKUCCHI, SIRIGEREPONT SHIVAMOGGA - 577 211.

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…PETITIONER

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(BY SRI KIRAN JAVALI, SENIOR COUNSEL FOR SRI. RAGHU H.P., ADVOCATE)

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AND:

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DIRECTORATE OF ENFORCEMENT, MINISTRY OF FINANCE AND DEPARTMENT OF REVENUE, III FLOOR, “B” BLOCK, BMTC, K.H.ROAD, SHANTINAGAR, BANGALORE – 560 027.

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ASSISTANT DIRECTOR, DIRECTORATE OF ENFORCEMENT, III FLOOR, “B” BLOCK, BMTC, K.H.ROAD, SHANTINAGAR, BANGALORE – 560 027.

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…RESPONDENTS

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(BY SRI. MADHUKAR M. DESHPANDE, ADVOCATE)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C., PRAYING TO CALL FOR THE RECORDS FROM THE OFFICE OF THE RESPONDENTS CONNECTED TO THE IMPUGNED PROCEEDINGS F.NO.ECIR/BGO/05/2021 AND QUASH THE SUMMONS DATED 06.10.2023 IN F.NO.ECIR/BGO/05/2021 AS PER ANNEXURE-A ISSUED IN THE NAME OF THE PETITIONER BY THE RESPONDENT NO.2 IS ILLEGAL AND BAD AT LAW AND ETC.

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IN W.P.NO.22989/2023:

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BETWEEN:

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SRI R.M. MANJUNATH GOWDA, S/O. RAMAPPA GOWDA, AGED ABOUT 62 YEARS, R/O: KARAKUCCHI, SIRIGEREPONT, SHIVAMOGGA – 577 211.

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…PETITIONER

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(BY SRI. JAYKUMAR S. PATIL, SENIOR COUNSEL FOR SRI. VARUN JAYKUMAR PATIL, ADVOCATE)

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AND:

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STATE OF KARNATAKA BY C.I.D. POLICE CID ANNEXE BUILDING, CARLTON HOUSE 1, PALACE ROAD, REP BY ITS HCGP, STATE PUBLIC PROSECUTOR, HIGH COURT BUILDING, HIGH COURT OF KARNATAKA BENGALURU-560001

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…RESPONDENT

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(BY SMT. WAHEEDA, HIGH COURT GOVERNMENT PLEADER)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C., PRAYING TO QUASH THE FINAL REPORT/CHARGE SHEET AT ANNEXURE-C AND ANNEXURE-D FILED AGAINST THE PETITIONER ON 30.07.2021 IN CRIME NO.325/2014 NOW NUMBERED AS CC NO.2634/2019, CC NO.2775/2021 AND CC NO.2776/2019 ON THE FILE OF THE LEARNED IST ADDITIONAL JUDGE AND JMFC, SHIVAMOGGA AND THE ENTIRE PROCEEDINGS INSOFAR AS IT PERTAINS TO THE PETITIONER CONCERNED.

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THESE PETITIONS, COMING ON FOR FURTHER DICTATION, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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IN W.P.No.22780/2023:

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The petitioner has filed this petition seeking for a writ in the nature of mandamus to call for the records from the office of the respondents relating to the proceedings in F.No.ECIR/BGO/05/2021 and has sought for a writ in the nature of certiorari to quash the summons dated 06.10.2023 in F.No.ECIR/BGO/05/2021 issued in the name of the petitioner,

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as illegal and consequently quash all consequential and incidental proceedings initiated against him. He has also sought for a writ in the nature of mandamus directing the respondents to forbear from proceeding in any manner contrary to law.

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The petitioner contends that he was elected as a

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Chairman of Shivamogga District Central Co-operative Bank Limited (henceforth referred to as 'D.C.C. Bank') in the year 2023 and served as its Chairman during the years 1997-1998, 1999-2010, 2011-2014 and 2015-2020. He claimed that on 17.07.2014, a First Information Report was registered in Crime No.325/2014 against the employees of D.C.C. Bank, Town Branch, Shivamogga. Initially, the investigation was conducted by Doddapete Police Station, Shivamogga and later it was transferred to Criminal Investigation Department (CID), who upon a detailed investigation filed a charge sheet on 20.08.2015 in C.C. No.1565/2015, which was re-numbered as C.C. No.2776/2019, on the file of the Principal Civil Judge (Jr. Dn.) and JMFC, Shivamogga. He contends that his name was dropped as there was no material against him. The accused in C.C. No.2776/2019 filed an application to discharge them and the Trial Court passed an order discharging them from the case. Being aggrieved by the order of discharge, Crl. R.P. No.20/2020 was filed by the D.C.C. Bank while Crl. R.P. No.42/2020 was filed by the State Government. Both the

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petitions were allowed in terms of the order dated 11.11.2020 passed by the III Additional District and Sessions Judge, Shivamogga, and the order discharging the accused in C.C. No.1565/2015 (renumbered as C.C No.2776/2019) was set aside. The accused No.2 challenged the order dated 11.11.2020 before this Court in Crl.P. No.3006/2021 and this Court has stayed the order dated 11.11.2020.

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Likewise, the other accused approached this Court in W.P. Nos.12423/2021 and 12426/2021 and the order dated 11.11.2020 was stayed by this Court. The petitioner contends that when things stood thus, after seven years, an additional charge sheet dated 30.07.2021 was filed against the petitioner alleging offences punishable under Sections 409, 202 read with Section 36 of the Indian Penal Code, 1860 (for short, 'IPC') along with accused No.16. He claimed that the cognizance of the offence is yet to be taken and that he has taken separate measures to question the credibility and legality of the additional charge sheet. It was alleged in the additional charge sheet that the petitioner was a Chairman of D.C.C. Bank, Shivamogga for 23 years during whose term, the accused No.1

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was appointed contrary to the applicable Regulations. He was also the President of the Advisory Committee in the town branch of D.C.C. Bank and that he failed to conduct meetings of the Advisory Board. It was alleged that the petitioner had favoured and facilitated the accused No.1 without initiating any action against her though several remarks and objections were raised against her in the internal and statutory audit reports for the years 2006-07 to 2012-13. It was also alleged that the petitioner had taken unilateral decisions without considering the advice/opinion of the Advisory Board. Though administrative irregularities in the town branch were brought to the notice of the petitioner, he failed to take any action against the people who were responsible, namely, the accused in C.C. No.2776/2019. That during his tenure, gold loans were sanctioned by the accused No.1 to her friends and relatives against spurious gold and without following the procedure. It was also alleged that in some of the accounts, the pledged gold was not available and the irregularities in the sanction of these gold loans at the town branch were to the extent of Rs.62,00,00,000/-. Though these irregularities were within the

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notice and knowledge of the petitioner, he failed to take any action. Based on the additional charge sheet dated 30.07.2021 filed against him, proceedings were initiated by the respondents under the provisions of the Prevention of MoneyLaundering Act, 2002 (for short, 'PML Act').

