In absence of cogent evidence to prove mens rea to deceive as well as to misappropriate funds, it is not safe to convict accused u/s 409 or 420 of IPC: SC

Read Judgment: N. Raghavender vs. State of Andhra Pradesh, CBI 

Pankaj Bajpai

New Delhi, December 14,2021: The Supreme Court has opined that in the absence of cogent and unimpeachable evidence to prove misappropriation of the funds of the Bank and/or of an individual, it is not safe to convict accused under the provisions of Section 409 of IPC. 

So far as the charge u/s 420 IPC is concerned, it will be too far-fetched to hold that the accused had any mens rea to deceive or to misappropriate or destroy valuable property, in the absence of even an ordinary complaint regarding misuse of his FDRs, added the Court. 

While stating that to prove charges u/s 409 IPC, the prosecution need not prove the exact manner of misappropriation, the Larger Bench of Chief Justice N.V. Ramana, Justice Surya Kant and Justice Hima Kohli observed that once the ‘entrustment’ is admitted or proved, the onus lies on the Accused to prove that the entrusted property was dealt by him in an acceptable manner. 

The background of the case was that, N Raghavender (Appellant) was charged u/s 409 r/w/s 420 of IPC and u/s 13(2) r/w/s 13(1)(d) of Prevention of Corruption Act, 1988 for allegedly misusing his official position at the Bank and passing loose cheques to withdraw funds from an account despite there being insufficient funds in the said account, and thereby extending an undue advantage to a co-accused. It was also alleged that the Appellant had prematurely encashed FDRs. 

After considering the arguments and evidences, the Larger Bench observed with respect to the question of ‘deceit’, that the depositions of prosecution witnesses unveil that though the relevant entries were missing in the Current Account Ledger, they do find a mention in the other ledger sheets maintained by the Bank, namely, the Officer’s Cash Scroll and the Cashier Payment Register. 

As far as allegations pertaining to alleged premature withdrawal of two FDRs and the subsequent unauthorized transfer of Rs. 14 Lakhs are concerned, the Apex Court noted that the allegation of premature withdrawal is also accompanied by the averment that despite the premature withdrawal, the interests relating to the two FDRs continued to be deposited into savings account of B. Satyajit Reddy. 

The interest amount, however, was transferred from account, which stood in the name of N. Raghavender (Appellant) and his wife, added the Court while observing that misappropriation with this dishonest intention is one of the most important ingredients of proof of ‘criminal breach of trust’. 

In the case in hand, the Apex Court found that the Appellant in his examination u/s 313 CrPC has neither disputed the factum of the premature withdrawal, nor of the subsequent transfer of the amount to account. 

On the contrary, he had specifically claimed that he only acted on the written request made by the customer and the Appellant had fortified his assertion by producing two letters statedly written by B. Satyajit Reddy and addressed to the Branch Manager, added the Court. 

Further, the Larger Bench noted that there is a serious dispute on the factum of whether or not B. Satyajit Reddy had sought the premature withdrawal and the subsequent transfer of the proceeds of FDRs to the account of Academy. 

The best person to clear the air and enlighten us would have been B. Satyajit Reddy himself, but neither was he associated during the course of inquiry/audit or the investigation nor was he examined as a prosecution witness in the trial, added the Bench.

The Apex Court also found that investigating agency did not care to record the statement of B. Satyajit Reddy either u/s 161 CrPC or as a court witness, and there was not even a whisper that B. Satyajit Reddy was won over by the appellant from the very inception and/or his examination at any stage would have been an exercise in futility. 

Further, there is also no written or oral complaint made by B. Satyajit Reddy against the Appellant or other officials of the Bank accusing them of misusing his FDRs or causing any financial loss to him, added the Court. 

Therefore, speaking for the Bench, Justice Surya Kant opined that the prosecution had failed to establish the charge of criminal breach of trust against the Appellant beyond a reasonable doubt.

Undoubtedly, some of the proven facts, like deposit of interest amount from the account of the appellant to that of B. Satyajit Reddy, do create a strong suspicion against the Appellant, but suspicion cannot take the place of proof, howsoever, strong it may be, added the Bench. 

Justice Surya Kant added that the Appellant acted brazenly contrary to the norms and internal instructions of the Bank. Although he was clever enough to not trespass into the prohibited area(s) of Sections 409, 420 and 477-A IPC, he ran the risk of causing financial loss to the Bank. 

Despite his subsequent act of depositing the interest accrued upon the FDRs of B. Satyajit Reddy, from his personal account, and thereby absolving the Bank from such liability, the actions of the Appellant constitute gross departmental misconduct and are unbecoming of a senior Bank Officer, added Justice Kant. 

The Larger Bench went on to reiterate that the management of the Bank rightly lost faith in the Appellant and the punishment of dismissal from service imposed on him, on the basis of his conduct which led to his conviction by the Trial Court, was fully justified.

In the peculiar facts and circumstances of this case, there was no legal necessity to hold any departmental enquiry to reiterate the same factual conclusions which have surfaced during the course of criminal trial, added the Bench.

Therefore the Top Court concluded that dismissal of Appellant from service of the Bank is fully legitimized and the punishment so awarded, is proportionate to the proven misconduct.

Accordingly, observing that the prosecution has failed to prove the charges u/s 409, 420 and 477A IPC against the Appellant beyond reasonable doubt, the Larger Bench held that conviction of Appellant u/s 13(2) r/w/s 13(1)(d) of the PC Act can also not be sustained. 

However, the benefit of doubt being extended to him on account of a thin margin between ‘strong suspicion’ and ‘conclusive proof’, shall not entitle him to initiate a second round of lis to seek his reinstatement or to claim other service benefits from the Bank, added the Bench.