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The petitioner contends that the allegations in the charge sheet are in the nature of violation of certain administrative protocols during his tenure and they do not constitute any offence. He further contends that the charge sheet dated 30.07.2021 only discloses offences punishable under Sections 409, 202 read with Section 36 of IPC which are not schedule offences under the PML Act. He contends, even otherwise, until cognizance of the offence is taken by the Trial Court, no action under the provisions of the PML Act could be initiated against him. He further contends that since the proceedings in the predicate offence is stayed by this Court in Crl. P. No.3006/2021, W.P. No.12423/2021 and W.P. No.12426/2021, the proceedings under the PML Act also stands eclipsed. It is alleged that the respondents without any authority of law, searched the premises of the petitioner at

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Shivamogga and at his native place on 05.10.2023 between 7.50 A.M to 5.00 P.M.

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The petitioner contends that the proceedings initiated by the respondents are illegal in as much as the First Information Report in Crime No.516/2021 was registered against him at the behest of certain faction of people, who had made the same allegations and that he approached this Court in W.P. No.8294/2021, which was allowed in terms of the order dated 31.08.2021 and that this Court quashed the FIR No.16/2021 as being untenable. He also contended that the Joint Registrar of Co-Operative Societies initiated suo motu proceedings against the petitioner on the ground that the order passed under Section 68 of the Karnataka Co-operative Societies Act, 1959 (for short, 'the Act of 1959') was not complied even after four years. The Joint Registrar by his order dated 16.02.2021 directed the concerned officials to register a complaint against the petitioner under the provisions of Sections 109 (11), (14) and (15) of the Act of 1959. The said order was set aside by the Additional Registrar of Co-Operative Societies in Appeal No.1/2021-22 on 07.08.2023. That the

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delay in registering the impugned ECIR proceedings after six years from the date of filing the first charge sheet dated 20.08.2015 and conducting a search and seizure on 05.10.2023 and issuing summons on 06.10.2023 reveals the casual approach of the respondents in prosecuting the petitioner.

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The petitioner contends that the respondents have mechanically invoked the provisions of the PML Act without there being any schedule offences committed by him. It is contended that the delay in registering the impugned ECIR proceedings after six years from the date of filing the first charge sheet is illegal and deserves to be quashed.

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The petition is opposed by Mr. Aravind Kamath, Additional Solicitor General and is assisted by Mr. Madhukar M. Deshpande representing the respondents who contended that the first information report in Crime No.325/2014 was registered by the Doddapete Police Station, Shivamogga and a charge sheet dated 18.10.2014 was filed alleging offences punishable under Sections 409, 120B, 201 read with Section 37 of IPC. The Court took cognizance and registered C.C.

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No.1849/2014 which was later renumbered as C.C. No.2775/2019 for the offences punishable under Sections 409, 201, 120B read with Section 37 of IPC. He admitted that though proceedings were initiated against the petitioner herein, he was dropped from the charge sheet. He submitted that another charge sheet was filed in C.C.No.1564/2015 renumbered as C.C. No.2634/2019 for the offences punishable under Sections 409, 420, 120B read with Section 37 of IPC where again the petitioner was not arraigned as an accused. Subsequent thereto, another charge sheet was filed in C.C. No.1565/2015 which is renumbered as C.C. No.2776/2019 for the offences punishable under Sections 409, 465, 468, 471, 201, 120B read with Section 37 of IPC. In this case too, the petitioner was not arraigned as an accused. Subsequent thereto, after incriminating material was collected, a request was made for further investigation under Section 173(8) of Cr.P.C., which was granted and a charge sheet was filed against the petitioner in C.C. No.2775/2021 for the offences punishable under Sections 409, 202 read with Section 36 of IPC. This apart, a case in Crime No.4/2014 dated 29.05.2014

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was registered against the petitioner for the offences under Sections 13(i)(e) read with 13(ii) of the Prevention of Corruption Act, 1988 (for short, 'P.C. Act, 1988') and a charge sheet dated 20.03.2018 was filed. Therefore it is contended that a schedule offence was committed by the petitioner in Crime No.4/2014. He contended that it is evident from the above that there was "proceeds of crime" involved in relation to a scheduled offence and therefore to conduct an investigation and to ascertain the facts, a summons was issued to the petitioner. It is contended that so long as a schedule offence is registered against the petitioner, the Enforcement Directorate is empowered to conduct investigation under the PML Act and accordingly, summons is issued by the Enforcement Directorate under Section 50 of the PML Act to the petitioner. It is contended that when the accused has committed an offence under Section 3 of the PML Act, it is not necessary that he should be an accused in a predicate offence. He contended that an offence under Section 3 of the PML Act is a stand alone offence and even if the predicate offence is committed by other persons, if the proceeds of crime is generated out of criminal

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activity, an investigation can be conducted. He contends that in the instant case, only a summons is issued to the accused to appear before the respondents for an inquiry, which does not affect or prejudice the petitioner in any manner.

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In this regard, reliance is placed on the judgment of the Hon'ble Apex Court in the case of Vijay Madanlal Choudhary and Others v. Union of India and Others¹ . Likewise, reliance is placed on the judgment of the Apex Court in the case of Pavan Dibbur v. Directorate of Enforcement² . It is contended that the investigation is on going and therefore, there should be no interference at the stage of issuance of summons. In this regard, reliance is placed on paragraph Nos.24, 25 and 431 of the judgment of the Hon'ble Apex Court in Vijay Madanlal Choudhary referred supra. It is contended that the Delhi High Court in Amit

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Katyal v. Directorate of Enforcement³ held that the Courts should not throttle the investigation process at the stage of

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issuance of summons. Further it is contended that the

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1 2022 Online SC 929

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2 2023 SCC Online SC 1586

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3 2023 SCC Online Del 7119

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petitioner against whom summons is issued, is not entitled to challenge the proceedings as the proceeding is at a preliminary stage.

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Learned Senior counsel for the petitioner

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elaborating his contentions contended that there was no scheduled offence against the petitioner which could form the basis of initiating proceedings under the PML Act. Though the petitioner was arraigned as accused No.15 in Crime No.325/2014, his name was dropped and thereafter an additional charge sheet was filed on 30.07.2021 in Crime No.325/2014 alleging commission of offences under Sections 409, 202 read with 36 of IPC which are not the offences mentioned in Paragraph 1 of Part A of the Schedule to the PML Act. He relied upon the judgment in Vijay Madanlal Choudhary referred supra and contended that the authorities under the PML Act cannot initiate action against any person for money laundering on an assumption that the property identified by them is accumulated out of proceeds of crime and that a scheduled offence is committed, unless the same is registered

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with the jurisdictional police or pending enquiry by way of complaint before a competent forum.

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As regards the 'proceeds of crime', he contended that they must have been any property derived or obtained, directly or indirectly, by a person “as a result of criminal activity relating to a scheduled offence.” Therefore, he contended that when there is nothing to show that the petitioner was in possession of proceeds of crime, initiation of proceedings under the PML Act was improper and illegal.

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He further contended that when the predicate offence is stayed by this Court in Crl.P. No.3006/2021, W.P. No.12423/2021 and W.P. No.12426/2021, no further proceedings on the basis of such predicate offence can be taken out. In this regard, he has relied upon the judgment of the Hon'ble Apex Court in the case of Y.Balaji v. Karthik Desari and Another⁴ . He further contended that the offence under Section 13(i)(e) of the P.C. Act, 1988 is not a schedule offence under the PML Act unless there is an allegation under Section

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4 2023 SCC Online SC 645

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13(i)(a) to (d) of the P.C. Act, 1988. In this regard, he has relied upon the judgment of the Apex Court in the case of CBI Vs. Ramesh Gelli⁵ . He contended that Section 120B of IPC cannot be a stand alone offence and therefore proceedings under PML Act cannot be initiated in respect of an offence under Section 120B of IPC unless the other provisions are invoked. He also contended that the delay in registering the impugned ECIR in the year 2021 is fatal and the respondents cannot proceed with the matter.

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Further he contends that the predicate offence in C.C.No.2775/2019 is stayed by this Court in W.P. No.22989/2023 and therefore, submits that there is no basis for initiating proceedings under the PML Act. Hence, he contends that the proceedings cannot continue until this Court decides W.P. No.22989/2023.

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In W.P. No.22989/2023:

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This writ petition is filed by the accused No.15 in C.C. No.2775/2021 on the file of the First Addl. Civil Judge and

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5 (2016) 3 SCC 788

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JMFC, Shivamogga, for quashing the final report dated 30.07.2021 filed against him in Crime No.325/2014.

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The petitioner contends that a case in Crime No.325/2014 was registered by the Shivamogga Town Police Station which was transferred to the Crime Investigation Department (for short, 'CID'). After investigation the charge sheet was filed on 18.10.2014 where his name was dropped. Nonetheless, proceedings were pursued in Crime No.325/2014 and separate cases were registered in C.C. No.2634/2019, 2775/2019 and 2776/2019. He contends that in C.C. No.2634/2019, there were only two accused, while in C.C. No.2776/2019 there were nine accused while in C.C. No.2775/2019 there were 11 accused. He contends that some of the accused pleaded for discharge and the I Addl. Civil Judge and JMFC, Shivamogga, by an order dated 05.03.2020 discharged all the accused in C.C. No.2775/2019 and by an order dated 06.03.2020 in C.C. No.2634/2019 and by an order dated 05.03.2020 in C.C. No.2776/2019. He claimed that as against these orders of discharge, the State Government as

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well as the D.C.C. Bank filed revision petitions which were allowed by order dated 11.11.2020.

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He contends that the accused in the said case have filed Criminal Petitions and Writ Petitions before this Court challenging the order dated 11.11.2020 where this Court had granted an order of stay. The petitioner claims that at the elections held to the Board of Directors on 06.05.2019, he was elected as a Director and later selected as President. He claimed that he had contested the election to the Karnataka State Legislative Assembly from Thirthahalli constituency, but was defeated. He claimed that in the elections to the State Assembly, held in the year 2018, he again contested the election from Thirthahalli constituency. He contends that after the formation of the Government in the year 2018, an investigation was initiated into the affairs of the D.C.C. Bank through the Co-operative department and an order of disqualification under Section 29-C of the Act of 1959 was passed against the petitioner alone which was challenged in W.P. No.12096/2020. This writ petition was later dismissed relegating the petitioner to the alternative remedy under

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Section 70 of the Act of 1959 consequent to which the petitioner filed an appeal before the Additional Registrar of Cooperative Societies, Bengaluru, which was allowed by an order dated 14.10.2022. The petitioner claims that when he tried to seek reinstatement as the Director of the D.C.C. Bank, his tenure as the Director of the Taluka Agricultural Produce Cooperative Marketing Society ('TAPCMS' for short), Shivamogga, had expired and therefore he ceased to be the Director of the D.C.C. Bank under Section 18-B of the Act of 1959. When elections were held to TAPCMS, Shivmogga, the petitioner was again elected as a Director of the Society. In the meanwhile, one of the elected Directors of the D.C.C. Bank resigned on 14.08.2023 and the petitioner was co-opted under Section 29E of the Act of 1959 as the Director. The Board of Directors of the D.C.C. Bank exclusively moved a ‘No Confidence Motion’ against the President and hence the post of President in the D.C.C. Bank fell vacant. The petitioner contested the election to the post of President and was declared elected on 29.09.2023.

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The petitioner contends that when all the efforts by his political rivals failed, they initiated prosecution against the petitioner, by seeking permission under Section 173(8) of of the Code of Criminal Procedure, 1973 (for short, 'Cr.P.C.') to further investigate Crime No.325/2014. Ultimately, a charge sheet was filed against the petitioner alleging offences punishable under Sections 409, 202 read with Section 36 of IPC. The petitioner is therefore before this Court challenging the said final report registered against him.

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The learned Senior Counsel for the petitioner submits that the entire case is at the instance of the authorities and officers other than the CID which appears to be based on the directions of the State Government. He contends that a plain reading of the charge sheet discloses that there is no offence committed by the petitioner under Section 409 of IPC. In this regard, he has relied upon the judgment of the Hon'ble Apex Court in Asoke Basak v. State of Maharashtra⁶ as well as the judgment in Robert John D'Souza and others v.

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6 (2010) 10 SCC 660

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Stephen V. Gomes and another⁷ . He contends that the essential ingredients for an offence under Section 409 IPC is the entrustment of the property and nowhere in the complaint is there any disclosure that the properties that were allegedly misappropriated were entrusted to the petitioner. He then relied upon the judgment of the Hon'ble Apex Court in Om Parkash Gupta v. State of U.P.⁸ which was also to the same effect. He also contends that none of the requirements of an offence under Section 409 of IPC was made out in the charge sheet filed against the petitioner. He then relied upon the judgment in the case of Surendra Nath Satpathy v. State⁹ and contended that in similar circumstances, the High Court of Orissa held that if the petitioner therein had contravened the rules of Orissa Treasury Code, the question whether the petitioner had failed to comply strictly with the rules mentioned in Orissa Treasury Code and whether such alleged noncompliance resulted in an offence of breach of trust, was answered against the prosecution.

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7 (2015) 9 SCC 96

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8 AIR 1957 SC 458

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9 AIR 1958 Orissa 194

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He then relied upon the judgment of the Hon'ble

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Apex Court in R.K. Dalmia Etc. v. Delhi Administration¹⁰ and contended that entrustment of property and dominion over the property is a condition precedent and not the failure to exercise a power to constitute an offence under Section 409 of IPC. He contended that non-exercise of the power would not make the dominion interest nugatory.

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He next referred to the judgment in the case of Mir Nagvi Askari v. Central Bureau of Investigation¹¹ and contended that entrustment/dominion over property is essential. He further contended that a Chairman of a Public Co-operative Society is a public servant and therefore no proceeding could have been initiated against the petitioner without obtaining appropriate sanction under Section 197 of Cr.P.C. In this regard, he has referred to the judgment of the Hon'ble Apex Court in the case of State of Maharashtra v. Laljit Rajshi Shah¹² and contended that the petitioner was a

¶153

10 AIR 1962 SC 1821

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11 (2009) 15 SCC 643

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12 (2000) 2 SCC 699

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public servant and therefore the required sanction had to be obtained.

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He further contended that in the absence of any sanction, the Trial Court could not have taken cognizance of the offences alleged against the petitioner. He referred to Section 19 of the P.C. Act, 1988 and contended that the words " a person who was at the time of commission of the alleged offence ”, invariably referred to a retired employee also and therefore it was inevitable that cognizance of the offence could not be taken without there being proper sanction. He also referred to the definition of a 'public servant' as found in Section 2(c)(ix) of the P.C. Act, 1988 and contended that any person who was elected as a President, Secretary or other office bearer of a Co-operative society receiving aid from the State Government is a public servant. He, therefore, contends that the prosecution of the petitioner without sanction was unjustified.

¶159

The learned High Court Government Pleader on the other hand representing the respondent in W.P. No.22989/2023

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contended that the allegation that the petitioner is implicated based on the directions of the State Government, is baseless. He submits that the Investigating Officer was entitled to seek permission from the Court for further investigation under Section 173(8) of Cr.P.C. which was granted. He contends that this order allowing further investigation is not challenged by the petitioner. Therefore he submits that the additional charge sheet filed against the petitioner is based on the materials collected during the course of investigation. He further submits that the petitioner was the then President of the D.C.C. Bank, Shivamogga and therefore was well aware of the transactions that happened in the Bank. He submitted that the way in which the other accused were allowed to transact in the D.C.C. Bank showed a clear complicity of the petitioner in the offence of laundering money belonging to the co-operative Bank which were nothing but public funds. He further submits that initiating proceedings under the provisions of the Act of 1959 are different than the prosecution initiated against the petitioner for offences under the Indian Penal Code, 1860. He contends that the question whether the petitioner had nothing to do with the

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sanction or disbursal of the loan or even exercising control over the employees of the D.C.C. bank, are all matters of trial and the petitioner cannot take advantage of this to contend that he had no role to play in the commission of the alleged offence. He further contended that the contention of the petitioner that he was not entrusted with any property or dominion over the property, is a matter of fact that has to be established in trial and not in a petition under Section 482 of Cr.P.C. He further contended that it is for the prosecution to establish that the petitioner was aware of the offences committed under his nose and that he deliberately did not take any action. He contended that when the additional charge sheet was filed and cognizance was taken by the Trial Court, the petitioner was not a public servant and Section 19 of the P.C. Act, 1988 did not cover the case of a retired public servant.

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I have considered the submissions made by the learned Senior Counsel for the common petitioner in both these writ petitions as well as the learned counsel for the Enforcement Directorate as well as the learned High Court Government Pleader.

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REASONING FOR THE FINDING IN W.P No.22780/2023

¶167

It is now settled in view of the judgment of the Hon'ble Apex Court in the case of Vijay Madanlal Chowdhary (referred supra) that an offence under the PML Act would be attracted only when any of the offences mentioned in the schedule to the PML Act is registered. The authorities under the PML Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed unless it is so registered with the jurisdictional Police or pending enquiry or trial by way of a complaint before a competent forum. It is also equally well settled that the registration of an ECIR cannot be equated to the registration of an FIR as the said document is an internal document for the purposes of the Enforcement Directorate. The proceeds of crime as defined under Section 2(1)(u) of the PML Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. The position of law is well settled that when once the accused is acquitted in the predicate offence or if it is quashed by a Court of competent jurisdiction or if he is discharged, there can be no offence under

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the provisions of the PML Act. With these prefatory notes, if the case on hand is perused, the petitioner was the Chairman of D.C.C. Bank during the period between 1997-98, 1999-2010, 2011-2014, 2015-2020. It was during his tenure that a statutory audit disclosed several deficiencies and lapses in the Town branch of the D.C.C. Bank inasmuch as the accused No.1 was appointed as a Senior Assistant at the branch and though was promoted between 2005 and 2014, yet was continued in the Town branch of the Bank though there weren't any promotional post at the Town branch of the D.C.C. Bank. Separate charge sheets are filed against accused No.1 and others for sanctioning gold loan to friends and relatives by accepting fake ornaments and in many cases, gold loans were advanced without getting the gold pledged. In many cases, it was alleged that the loans were disbursed to many customers who were the relatives of accused No.1. It was alleged that accused No.1 with the help of accused No.15 had misappropriated Rs.62,00,00,000/- belonging to the D.C.C Bank and accused No.15 had not taken any action. The petitioner was charge sheeted for the offences punishable

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under Sections 409, 202 read with Section 36 of IPC in C.C. No.2775/2021 which were not schedule offences under the PML Act. Therefore, the apprehension of accused No.15 / petitioner that he is sought to be prosecuted under the PML Act is wholly unwarranted and baseless. The petitioner was issued with a summons by the respondents to appear before them. The power to issue summons under the PML Act is found in Section 50 of the PML Act which is akin to Section 61 of Cr.P.C and reads as follows:

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"50. Powers of authorities regarding summons, production of documents and to give evidence, etc (1) The Director shall, for the purposes of section 13, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely:

¶173

(a) discovery and inspection;

¶174

(b) enforcing the attendance of any person, including any officer of a reporting entity, and examining him on oath;

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(c) compelling the production of records;

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(d) receiving evidence on affidavits;

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(e) issuing commissions for examination of witnesses and documents; and

¶180

(f) any other matter which may be prescribed. (2) The Director, Additional Director, Joint Director, Deputy Director or Assistant Director shall have power to summon any person whose attendance he considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under this Act.

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(3) All the persons so summoned shall be bound to attend in person or through authorised agents, as such officer may direct, and shall be bound to state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required.

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(4) Every proceeding under sub-sections (2) and (3) shall be deemed to be a judicial proceeding within the meaning of Section 193 and Section 228 of the Indian Penal Code (45 of 1860).

¶183

(5) Subject to any rules made in this behalf by the Central Government, any officer referred to in sub-section (2) may impound and retain in his custody for such period, as he thinks fit, any records produced before him in any proceedings under this Act:

¶184

Provided that an Assistant Director or a Deputy Director shall not -

¶185

(a) impound any records without recording his reasons for so doing; or

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(b) retain in his custody any such records for a period exceeding three months, without obtaining the previous approval of the Joint Director."

¶188

A perusal of Section 50(2) of the PML Act leaves no

¶189

doubt that the Enforcement Directorate has the power to summon any person whose attendance it considers necessary whether to give evidence or to produce any records during the course of any investigation or proceeding under the PML Act.

¶190

It could be that the Enforcement Directorate requires the attendance of the petitioner to give evidence or to produce any records in respect of the schedule offences committed by the other accused. After all, the allegation was that the accused No.1 had the benevolence of the accused No.15 / petitioner herein and therefore, he was bound to assist the Enforcement Directorate and this did not in any way prejudice the petitioner. This apart, the petitioner was accused of an offence in Crime No.4/2014 for the offences under Section 13(1)(e) read with Section 13(ii) of the P.C. Act, 1988 and a charge sheet was filed on 20.03.2018. It could be that the summons was issued to the petitioner in that regard. Under

¶191

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the circumstances, the petitioner cannot challenge the issuance

¶194

of summons and his apprehension that he is sought to be prosecuted for an offence registered against him in C.C No.2775/2021 under the PML Act is unwarranted as the offences alleged against him are not schedule offences under the PML Act. In this regard, it is apposite to refer to the findings recorded by the Hon'ble Apex Court in the case of Vijay

¶195

Madanlal Chowdhary and others:

¶196

"467. In light of the above analysis, we now proceed to summarise our conclusion on seminal points in issue in the following terms: -

¶197

(i) The question as to whether some of the amendments to the Prevention of Money-laundering Act, 2002 could not have been enacted by the Parliament by way of a Finance Act has not been examined in this judgment. The same is left open for being examined along with or after the decision of the Larger Bench (seven Judges) of this Court in the case of Rojer Mathew 705.

¶198

(ii) The expression “proceedings” occurring in Clause (na) of Section 2(1) of the 2002 Act is contextual and is required to be given expansive meaning to include inquiry procedure followed by the Authorities of ED, the Adjudicating Authority, and the Special Court.

¶199

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(iii) The expression “investigation” in Clause (na) of Section 2(1) of the 2002 Act does not limit itself to the matter of investigation concerning the offence under the Act and is interchangeable with the function of “inquiry” to be undertaken by the Authorities under the Act.

¶202

(iv) The Explanation inserted to Clause (u) of Section 2(1) of the 2002 Act does not travel beyond the main provision predicating tracking and reaching upto the property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence.

¶203

(v) (a) Section 3 of the 2002 Act has a wider reach and captures every process and activity, direct or indirect, in dealing with the proceeds of crime and is not limited to the happening of the final act of integration of tainted property in the formal economy. The Explanation inserted to Section 3 by way of amendment of 2019 does not expand the purport of Section 3 but is only clarificatory in nature. It clarifies the word “and” preceding the expression projecting or claiming as “or”; and being a clarificatory amendment, it would make no difference even if it is introduced by way of Finance Act or otherwise.

¶204

(b) Independent of the above, we are clearly of the view that the expression “and” occurring in Section 3 has to be construed as “or”, to give full play to the said provision so as to include “every” process or activity indulged into by anyone. Projecting or claiming the property as untainted

¶205

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property would constitute an offence of money-laundering on its own, being an independent process or activity.

¶208

(c) The interpretation suggested by the petitioners, that only upon projecting or claiming the property in question as untainted property that the offence of Section 3 would be complete, stands rejected.

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(d) The offence under Section 3 of the 2002 Act is dependent on illegal gain of property as a result of criminal activity relating to a scheduled offence. It is concerning the process or activity connected with such property, which constitutes the offence of money laundering. The Authorities under the 2002 Act cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and/or pending enquiry/trial including by way of criminal complaint before the competent forum. If the person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of moneylaundering against him or any one claiming such property being the property linked to stated scheduled offence through him.

¶210

(vi) Section 5 of the 2002 Act is constitutionally valid. It provides for a balancing arrangement to secure the interests of the person as also ensures that the proceeds of crime remain available to be dealt with in the manner provided by the 2002 Act. The procedural safeguards as

¶211

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delineated by us hereinabove are effective measures to protect the interests of person concerned.

¶214

(vii) The challenge to the validity of sub-section (4) of Section 8 of the 2002 Act is also rejected subject to Section 8 being invoked and operated in accordance with the meaning assigned to it hereinabove.

¶215

(viii) The challenge to deletion of proviso to sub-section (1) of Section 17 of the 2002 Act stands rejected. There are stringent safeguards provided in Section 17 and Rules framed thereunder. Moreover, the pre-condition in the proviso to Rule 3(2) of the 2005 Rules cannot be read into Section 17 after its amendment. The Central Government may take necessary corrective steps to obviate confusion caused in that regard.

¶216

(ix) The challenge to deletion of proviso to sub-section (1) of Section 18 of the 2002 Act also stands rejected. There are similar safeguards provided in Section 18. We hold that the amended provision does not suffer from the vice of arbitrariness.

¶217

(x) The challenge to the constitutional validity of Section 19 of the 2002 Act is also rejected. There are stringent safeguards provided in Section 19. The provision does not suffer from the vice of arbitrariness.

¶218

(xi) Section 24 of the 2002 Act has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act and cannot be regarded as manifestly arbitrary or unconstitutional.

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(xii) (a) The proviso in Clause (a) of sub-section (1) of Section 44 of the 2002 Act is to be regarded as directory in nature and this provision is also read down to mean that the Special Court may exercise judicial discretion on case-to-case basis.

¶222

(b) We do not find merit in the challenge to Section 44 being arbitrary or unconstitutional. However, the eventualities referred to in this section shall be dealt with by the Court concerned and by the Authority concerned in accordance with the interpretation given in this judgment.

¶223

(xiii) (a) The reasons which weighed with this Court in Nikesh Tarachand Shah for declaring the twin conditions in Section 45(1) of the 2002 Act, as it stood at the relevant time, as unconstitutional in no way obliterated the provision from the statute book; and it was open to the Parliament to cure the defect noted by this Court so as to revive the same provision in the existing form.

¶224

(b) We are unable to agree with the observations in Nikesh Tarachand Shah distinguishing the enunciation of the Constitution Bench decision in Kartar Singh 708; and other observations suggestive of doubting the perception of Parliament in regard to the seriousness of the offence of money-laundering, 706 Supra at Footnote No.3 707 Supra at Footnote No.3 708 Supra at Footnote No.190 537 including about it posing serious threat to the sovereignty and integrity of the country.

¶225

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(c) The provision in the form of Section 45 of the 2002 Act, as applicable post amendment of 2018, is reasonable and has direct nexus with the purposes and objects sought to be achieved by the 2002 Act and does not suffer from the vice of arbitrariness or unreasonableness.

¶228

(d) As regards the prayer for grant of bail, irrespective of the nature of proceedings, including those under Section 438 of the 1973 Code or even upon invoking the jurisdiction of Constitutional Courts, the underlying principles and rigours of Section 45 may apply.

¶229

(xiv) The beneficial provision of Section 436A of the 1973 Code could be invoked by the accused arrested for offence punishable under the 2002 Act.

¶230

(xv) (a) The process envisaged by Section 50 of the 2002 Act is in the nature of an inquiry against the proceeds of crime and is not “investigation” in strict sense of the term for initiating prosecution; 538 and the Authorities under the 2002 Act (referred to in Section 48), are not police officers as such.

¶231

(b) The statements recorded by the Authorities under the 2002 Act are not hit by Article 20(3) or Article 21 of the Constitution of India.

¶232

(xvi) Section 63 of the 2002 Act providing for punishment regarding false information or failure to give information does not suffer from any vice of arbitrariness.

¶233

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(xvii) The inclusion or exclusion of any particular offence in the Schedule to the 2002 Act is a matter of legislative policy; and the nature or class of any predicate offence has no bearing on the validity of the Schedule or any prescription thereunder.

¶236

(xviii) (a) In view of special mechanism envisaged by the 2002 Act, ECIR cannot be equated with an FIR under the 1973 Code. ECIR is an internal document of the ED and the fact that FIR in respect of scheduled offence has not been recorded does not come in the way of the Authorities referred to in Section 48 to commence inquiry/investigation for initiating “civil action” of “provisional attachment” of property being proceeds of crime.

¶237

(b) Supply of a copy of ECIR in every case to the person concerned is not mandatory, it is enough if ED at the time of arrest, discloses the grounds of such arrest.

¶238

(c) However, when the arrested person is produced before the Special Court, it is open to the Special Court to look into the relevant records presented by the authorised representative of ED for answering the issue of need for his/her continued detention in connection with the offence of money-laundering.

¶239

(xix) Even when ED manual is not to be published being an internal departmental document issued for the guidance of the Authorities (ED officials), the department ought to explore the desirability of placing information on

¶240

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its website which may broadly outline the scope of the authority of the functionaries under the Act and measures to be adopted by them as also the options/remedies available to the person concerned before the Authority and before the Special Court.

¶242

(xx) The petitioners are justified in expressing serious concern bordering on causing injustice owing to the vacancies in the Appellate Tribunal. We deem it necessary to impress upon the executive to take corrective measures in this regard expeditiously.

¶243

(xxi) The argument about proportionality of punishment with reference to the nature of scheduled offence is wholly unfounded and stands rejected."

¶244

The reliance placed by the learned senior counsel for the petitioner on the judgment of the Hon'ble Apex Court in

¶245

the case of Y. Balaji (referred supra) that stay of a predicate offence eclipses a scheduled offence is inapplicable to the facts of this case as the summons is not issued by the respondents on the premise that a schedule offence is registered against the petitioner. Likewise, the judgment relied by him in the case of

¶246

CBI v. Ramesh Gelli (referred supra ) is also inapplicable as Section 13 was made a schedule offence by virtue of Act 16 of 2018. Even otherwise, there is nothing on record to prejudge

¶247

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the case whether the summons was issued in respect of the charge sheet filed against the petitioner under Section 13(1)(e) read with Section 13(ii) of the P.C Act, 1988 or to take further steps in the matter of the investigation into the offences against the co-accused. Therefore, all the contentions urged by the learned senior counsel for the petitioner in assailing the summons issued to the petitioner are liable to be rejected and are accordingly, rejected. Consequently, W.P. No.22780/2023 filed by the petitioner lacks merit and is dismissed .

¶250

REASONING FOR THE FINDING IN W.P. No.22989/2023

¶251

The additional charge sheet filed against the accused No.15 discloses that the petitioner was the President of D.C.C. Bank, Shivamogga between 1997 to 1998, 1999-2010, 2011 to 2014 and 2015 to 2020. It is alleged that the accused No.1 was appointed as a Senior Assistant at the Town Branch of D.C.C. Bank. Though she was promoted between 2005 to 2014, yet the accused No.15 continued her in the Town Branch

¶252

of the Bank, though there were no promotional posts in the Town Branch of the Bank. It is alleged that between 2006 to

¶253

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2014 the petitioner was the President of the Advisory Board of

¶255

the Town Branch of the Bank but he did not conduct any meetings of the Advisory Board. It is alleged that between 2006 to 2007 and 2011 to 2012 an internal and statutory Audit was conducted which disclosed several serious irregularities but the petitioner failed to take any action against the accused No.1. Later, the statutory audit during the year 2012-13 disclosed several serious deficiencies and lapses but the accused No.15 did not take any action against the accused No.1. It was alleged that neither the Managing Director nor the petitioner brought these illegalities to the notice of the Managing Committee but at all the meetings of the managing committee, the petitioner took a unilateral decision without allowing the Directors to express their opinion. These decisions were implemented by the accused No.16.

¶256

It is further alleged that the irregularities and illegalities found in the statutory audit and the internal audit were not disclosed to anyone outside and the Officers of the Bank and staff were warned against any such disclosure. Taking advantage of this, the accused No.1 had sanctioned gold

¶257

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loan to her friends and relatives by accepting fake gold ornaments and in many cases, advanced gold loan without getting the gold pledged etc. It is further alleged that in many accounts gold loans were disbursed in favour of many customers, some of whom were the relatives of accused No.1. Thereby it is alleged that the accused No.1 with the help of the petitioner and others had misappropriated Rs.62,00,00,000/belonging to the D.C.C. bank. Therefore, it is alleged that the petitioner was fully aware of these illegalities committed by the accused No.1, but did not deliberately take any action to bring her to book.

¶259

The prime contention of the petitioner is that several other proceedings were initiated against the petitioner under the provisions of the Act of 1959 including a report to prosecute the petitioner which is now pending consideration before the concerned authorities. It is also contended that the petitioner was the President of the D.C.C. Bank and therefore he was not directly involved in the day-to-day affairs of the bank but there were other officers responsible for the affairs of the D.C.C. bank at its Town branch. He therefore contends

¶260

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that he was neither entrusted with any property nor did he exercise dominion or control of any funds belonging to the D.C.C. bank and therefore he could not be prosecuted for the offence punishable under Section 409 of IPC.

¶263

The fact that the petitioner was a President of the D.C.C. Bank, Shivamogga during the relevant point of time is not in dispute. It is also not in dispute that the statutory audit and the internal audit conducted in the town branch of the D.C.C. bank disclosed several irregularities. The petitioner had though approached this Court in W.P. No.8294/2021 challenging the registration of FIR in Crime No.16/2021 against him, this Court though quashed the FIR No.16 registered against the petitioner and held that the order would not come in the way of initiating fresh action against the petitioner by filing a complaint by the competent or authorized authorities for the offences under the Karnataka Co-operative Societies Act, 1959.

¶264

Though it is contended by the learned senior counsel for the petitioner that the petitioner was in no way

¶265

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responsible for posting the accused No.1 at the Town branch and it is also contended that the petitioner was neither in control nor was entrusted with the funds of the D.C.C. bank and therefore he did not have dominion over the properties of the bank, the allegations made in the charge sheet go to show that the petitioner even after being notified about the illegalities, did not take any action to bring the accused No.1 to book.

¶267

CW-1 specifically stated in her statement that between 16.07.2014 and 22.07.2014, the officials from the Cooperative Department had visited the Town branch of the D.C.C. bank along with the independent appraisers to verify the gold loan that was sanctioned between 2013-2014. She stated that out of 785 gold loan accounts, a sum of Rs.4,69,34,385/was sanctioned against gold which were pledged in 114 accounts while a sum of Rs.5,05,85,641/- was sanctioned against fake gold ornaments and in about 486 accounts, a sum of Rs.40,57,83,762/- was sanctioned against fake gold ornaments that were pledged and in 185 accounts, loan of Rs.17,13,94,157/- was sanctioned without obtaining any gold.

¶268

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He stated that the reports of all the illegalities were furnished

¶270

to the officials of the bank.

¶271

CW-24 was the Joint Registrar of Co-operative societies who stated about the illegalities committed in the matter of sanction of gold loan at the town branch of the D.C.C. Bank, Shivamogga. Likewise, CW-25 spoke about the internal audit conducted at the town branch took in the year 2011-12 at 12.30. CWs.88, 89 and 90 were the Directors and members member of the D.C.C. Bank and they stated that sanction of loan, transfer of employees was never brought to the notice of the Directors and that the petitioner and the Managing Director were taking all decisions unilaterally. The prosecution therefore filed a charge sheet alleging that a sum of Rs.63,00,00,000/was the amount that was misappropriated at the Town branch of the D.C.C. Bank, which was purely at the instance of accused No.1 and that the petitioner herein had helped the accused No.1 in perpetuating the crime. Therefore it is also relevant to note that all the accused other than the petitioner herein, were charge sheeted for the offences punishable under Sections 471 and 120B of IPC amongst other offences. The accused in the

¶272

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present case was charged sheeted for the offences punishable under Sections 409, 202 read with Section 36 of IPC.

¶274

34. The contention of the learned Senior counsel for the

¶275

petitioner that the petitioner was not involved in any offence as there was a hierarchy of employees in the D.C.C bank who were all responsible for the sanction and disbursal of loan, cannot be considered at this stage of the proceedings. The question whether the petitioner had dominion or control or was entrusted with the property of the bank, is a matter that had to be established at a trial and certainly not in a petition under Section 482 of Cr.P.C. In so far as the contention that the petitioner was a public servant and therefore, cognizance could not have been taken against him without the required sanction under Section 197 of Cr.P.C. is concerned, the petitioner is not a public servant and even if he was, since the acts complained of were not in the course of discharge of his public duty, he cannot take advantage of the protection under Section 197 of Cr.P.C. In that view of the matter, the petition filed by the petitioner to quash the prosecution launched against him is without any basis and is therefore liable to be rejected.

¶276

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¶277

Consequently, W.P. No.22989/2023 lacks merit and is

¶278

dismissed .

¶279

W.P.NO.12451/2021:

¶280

The petitioner in W.P. No.12451/2021 was accused No.1 in C.C No.2776/2019 for the offences punishable under Sections 409, 465, 468, 471, 201 and 120B read with Section 37 of IPC pending trial before the First Additional Civil Judge and JMFC, Shivamogga (henceforth referred to as 'the Trial Court).

¶281

The petitioner in W.P. No.12423/2021 was accused No.1 in C. C No.2634/2019 for the offences punishable under Sections 409, 420, 120B read with Section 37 of IPC pending trial before the First Additional Civil Judge and JMFC, Shivamogga.

¶282

The petitioner in W.P. No.12426/2021 was accused No.1 in C.C No.2775/2019 for the offences punishable under Sections 409, 201, 120B read with Section 37 of IPC pending trial before the First Additional Civil Judge and JMFC, Shivamogga.

¶283

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The allegations in brief against the accused no.1 was that she being a Manager at the town branch of the D.C.C. Bank, Shivamogga was responsible in sanctioning and disbursing gold loan to the tune of Rs.63,00,00,000/-. The allegation was that she had sanctioned loan against fake gold while in some cases, loan was sanctioned without obtaining any gold from the borrowers. A charge sheet was filed against the petitioner in all these cases for said offences. The petitioner in these petitions filed separate application/s for discharge under Section 239 of Cr.P.C. The Trial Court after considering the charge sheet and the materials attached with it allowed the application/s and discharged the petitioner from the said offences on the following grounds:

¶286

(i) Before filing a complaint, the audit of the accounts at the Town Branch of D.C.C. Bank was not done but was done at the time of investigation;

¶287

(ii) The seizure mahazar and spot mahazar, the audit reports and the statement of witnesses showed that the key of the strong room where the cash was kept was collected from the case worker at the time of surprise visit of the Managing Director and after two days, the cash was

¶288

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counted. No reason was mentioned by the Investigating Officer for the delay in counting the cash;

¶290

(iii) The Investigating Officer had not obtained the bye-laws of the D.C.C. Bank;

¶291

(iv) A perusal of the report of the Joint Registrar of Co-operative Societies showed that there was misappropriation and the D.C.C. Bank had not conducted the audits since 2004 and that the Investigating Officer had neglected this report;

¶292

(v) The Investigating Officer had filed the final report on the basis of the audit done by the private auditors;

¶293

(vi) The Investigating Officer had not conducted any enquiry about the authority of the Managing Director by going through the provisions of the Karnataka Societies Registration Act, 1960, The Income Tax Act, 1961, Civil Right Enforcement Act and the bye-laws of the Bank. The accused were the employees of the Bank and there is no direct material against them to link with the alleged offences;

¶294

(vii) Though the charge sheet was filed on 18.10.2014 and a further charge sheet was filed on 21.08.2015, the report of the Joint Registrar of Cooperative Societies was obtained by the Investigating Officer on 29.02.2016 which showed that he was negligent and the investigation was not done properly.

¶295

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(viii) In the final report, it was mentioned that loan applications and handwriting samples were sent to Forensic Science Laboratory and reports were not yet received. However, the final reports were filed in a hurry. Therefore, the investigation was not yet complete.

¶297

(ix) After cognizance was taken, the statements of the appraisers of gold ornaments were recorded as CWs.1 to 8 and Exs.C1 to C780 were marked. On perusal of the statements and exhibits, there was no material to constitute the alleged offence.

¶298

(x) That the Investigating Officer had not mentioned the reasons for which the other accused were given up in the case.

¶299

(xi) The C.C. camera footage of the strong room where the cash and gold ornaments were recovered was not obtained by the Investigating Officer and there was no reference in the case file.

¶300

(xii) That the Investigating officer in C.C. No.2776/2019 (old CC No.1565/2015) had mentioned that the accused persons were Government servants but no sanction was obtained from the Government to prosecute them. Therefore, it held that the Investigating Officer had not conducted a proper investigation but he negligently filed a final report.

¶301

Being aggrieved by the same, Criminal Revision Petition Nos.20/2020 and 42/2020 were filed by the respondent

¶302

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¶304

Nos.2 and 1 respectively in W.P. No.12451/2021; Criminal Revision Petition Nos.21/2020 and 45/2020 were filed by respondent Nos.2 and 1 respectively in W.P. No.12426/2021 and Criminal Revision Petition Nos.22/2020 and 38/2020 were filed by respondent Nos.2 and 1 respectively in W.P. No.12423/2021.

¶305

The Revisional Court after perusing the materials on record held that there is nothing on record to discharge the accused as the charges were grave and the innocence of the petitioner had to be established after a trial. Consequently, it allowed the revision petitions and directed the Trial Court to frame charges against the petitioner and other accused for the offences alleged in the charge sheet.

¶306

The petitioner in these petitions without challenging the order/s passed by the Revisional Court has sought for quashing of the proceedings in C.C. No.2776/2019, C.C. No.2634/2019 and C.C. No.2775/2019 against her. It is contended that the accusations made against her were without substantial proof of evidence. Further, she contended that she

¶307

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is not a specialist to verify the gold ornaments to certify whether they were genuine or fake and therefore, she cannot be held responsible for the alleged fraudulent loan accounts. She further contended that the Managing Director of the Bank conducted an enquiry from 07.07.2014 to 15.07.2014 and there was no record of the cash balance in the strong room on the first and last day of the enquiry. She claimed that there was a delay in counting of cash in the strong room. She alleged that the Managing Director and other Directors of the Managing Committee of the D.C.C. Bank had conspired and fabricated documents to frame her. She further contended that she was on leave on the dates of the alleged transaction. She claimed that in the charge sheet, the total savings of the gold loan accounts were 775 but in the audit report, it was shown as 785 and thus, the investigation was not accurate. She claimed that no money or valuables was recovered from her which indicated that she was trapped by the officials of the Bank. She claimed that report of the Joint Registrar of Co-operative Societies dated 29.02.2016 showed that no audit was conducted by the respondents since the year 2004 and the audit was done

¶309

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immediately after the commencement of investigation. Thus, she contended that the Investigating Officer had neglected the audit reports while filing the charge sheet. She further contended that in the event of any misappropriation, the same had to be reported to the Head of the Department and attempts ought to have been made for superseding the Board. However, in the instant case, she contended that the respondents had superseded the Board during the time of alleged misappropriation. She contended that the respondents ought to have appointed a Liquidator to conduct a detailed audit after which complaint had to be filed. She, therefore, claimed that the whole process was in violation of the Karnataka Co-operative Societies Act, 1959. She reiterated the grounds mentioned by the Trial Court for discharging her of the offences.

¶311

The learned senior counsel for the petitioner in these petitions contended that at the time of investigation, no money was recovered from the petitioner and there were no suspicious cash transactions in the account of the petitioner thereby indicating that the bank had trapped the petitioner.

¶312

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He submitted that there were multiple reports submitted by the officers of the D.C.C. bank which were not counter signed by the petitioner and therefore those documents could not have been used against her. He further submits that the strong room key at the Town branch was obtained on 15.07.2014 but the money in this strong room was counted only on 17.07.2014 and there was no explanation by the Investigating Officer as to why there is delay in counting the money. He claimed that the counting of money was not even video graphed and therefore, the investigation is lopsided and is not done strictly in accordance with the procedure prescribed.

¶314

He further contended that a perusal of the report of Joint Registrar of Cooperative societies on 29.02.2016 indicated that the respondents did not conduct an audit since the year 2004 and there was no proof regarding misappropriation of money and assets. He submits that the audit was conducted only after the commencement of investigation and therefore, it is not sure whether the allegations made against the petitioner

¶315

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were based on proper documents. He submits that several proceedings initiated against the President of the D.C.C. bank were set at naught by this Court and therefore there is no basis for the allegations made against the petitioner. He further contends that the respondents have filed multiple charge sheets from time to time, which demonstrated that the investigation was driven by extraneous reasons. He further submits that hand writing samples of the petitioner were obtained and sent to the Forensic Science Laboratory, but the final report of the hand writing expert is not obtained till date and the same was not a part of the charge sheet. Therefore, he contends that the Trial Court had noticed all the illegalities committed by the Investigating Officer while filing the charge sheet and therefore, the Trial Court was right in discharging the petitioner from the offences alleged against her. He further contends that the Trial Court had noticed the way in which the investigation was conducted initially by the Doddapete Police Station and later, on the instructions of the Minister of Cooperative Societies, the investigation was handed over to the Crime Investigation Department (CID) for concluding the

¶317

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investigation. He submits that the entire investigation is at the instance of vested interest and therefore, the Revisional Court ought not to have interfered with the order/s of discharge passed by the Trial Court.

¶319

The learned High Court Government Pleader has contested these petitions and contended that during the course of investigation, it was revealed that the complaints against the accused No.1 were true. She contended that the accused Nos.1, 2 and 3 had created fake savings accounts in the names of other people including the family members of accused No.1 and created 785 bogus gold loan accounts linked to those savings accounts. She claimed that the gold loan sanctioned were during the time when accused No.1 was in-charge of the City Branch as its Manager. She claimed that though money was not recovered from the accused No.1 but in the course of investigation, she gave a voluntary statement that she and her family members had purchased properties in different places and she had invested Rs.2,00,00,000/- in Margadarshi Chit Funds in her name as well as in the names of her family members. She contended that silver articles that were kept in

¶320

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the house of accused No.1 were recovered and many property documents were recovered. She claimed that silver and brass ornaments were recovered from the accused which they intended to use to make gold coated fake ornaments. She claimed that when the preliminary charge sheets were filed, the audit reports were not taken into account but after further investigation, additional charge sheet was filed which included the audit report and the FSL report. She contended that though the FSL reports were not submitted at the time of charge sheet, later they were submitted to the Court. She contended that the assertions made by the petitioner are all matters of fact which have to be established at the trial and the same cannot be assailed in a petition under Section 482 of Cr.P.C.

¶322

I have considered the submissions made by the learned Senior counsel for the petitioner and the learned High Court Government Pleader and also perused the records placed along with the petitions.

¶323

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¶324

An accused can be discharged, when upon

¶325

consideration of the record of the case and the documents submitted therewith, if there are no sufficient grounds to continue the prosecution against the accused. The truthfulness, sufficiency and acceptability of the material placed by the prosecution can be tested at the stage of trial. It could be that, the investigation is sloppy or faulty but unless such investigation prejudices the accused in any manner, that could not be a ground to discharge an accused. The assumption that an accused cannot be convicted on the material available is too risky a proposition to be readily accepted, particularly in offences like the one on hand.

¶326

A perusal of the impugned judgment passed by the Trial Court discloses that the Trial court has virtually punched holes in the case of the prosecution by adverting to some lapses in the prosecution and taking into account certain orders passed by the authorities under the Karnataka Co-operative Societies Act, 1959 and proceeded to discharge the accused. The Trial court was clearly oblivious of the allegations made against the petitioner and was also not alive to the fact that the

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¶328

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¶329

petitioner was employed as the Manager at the Town branch of the D.C.C. Bank, Shivamogga and therefore she was responsible for all the transactions brought about at the D.C.C. Bank. The allegations as set out in the charge sheet would indicate that nearly 485 gold loan transactions were brought about on the basis of fake jewels that were pledged at the D.C.C bank without even obtaining an appraisal certificate. There were also accounts where gold loan was sanctioned and released without even obtaining the gold or the ornaments. The question whether the petitioner in these petitions was involved in the said offences is purely a question of fact and mere omissions by the Investigating Officer cannot result in discharging the accused from the offences alleged. The Revisional Court has thoroughly considered this position of law and has rightly held that there are sufficient material to charge the accused. In that view of the matter, there is no error committed by the Revisional Court in allowing the criminal revision petitions and setting aside the order/s passed by the Trial court in discharging the accused.

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¶331

It is relevant to note that in all these petitions there

¶332

is no challenge to the orders passed by the Revisional Court setting aside the orders of discharge passed by the Trial Court but the prosecution of the petitioner is challenged on various grounds which are referred above. These grounds are essentially matters which have to be thrashed out after a trial and are certainly not a ground to quash the proceedings under Section 482 of Cr.P.C.

¶333

Consequently, W.P. Nos.12451/2021, 12423/2021

¶334

and 12426/2021 lack merit and are dismissed .

¶335

In view of dismissal of these petitions on merits, pending IAs, if any, also stand dismissed.

¶336

Sd/JUDGE

¶337

BVV/PMP List No.: 19 Sl No.: 4 CT-ASC

Smt.Shoba B v. State of Karnataka by Doddapet P.S.

Case brief

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Smt.Shoba B v. State of Karnataka by Doddapet P.S.

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